Same happens in real estate investments, though its nomenclature, sadly, isn’t nearly as plentiful or colorful as is baseball’s. Here are a few terms with some plain English definitions. Some of them are formal terms, some slang. Hope this helps.

Tax Free Exchange This is an insidious, non-existant animal, as there is no such thing. When using Section 1031 of the Internal Revenue Code, you’ll be deferring your potential capital gains taxes — not escaping them. Be serious, how many times in life do we get to skate on taxes? Which is, of course, why it’s correctly known as a tax deferred exchange.

Starker Exchange Much more commonly known now as a Delayed Exchange. Those who’ve been in the business longer than a few years have heard about ‘Starker’. We can all thank the Starker family for forcing the IRS, the heavy lifting done by the Tax Court (through an appeal actually) for our presently codified ‘Delayed Exchange’. Before Starker? Every property in a tax deferred exchange had to close on the same day in the same moment in time or there was no tax deferral. It was, um, interesting the same way the Chinese mean when they wish their enemies to live in interesting times. It was rarely anything but organized chaos which almost always including generous doses of abject terror for all involved. I’ve included a link below for some rules and definitions from an earlier post on the subject.

Installment Sale Sellers will sometimes accept a mortgage for all or part of the sales price. Tax on the gain is paid as the mortgage principal is collected. Payments on installment sale notes are separated into three categories. 1) Return of principal (not taxed) 2) Return on principal (subject to capital gains taxation) 3) Interest (taxable in the year received). For the long term real estate investor, this is a tax reduction strategy, sometimes applied in concert with a tax deferred exchange. Most investors are unaware that tax deferred exchanges don’t have to be ‘all or nothing’. To use the cliché, while horribly mashing together metaphors — it’s possible to be partially pregnant when it comes to tax deferred exchanging. Sorry about mixed metaphor, but seriously, how long have ya been readin’ stuff here?

Capital Expenditure This one can cause problems for those tryin’ to be too clever by half on their tax returns. An operating expense, for instance a management fee, is deductible against the property’s rental income. A capital expenditure, a new roof for example, must be ‘capitalized’, i.e., given a life and depreciated or a finite period of years. Do not play games with these two line items, as in the end, you will lose. The IRS isn’t stoopid, and can tell the difference between repairing a few shingles or flashing and reroofing. ‘Nuff said.

Debt Coverage Ratio Often referred to as DCR. This one’s a ratio used by loan underwriters for income producing property. It’s created by dividing Net Operating Income by total debt service. NOTE: Debt service is simply the total of all your monthly loan payments for the year. Ratios of at least 1.10 are generally required with ratios of 1.20 and higher considered the norm when it comes to apartment properties of more than 4 units. A ratio of 1.0 denotes a ‘break even’ cash flow. Under 1.0 means there’s a negative cash flow.

Time is of the Essence This is a phrase, that when inserted into a contract, requires all references to specific dates and times of day noted in the contract be interpreted exactly — in its absence extreme delays might be acceptable. Most contracts insert this in the boiler plate. It’s one of the fundamental factors in any real estate transaction. Take it literally — the other side will.

Here are some terms and definitions specifically related to tax deferred exchanges, now commonly known as Delayed Exchanges.

Capitalization Rate Often made to sound way cool by just sayin’ Cap Rate. This one is one of the simplest, yet one of most often misunderstood terms in real estate investing. The definition/formula is pretty straightforward. You figure the cap rate by takin’ the Net Operating Income (NOI) of a property and dividing it by the price. For example, a property sportin’ a $10 NOI with a $100 value would look like this: 10/100 = 10% capitalization rate. It’s always expressed as a percentage. Get a whole number and you’ve screwed the pooch somewhere. Another way to look is what your cash on cash return would be if you wrote a check for the entire purchase price. A $10 cash flow would be a 10% cash on cash return AND cap rate on a $100 property if purchased for cash.

These are just a few, but that’ll do for today. Gimme a call with any questions — none are too small. 619 889-7100 will find me. Have a good one.

I write on a couple other real estate related blogs, one of which I’m gonna link to tonight. There are a couple posts — one in which I directly address the issue of gutting your 401K/IRA. The other builds on that one, in the sense that I demonstrated that what I tell you and my clients to do, is the same thing I just told my own daughter and her new husband.

I encourage you to read those posts at your leisure — and in the order in which I linked them. Digest what was said, read any comments and replies, then come back here, if the spirit moves ya, and let me know your thoughts. After reading them you’ll know one thing for sure — I’m consistent.

Meanwhile, back at BawldGuy Ranch — gimme a call, will ya? For Heaven’s sake, where ya been? Let’s see what’s possible in your specific situation. Besides, I need a fix. Go ahead — enable me. 619 -889-7100 will do the job. Have a good one.

This is located in the North Dallas area. Each side has 3 bedrooms and 2 bathrooms. You can see the garages. 20% down will yield, give or take, about 6-9.5% cash on cash — given today’s interest rates. Most are in such demand — Investors and tenants — that they frequently sell before they’re even built. They’re just as frequently rented before the dust clears after escrow closes. Sweet, eh?

In fact, one of these just closed last week. Our client was amazed when he learned the new first tenant was moving in about three days later. Woulda been sooner, but the tenant had to wait for the weekend to move.

The Amenities

Here’s a shot of what has consistently attracted tenants to this neighborhood. Though the address is absolutely one coveted by many in the general Dallas/Fort Worth MetroPlex, once they see the amenities, their main concern is being accepted as a credit worthy tenant. This pool area is just one of many superbly designed amenities.

Compare this to the usual motel-like pools offered as ‘amenities’ in many so-called upscale developments. They only wish they could offer something this cool and spacious.

What you see here is the community kitchen tenants can use for whatever event they may be hosting. We’ve all seen these in various developments in our own hometowns, right? Are they equipped with two huge fridges like this? Not freakin’ likely. Combined with the adjacent dining area, a very nice wedding and/or reception, or New Year’s Eve party would rock. I know a couple folks who own catering companies. One of their most common challenges is a far too small kitchen for a far too large crowd. Not here.

This next one is of the dining room area contiguous to the kitchen. You can easily see how it’d be perfect for pretty much any social gathering you’d ever wanna put on.

What an inviting ambience — a very adaptable environment. You can’t see the fireplace in this shot — but it’s there and obviously adds to the mood of any gathering when the weather is cooler. Most of the great rooms provided by developments we’ve inspected around the western U.S. have been mundane at best, and claustrophobic at worst. As you can readily see, that’s simply not likely in this room.

There are 3-4 other rooms of pretty good size, just down the hall from the kitchen pictured above. Here’s one of ‘em. Besides the normal stuff, baby showers, birthday parties and the like, it’s perfect for seminars, business conferences, club meetings, or whatever else we could come up with. These rooms have a capacity of around 130 or so. Notice, as in the other rooms, how high the ceilings are. Some may say that’s of little or no consequence, but to someone who speaks around the country, and attends various conferences on a more or less regular basis, it matters — big time.

The next couple shots are literally unique to my experience. The first one is of the computer room. A dozen or so computers with printers etc. for the residents to use at their will. What is so cool about it is how many kids use it to do their homework, print it out if necessary, then adjourn to the real reason they walked over there in the first place. I suspect the kids go there, not cuz they don’t have their own ‘puters at home, but cuz their friends go there too. The second pic is of the — I kid you not — video game room. No, not makin’ it up. The ‘wallpaper’ you see is not only not boring, but soundproofing. See the black leather chair? It’s a gaming chair — with all the controls required to play whatever game you’ve loaded.

Are you freakin’ kiddin’ me?! Where was that room when I was in school?

Please — I dare ya — tell me you’ve seen a weight room like this in any place not considered a slam dunk luxury development. I’ve been to dozens over the years, and the only ones that rivaled this one were condos on San Diego’s coast or in comparable locations. This is far and away the best workout room I’ve seen since I’ve been takin’ clients outa state. That’s almost seven years. I love this gym.

Look what they put up at the pool for the kids! Gotta think a half hour to 45 minutes max, and your rugrats will be ready for some ‘quiet time’. I can see their eyes when they first spy this incredible setup — probably turned into banana cream pies. When I was young, only special carnivals and such places had stuff like this. Tell me you wouldn’t sneak on it yourself, pretending to show your kids how it’s done.

Note: Remember — click the pictures to get a full size shot. They’re worth it.

About 10-20% of my clients actually fly to wherever I recommend they invest. Those who have made that choice recently, and have decided to check out North Dallas, have come back completely blown away. They’ve not seen amenities like what they were shown by my team. Much like they do when tenants take a look-see, the place sells itself. Numbers are fine and dandy, but seeing is believing.

Hey you! I need a fix. Please, gimme a call, OK? Try 619 889-7100 and you’ll find me. Have a good one.

Happy Friday to all. Second verse same as the first. It appears that Eco news today caused a mass sell-off of mortgage backed securities today when it was announced that economic growth was not as sluggish as many thought it would be. Although first estimates of the GDP were 2.4% and the revised numbers came in at 1.4%, you would think that just the opposite would be happening and mortgage backs would be more favorable than stocks, but, many forecasters were expecting the revised GDP numbers to be closer to 1.2, and 1.4 looks a heck of a lot better than 1.2. Now, patience is not a known trait of a Wall Street Investor, so this news caused a sell off of MBS and purchases of stocks. As I write this, the Down is up a robust 100 points, the NAZ is up 22 points and our friends, the mortgage-backed securities are down -16.

By no means should this be taken as a sign that the US economy is back on track. Big Ben (Fed. Chairman), stated that the Fed is still prepared to take any additional action needed to ramp up the US economy if needed. This of course only adds more octane to Wall Street Investors’ coffee. Although any gains that the MBS made this week were completely erased by today’s sell off, I’m sure that this is a temporary result of profit-taking.

Today’s rates:

5.125% for Single-family investment purchase
5.125% for duplex investment purchase

Office Direct: (210) 483-4962
Mobile: (210) 557-6320

I wanna be a 23 years old major league pitcher with an indestructible right arm capable of throwing 140 pitches every fifth day at roughly 97 mph. Oh, and I wanna be able to have pinpoint control with not only my fastball, but my killer curve, and my virtually un-hitable sinking change-up.

I know, I’m bein’ a first degree smart-aleck. But you get the gist, right? Nobody — well, almost nobody, is sayin’ that appreciation can’t or won’t ever become reality again. But there are a couple lines here that’ll need to cross. The line that stretches down the road year after year ’till appreciation returns — and the line dictating when you shuffle off this mortal coil.

We used to say something quite different when we talked about San Diego real estate. Since I first entered the business, it was common to hear the old veterans talk about how if you invested in an investment property today, in 10 years, regardless of the predictable cycles, you’d have experienced a significant increase in value. That was indeed true from the late ’60’s through the the first few years of the 21st century.

Alas, those who still believe that ship hasn’t sailed will suffer the consequences at retirement — that is, if they can retire, having waited for a ship that now lies on the ocean’s bottom.

For the foreseeable future, let’s say the next 5-10 years, it’s more likely you’ll learn to successfully dribble a football than see a rise in your income property’s value in the next 5-10 years.

‘Course that’s just an opinion. My crystal ball is as accurate as yours, right?

I’m predicting a further drop in real estate prices in most, not all regions, and have been since the first of this year. I think in places like SoCal it could be 10% or more, we’ll hafta wait and see. What that means in practical terms is that those who buy ‘at the bottom’ may soon learn, as those who bought in San Diego and places like it in 2007, that prices could indeed continue dropping. I warned them then as I’m doing now. If you’re wanting to buy a home or a 2-4 unit property in which to live, go ahead, cuz over the long haul it’s your home, not an investment.

Please believe me when I tell you, the days of reliable appreciation are over, and for a long, long time.

Think about becoming a west coast investor today. You close escrow in early October, payin’ $250-255,000. Over the next 1-2 years your property loses 8% in value. Now, in order for you to benefit from any future appreciation the property must first appreciate 8.7% to make up for that 8% drop. If after your first couple years the value did decrease by 8%, a credible scenario in my view, it’d take another couple years at 5% annual appreciation just to get you to ground zero — your original purchase price. (20% down payment is assumed here.)

That sequence of events took four years and you’ve gone nowhere. If the market then blessed you with five years of 5%/yr appreciation, your place would then be worth about $322,500. So, in nine years you would’ve netted, before taxes that is, (but after 8% costs of sale) roughly $146,000 from the sale of your property. (That includes the loan balance having been reduced.)

That’s a bit over 11% a year. (I’m using simple math here to make a point.) Sounds relatively OK to better than OK, right? Well, not really. Here’s why.

Those who refused to buy into the hope for appreciation, bought in regions where solid location and positive demographics produced cash flow from Day 1. Think in the example above in San Diego. They made a bit better than an 11% annual return based upon the purchase/sale prices. There was no cash flow. In fact, I quietly assumed they had a break even, which in SoCal is a bad joke when using just 20% down. For those who’ll wanna comment about how they’ve recently done just that, I’m only talking about locations where the investor need not shoot their way in and out of the neighborhood. Minor detail.

Remember: If ya wouldn’t put Mom or Grandma there to live alone, ya didn’t get it from me.

Back to that impressive 11%+ annual return.

Real estate investors currently acquiring income property in areas justifiably known as growth regions, are cash flowing at a 5-10% cash on cash rate annually — with 20% down. Now don’t say it, cuz I can see your wheels spinnin’ away. Wait just a minute here, BawldGuy, 11% is 11% no matter how it’s sliced, right? Yeah, but at this point we should discuss how in the real world sometimes one man’s 5-10% beats another man’s 11% eight ways from Sunday.

It’s all about doin’ things on Purpose, and with a Plan.

The guy choosing San Diego or pretty much anywhere else on the west coast, is gonna hafta put at least 30-40% down payments just to break even in good areas. For instance, those banks who lend to self-directed IRAs and Solo 401Ks? They won’t even talk to those who wanna invest in California unless they’re willing to put at least 50% down. Still, let’s disregard reality for the moment, and say 20% broke you even.

So what?

The investor who bought the cash flow property is applying that cash flow each month to the reduction of the loan balance. Let’s look at how they fare over the years. I’m assuming no increase in value for the cash flowing property, or any increase in the net operating income whatsoever over the entire holding period.

In the first example our San Diegan realized an 11%+ return annually after nine years. We assumed they lost 8% in value the first couple years. We’ll assume the same for our cash flow investor to make it fair. It’s irrelevant, but we’ll do it just the same.

In nine years the San Diegan’s fantasy property (Sorry, couldn’t hep myself) has a loan balance of $170,100. The growth region/cash flow investor has a loan balance of just $115,000.

Oops — seems a few hundred a month of ‘meaningless’ cash flow has increased our growth region investor’s equity by roughly $55,000 over his San Diego counterpart.

Let’s fast forward 7 years and 9 months later, OK? (This is fun.)

It’s now been 16.75 years since these two investors made their respective choices. Let’s look at how they each fared.

The San Diegan now owns a property with a loan balance of approximately $127,600 or so.

The other guy? He doesn’t owe one thin dime. His cash flow is well over $1,500 monthly at this point. The San Diegan? He’s still thrilled his property is breakin’ even.

Remember, we allowed for no appreciation in value or net operating income. But if we allowed the San Diegan to increase his NOI by half over the 16.75 years? He’d still only be cash flowing about $560 a month — a far cry from the $1,500 our growth region guy enjoys. Further more, unless he takes a page from our cash flow dude, he’s still gotta wait almost 14 more years to be free and clear.

Bottom line?

The cash flow investor in this example has a gross equity of $250-255,000 in 16.75 years — without dollar #1 of appreciation. His capital, not counting any cash flow, grew from about $55,000 to say, $252,500. That’s an annual capital growth rate of 9.5% — again, without any appreciation whatsoever.

BawldGuy TakeAway: If you own property in San Diego, or pretty much anywhere on the west coast, please, I beg you:

Get Outa Dodge Now.

Take your investment capital and/or your current net equities in local income properties and put them where they’ll actually produce the results you wanted in the first place.

Stop tryin’ to dribble a football. It can’t be done. So why do so many keep tryin’?

Let’s talk about your situation, OK? What’s your plan? Gimme a call at 619 889-7100 and we’ll figure things out together. Come on, I need a fix. Have a good one.

Anywho, cap rates. (Capitalization Rate)

Plain English Definition: Arrived at by dividing the Net Operating Income (NOI) by the price paid, or contemplated. Example: NOI = $10,000 — Price = $125,000 — Cap Rate = $10,000/$125,000 = 8% Cap Rate.

Put another way — If the investor pays cash for this example, his cash on cash return, before tax, would be 8%.

This is all preamble to the false assumptions and/or pitfalls of chasing high cap rates. They don’t exist in a vacuum. A cap rate is merely another factor in a pretty full bag of factors — all of which have their own affect on your investment decision. Yet when I speak to investors countrywide, from time to time I get the feeling a property’s cap rate has been given far too much importance, relative to other elements in the decision making process.

Here’s the biggest snake in the woodpile.

Take a step back and try to find the common denominator running through most of the high cap rate properties you may have run across lately. If the numbers used to arrive at the rate in question are real (highly questionable 80% of the time, btw), you’ll notice the locations are, um, probably not of the highest quality. Let’s not be so ambiguous though, and define high quality location.

Over the years I’ve had to solve the communication problem arising when a member of my team in a region in which I’m doing business, tells me, “it’s a ‘great location’.” What the Aunt Fannie does that even mean? I solved it so that there’s virtually no misunderstanding about what the phrase ‘great location’ now means.

It means I’d put my 79 year old mom in it to live alone without battin’ an eye.

If someone figures a way to misunderstand that one, he’s no longer on my team. And yeah, it’s happened once.

Thing is, you’ll generally find that the higher the cap rate the worse the location. Think about it. The higher the cap rate is, the lower the price. If the location is so good, why is the price so relatively low as related to the income? Ya can’t have it both ways. Either it’s an excellent location or it ain’t. If it is, that cap rate just isn’t gonna be that high.

BawldGuy TakeAway: Cap rates aren’t the be all end all. They’re another tool of measurement. They’re also affected big time by their relative geographic location. Real estate investors who’re goin’ for cash flow should consciously resist being seduced by the many false assumptions underlying a high cap rate. Ask yourself: Would you put Mom in there to live alone?

Remember we want high quality tenants, stable rents, low and quick turnover. I’ll take a lower cap rate in that kinda neighborhood almost every time when compared to an inferior location offering a higher cap rate.

Those who chase high cap rates into the ambush of bad location and what naturally flows from those locations will suffer the consequences in increased expenses, more intense management, higher turnover, and slower rent up times.

Beware the high cap rate. It’s more likely than not they’re high due to either inferior location, or faulty numbers — or both.

Let’s talk about what you’re lookin’ to make happen. The first step is to gimme a call at 619 889-7100. Have a good one.

The friction, of course, is caused by the practical need to get things rollin’ with a sense of urgency, while keepin’ at least one foot firmly entrenched in the Zone of Comfort. Frequently this results in the investor takin’ a step back to define exactly which comfort level they’re gonna salute, cuz there’s a couple, not just one — and their demands are often in conflict with each other — irritatingly so.

We all have that Right-Now comfort zone. We like to do things like, ‘test the water’ or ‘check things out’ in terms of process and results. It’s not by any means a stretch to say that this is, more or less, universal — not to mention, prudent. Problem is, when we’re talkin’ about our own retirement, it dawns on us that insisting on the appeasement of our Right-Now comfort demands can take us completely out of our too fast approaching Retirement comfort zone.

What to do?

I often suggest an old fashioned gut check. Preparing for and investing for the purpose of building a wicked cool retirement when time ain’t yer friend, is gonna involve choices. Do ya wanna be a tad outa your current comfort zone — or — be comfortable now — knowing your retirement will be less than it coulda been? It’s a tough call forced on many who wake up one day realizing they need to ‘power up’ their current Plan. I get calls from those folks the next day, all the time.

Here’s some advice based on over 40 years of experience.

Learn the difference between feeling anxious about doing more now than perhaps you’d prefer, and doing something that is flat our too risky, and born of panic instead of a Purposeful Plan. The difference is huge. The former is anxiety, generated from a personal preference. The latter is your gut tellin’ you to slow down and back the heck away from the cliff’s edge.

The two are worlds apart.

Overcoming your personal preference for doing less than is indicated as necessary to accomplish your goals, given your timeline, is doable on an objective level. You can empirically see the prudent moves resulting in the retirement you’ve always envisioned. It’s kinda like workin’ out in the gym, right? Some physical stress today, for what you confidently perceive as worthwhile rewards tomorrow.

Playin’ the silly game of catch-up by doing things you know aren’t wise, is analogous to the gambler tryin’ to make up his losses by doublin’ his bets and throwin’ caution to the wind. Whether you have lots of time, or are watchin’ the last grains of sand in your retirement hourglass hit the pile below, this approach is never, as in never ever the way to go.

BawldGuy Takeaway: Whatever answer you choose is probably gonna be right for you. You wanna make sure whether current comfort or a comfortable retirement is more important to you. Comfort means different things to different people, so understand — there’s no right answer for everyone. It’s gotta feel right for you. Just understand the more or less predictable results of whatever decision you make.

As you’re pondering how to make serious progress towards retirement the next 8-15 years, don’t let the loud ticking of Big Ben intimidate you. But do understand the message it’s delivering — loudly and clearly.

Wondering what you can do to get your retirement Plan back on track? The first step is to gimme a call at 619 889-7100. Have a good one.

I play recreational poker about once a year usually with the nephews for braggin’ rights. The game can be fun to play and, even playing with nephews, it can increase the heart rate a bit. Thank goodness they fall for my incredible theatrical talents at the table and I usually collect all their chips.

Well, while poker may be fun to play and tell stories about, it only serves in this article as an analogy with what may be happening with many individuals who are setting up self-directed IRAs and 401Ks. Many people are tired of the Wall Street yo-yo of up and down performance. And, it certainly can’t make one’s heart or stomach feel any better.

Consider some facts.

We must understand that while the S & P 500 has made a rebound of sorts in recent months, the market is nearly 25% less than it was 10 years ago. Also, when taking accounting for inflation, these numbers are even more disconcerting. In addition, many people who were counting on home values as part of their “assets” have seen their homes, on average, dip 30 -40% in value. Foreclosures are at a record high and…does anyone remember the days of equity in their home??!! Possibly the saddest aspect, however, is that this happened to many, many people and these individuals had no plan or call to action to take control of their retirement assets.

So, what does this have to do with poker and going “ALL IN”? People have severe angst with Wall Street and want options. They are tired of losing money, feeling like they literally have no control and are further infuriated when they know that their broker still makes commissions…whether their account gains or loses in value. They are desperately searching for options. Like in poker where the player has the smallest and dwindling pile of chips, they tend to take the approach of “ALL IN” as they feel they have no other viable options. In many cases, they are desperate and are searching for options.

This anger, worry, sadness…whatever words you want to attach to it…instinctively leads people to react in two very common ways. First, they may resign themselves to the attitude “woe is me” and that there is nothing they can do other than try to ride out the storm and hope for better days. The “put your head in the sand” approach is easy to fall into. A second approach may be to develop an “ALL IN” mentality and completely reverse their course of action and invest in assets which will lead to a more stable end game.

Most people are not aware that they can self-direct their retirement assets. Or they may know that this option exists, but have been scared to take that step. When the individual DOES take that step to self-direct, many take on the “ALL IN” mentality and forgo and forsake the “traditional” investment world’s view of “what works”.

Just like poker, an individual can go “ALL IN” or make other types of bets (options with investments). But the moral of the story here is that one doesn’t have to go “ALL IN” with their self-directed IRA or 401K. They have the ability and option to do so. They have the option to figure out what the “advisor” at work wouldn’t tell them because it simply didn’t fit with what they had to offer.

Now, it is true that many companies who assist individuals in establishing self-directed IRAs and 401Ks have imposing fees. These fees may make it difficult for the typical individual to justify owning several or multiple assets. They question their ability to achieve a good ROI when significant fees must be paid just for the ability to self-direct. They tire in their research and are disgusted that companies charge fees for practically everything. When spread out over many years, individuals can easily spend tens of thousands of dollars in fees just to self-direct…all this and still not actually have true control of their retirement assets.

What to do?

Determine IF you want to self-direct your retirement assets. Get educated on the process and difference in companies (i.e., custodians, administrators, facilitators) that assist with establishing self-direction for their clients. If you choose to self-direct, your eyes will be opened to a world of potential investment opportunities…but you have to make the choice that you want those options.

IF you do want to self-direct, determine if you want to hand over checkbook control to someone else or do you want control of the checkbook.

Understand the fee structure of the companies.

One company may have a one-time fee. Another company may have annual, on-going fees. But compare apples to apples. The company charging a one-time fee may charge a fee that represents 3 years of fees with another company. But, will you be self-directing for one year — ten years — 20 years? Bottom line is to consider working with a company/individual whose fees will not penalize you for: 1) growing your plan (why should you pay more in fees for increasing the value of your plan?); 2) owning multiple and several assets within your plan; and, 3) owning both “traditional” and “non-traditional” assets within your plan.

Education and Support -– Do you feel the company has a strong knowledge base in this field and will they be there to assist you in the future with questions you may have. Do they provide this assistance, do they charge for this assistance, etc.?

Trust -– An oft-used and sometimes lightly regarded word. Do you trust the company/person with whom you’re working? Are they interested in education and assistance or making a sale? In establishing this trust, it is always okay to ask for testimonials and the ability to speak with current clients.

Self-direction allows you the ability to go “ALL IN” but, more importantly, it gives you the ability and option of choosing in what you want to invest, when you want to invest, where you want to invest, how much you want to invest, etc. If structured correctly, you will have full control and you just may not have that fearful thought that your only option is to go “ALL IN”.

It has been a crazy up and down week as far as the mortgage-backed securities are concerned. This weeks up and down action resembled something out of a ‘Rocky Movie’. You have the mortgage-backed securities resembling Rocky getting pummeled for two days straight by the Dow Jones, who we’ll refer to as Apollo. Investors and forecasters were sure that this was signaling the potential end of the historically low rates that we have all been enjoying for some time. The MBS were being dropped to the canvas quicker than you can say profit-taking. But amazingly and predictably enough, Rocky (MBS mind you), finds the strength to summon up a flurry and punch it’s way out of defeat and gain the upper hand. So how did this all happen?

Part of it could have been the brass knuckles insides Rocky’s gloves…The labor department had more bad news that first time unemployment benefits seekers rose by 14,000 to an adjusted 500,000. Again this was all too predictable, and was just enough to send investors scurrying for a safe place to store their “cheese”, and of course the safest place for an investor to store their “cheese” is in the safe haven of treasuries and mortgage-backed securities until the dust settles.

Analogies out of the way, this has most certainly caught the attention of Big Ben Bernanke and the Obama administration, and I’m sure they’re already looking at additional stimulus plans to jump start the economy again. Who knows how this will end up, but there are a couple of things I would like everyone to consider, and again this is strictly only my opinion.

We need to watch the Dow very carefully because as you all know, this is the last hurrah for the Bush tax cuts, as next year, big business, and publicly owned companies are going to experience higher taxes and the government taking a bigger bite out of their profits in 2011. Wouldn’t it make sense for said companies to report their biggest profits and growth in 2010 than in a certainly higher tax laded 2011? If the Dow closes up over 10,800 in the near future, that could certainly mark the end of Rocky’s career and the resurgence of the Dow into 11,000 land. But it wouldn’t surprise me to see just the opposite happen, not much surprises me anymore. So what does all this mean to the investors?? Get in while the getting’ is good! Don’t wait too long, or you may miss the boat all together. This is certainly going to get interesting as the final 4 months of the year is shaping up to be a potentially crazy finish.

O.K. I’ve talked long enough, onto the rates for this week:

Investor Rates for purchase, 20% down: 5.125%, Same for duplex with 25% down as always.

I have been receiving numerous requests for refinances of investment property as of late, and please keep in mind that if you have 5 or more properties with financing on them, but at 10 or less, we can help you refinance the rate and term, by doing a direct-sale to Fannie Mae as they are the only investor who will purchase these loans. But you cannot cash-out your equity as Fannie Mae does not permit cash out. Now if you have 4 or fewer properties with financing, you don’t have to abide by that, as we are allowed to ‘in-house’ finance you.

Secondly, if you have the 5-10 and are looking to refinance just the rate and/or term, also keep in mind that it is not 75% loan to value, as is the case with our current LTV basis, it is in fact 5% less with Fannie Mae on 1-4 unit properties, so it will be limited to 70%.

I hope everyone has a great weekend, and let me know if I can help. You may contact me here.