In case you somehow missed it, President Obama last week signed an extension of the tax credit for first-time home buyers.

The credit that was set to expire on Nov. 30 will now be available to those who have an offer accepted by April 30 of next year and close by June 30. Buyers who haven't owned a home in the past three years are eligible for a credit of 10 percent of the home's purchase price, up to $8,000.

What's interesting, though, is that the bill that carried this extension for first-timers also has a provision for "move-up" homeowners. Anybody who has lived in their home for five years will get a tax credit of up to $6,500 if they purchase a home of greater value.

Why is this new provision included? Well, because while somewhat successful, the original first-time buyers credit didn't have all the economic effect lawmakers and those in the real estate industry would have liked it to have.

One criticism was that of about 1.4 million Americans who qualified for the first run of the credit, only about 350,000 homes were purchased by those who wouldn't have bought had it not been for the tax credit. Sure, that's a 350,000-home reduction to the inventory glut of homes on the market we have -- but it's not enough of a dent to help the overall economy much.

This real estate problem in the U.S. is kind of a circle. The number of foreclosures that hit the market in the past couple of years helped sink prices. With sinking prices, more homeowners owed more on their homes than they were worth, which leads to more foreclosures. More foreclosures lead to more inventory, and more inventory leads to sinking prices.

On top of that, with credit tightening up, there were fewer buyers out there. More inventory with fewer buyers meant further pressure on prices. So the government, recognizing it had to do something with the real estate market in order to help the overall economy, set out to A. slow down foreclosures; and B. increase buyers while decreasing inventory.

And the tax credit helped bring buyers to the market, which in turn helped reduce inventory. THAT in turn, has helped prices finally start to stabilize. They are, in fact, creeping up in some markets.

What didn't happen, however, is the the full effect everybody was hoping for.

"It did not have the chain reaction impact it was supposed to," National Association of Realtors Chief Economist Lawrence Yun was quoted as saying in aCNN/Money article. "Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers."

So by extending a credit to current homeowners, the hope is that more people will enter the market and homes prices will further stabilize. The thinking goes that as home prices stabilize -- beyond the lower end of the market -- more consumers should be more confident in their spending, which will further stabilize the overall economy.

So the effort has been made to further close the circle that is the real estate market. Will it work? Only time will tell, but trying to involve more people in that circle could be a big step.

I've written about it before, both on this blog and in the Income for Life Members-only Newsletter, but it bears repeating again.

Focus on investments you control.

The lesson was reinforced by the whole Bernie Madoff ponzi scheme that got so much attention, and, unfortunately, it comes to light again with the collapse of an Idaho company called DBSI Inc.

According to an article in the Minneapolis Star Tribune, DBSI has filed for bankruptcy, leaving thousands of investors likely empty-handed.

The company apparently specialized in commercial properties, getting investors to put up cash for part-ownership in properties and "guaranteeing" a rate of return.

This sort of real estate investment appeals to investors and would-be investors because it's passive. This company promised a return of 6 to 10 percent, according to the article, without the investors' involvement in the property. The lure of passive real estate returns enticed approximately 8,000 investors nationwide into handing money over to DBSI, the article said.

The company got around securities regulations issues by structuring the investments as something called "tenants in common,"  or TICs. From the article:

"TICs, the little-known investment that proved DBSI's downfall, involved selling little pieces of commercial property to lots of investors. A single office building, for example, could be owned by 20 or more individuals, each of whom would receive a deed for their percentage. DBSI would buy the property and flip it to the TIC investors at a markup, from 20 to 40 percent."

The company would hire a management firm to operate the property, and investors would just sit back an collect checks. Seems a nice setup if you're the investor.

However, the company guaranteed the investors' monthly payments, regardless of the properties performance. That should immediately raise a red flag -- no business, no investment can keep paying profits regardless of its revenue. How did the company keep paying its investors? Apparently with money it received from new investors -- which makes it little more than a Ponzi scheme itself.

Now, I'm not saying that all companies that do this are crooks. Or that it's always bad to invest in property that others manage, creating passive income for you. But this company, apparently, sold these investors pieces of property without disclosing risk, according to the article, and that's the key thing.

In any investment, there is always risk.

Yes, this company seems to have taken the money of unsuspecting investors, including some who were counting on the income for retirement. Shameful. And, yes, this company looks to have exploited a loophole with the TIC structure that helped them avoid securities regulations when, in effect, they were selling securities.

But there is still a lesson for the investor: Be wary of investments that you don't control.

If something seems too good to be true, it probably is. There aren't such things as "guaranteed" real estate investments. You don't want to deal with companies that don't disclose that there are risks. You want to steer clear of anybody promising you a return no matter how many vacancies the property incurs. According to the article, the company bragged that no investor ever lost money.

Steer clear.

It sucks that there are companies who continue to dupe investors. It sucks that it gives reputable real estate companies a bad name. It sucks that so many people who cling to the idea of truly passive real estate investment just hand over their hard-earned money.

But it serves as another lesson for investors.

Income for Life Members, if you haven't yet received your November Members-Only Newsletter -- make sure you keep your eyes open, as this is something you won't want to miss.

For the IFL audio series, I interviewed Than Merrill of A&E's "Flip this House." Since retiring from an NFL playing career five years ago, Than has turned into a top real estate investor, buying and selling more than 350 properties.

He’s in his third season of filming “Flip this House” and has offices on both coasts — New Haven, Conn., and San Diego, Calif. During this fantastic interview, Than shares:

• What led him to real estate investing
• What his first investment was like
• What investment strategies he has tried
• His thoughts on systems and having a team
• How he profits in a down market
• How investors can help buyers get qualified for financing
• How much of the real estate business does the TV show reveal?
• His plans for the future
• And more!

This is a great interview. I honestly believe Than and his team are the best on Flip this House, so this interview is something every real estate investor will want to hear.

Also in the November newsletter: How you can help your tenants purchase your house; a simple and effective way to invest in the stock market; opinions on the first-time home buyer tax credit and more!

Not an Income for Life member yet? Visit www.IFLapplication.com to fix that.

I know it's not even Halloween yet, and we have a bunch of holidays to celebrate and a new year that will dawn before we get to February. But that doesn't mean it's too early to start getting ready for February now.

"What's the big deal about February?" you ask.

It's the month when the new credit card laws, signed into the law books by President Obama this past May, go into effect.

If you're one of the millions of Americans who owe somewhere around the average of $17,000 in credit card debt, the new laws are there to protect you. Banks can no longer raise your finance rate without telling you, and they have to give you 21 days to mail your payment instead of 14 -- among other things.

If you're NOT one of those deep in credit card debt, well, the new laws could very well affect you, too. See, when congress imposed its will on banks in an effort to help those struggling with credit card debt, it touched off a sort of cat-and-mouse game.

Since the bill was passed by congress, we've seen banks start raising interest rates while they still can. We've seen them add annual fees to cards that didn't have them before. "If you're going to take away this," the banks seem to be saying. "we're going to take away that."

A recent article in USA Today reported that some banks are expected to charge fees to cardholders who don't carry a balance on their cards, or those who don't charge enough in one year. And don't think it's not coming --way back in the first quarter of this year, 25 percent of all credit card offers carried an annual fee, compared to 18 percent a year ago, according to data in the USA Today article. Banks were starting to charge fees BEFORE the legislation was signed.

So forget for a minute the irony that legislation that was supposed to help people stay out of credit card debt is one of the things behind the card issuers' punishment of those who DO stay out of debt. Instead, prepare yourself for February by beginning to assess your credit card situation now:

1. Do you have a card or cards for which it would be worth it to pay an annual fee? Is there some kind of reward program or frequent flier airline value to the card that makes it too valuable to dump over a small fee? You must waive that.

2. Look at your credit score. Is it good? Or can you do things to boost it by February -- either by disputing errors or paying down debt? It's going to be fairly important because ...

3. If you have a good score, your bank is more likely to waive the fee if you call and complain. If they don't, and you refuse to pay the new fee and cancel the card, you will have the option of finding a better option. Without a solid score, it's not as strong an option.

4. Consider keeping a card with a small annual fee if your available credit line is big. Part of your credit score is "utilized credit," which takes into acccount how much credit you have available to you vs. how much you're using. Closing cards with big limits can ding your score.

OK, February isn't exactly close yet, but remember that it's not too early to start going over your credit card situation now in order to save some money then.

I found a great Money Magazine/CNN.com article yesterday about investing in distressed real estate. It's probably the most thorough article I've read as far as explaining distressed real estate to an inexperienced investor. The headline is: "Is this $6,900 home a bargain?"

The article focuses on the city of Detroit, which has become as much a symbol of the real estate bubble burst as any city in the country. And to answer the article's headline question, yes, the $6,900 house turned out to be a bargain.

But the investor was not a flipper. He is a retired police officer looking to supplement his pension. He purchased the house for cash and spent about $15,000 including repairs, which turned out to be minor. He is renting the house out for $800 per month and after taxes and maintenance fees should have his money back in three years.

This is the difference in real estate investing now vs. three years ago. Speculators and flippers dominated the market back then, with appreciation rising so fast in some areas that new construction homes were being sold more than once before the building was even finished. This is what fueled the bubble.

Now, after the burst, the low-priced bargains are out there. But sensible investors, instead of trying to capitalize on insane appreciation, are looking at acquiring properties that they can own free and clear in a short period of time, and they plan on holding them for long-term income. It's kind of back to the way that real estate investing has always been.

This is a much safer strategy for a beginning investor. Although, like the article warns, not every low-priced home is a "bargain." There was an example in the article of a $14,000 home that, because of all the damage, would have been a rip-off. Unfortunately, not every beginning investor is going to know that. Someone will get stuck with a nightmare on his or her hands.

One sentence from the article really hit me: "Unlike stocks, an investment in real estate turns you into a businessman." How true. I have a feeling that with the rock-bottom home prices in many areas, beginning investors are launching their "careers," finally dabbling in real estate investing. Which is great.

However, I hope they heed the warnings in this article. I know that Income for Life member investors have always been instructed on the two main points in this article:

1. That you have to know the difference between the right house and the wrong house

2. That becoming an investment property owner makes you a business owner.

My advice to beginning investors who are looking to use the current real estate market as a way to build wealth is -- Go for it, but be smart and get guidance from someone who has experience.

Because, no, not EVERY $6,900 house is a bargain. Don't find out the hard way.

I've written about a very important strategy for improving your monthly cash flow in past Income for Life Members-Only Monthly Newsletters, but it is worth mentioning again now.

You see, in today's real estate investing world, cash flow is king. True, some markets around the country are experiencing a recovery in home values, but overall we're not seeing the huge jumps in appreciation that made real estate such an attractive short-term investment during the real estate boom that ended a couple of years ago.

But with lower prices overall in addition to low interest rates, lower mortgage payments mean bigger cash flow for investors. I've heard of investors earning $400 and $500 per month in cash flow on single-family homes, which was rare when real estate prices were escalating rapidly. A property that cash flows that kind of money is a solid long-term investment, even if we're not seeing the jumps in re-sale value that had so many investors jumping into the game during the "bubble."

But another cash flow boost the down economy is providing is one I have a feeling many investors are letting slip by: lowered property taxes.

As home values slide, so should what you pay in taxes on any property -- including your primary residence. If you are paying more than you should be in taxes, you are hurting your monthly cash flow. It's that simple.

The good news is that you can attempt to boost your cash flow by challenging the value of your home on which the tax assessment is based. The process for doing this varies by area, but you should definitely check your local government's way of handling this, and if you believe your home's value is below what you're being taxed on, follow your area's appeal process.

Let me give you an example: The county where I live this year reassessed property values (they do it every three years). I know somebody whose new "fair market value," as determined by the county, is $30,000 less than the market value his taxes have been based on for the last three years. His 2009 taxes will be about $600 less than they were the three years prior. Because his tax payments are built into his mortgage payment, his payment will go down about $50 a month.

But what if he had appealed last year, when values were down? Or in 2007? Could he have saved $50 a month two years earlier?

And think of this scenario with an investor who owns multiple homes. It is worth the effort to challenge the value on every home you own, in order to boost the cash flow of all your properties.

Again, appealing your property's value varies by location, so check your locale's website or auditors office for specific information, but here are some general things to know:

1. You must prove that the value of your home was less than the assessed value as of the assessor's date, which is usually Jan. 1. It's not the value NOW; your assessed value is determined by what your house was worth when the tax period started.

2. You must be able to prove your case at an appeal hearing. That means you must provide comparable sales, or "comps," that support your argument that your home was worth less on Jan. 1 of this year. Generally, five comps is sufficient. They should be within a mile or so of your address and preferrably not more than two months prior to the tax assessment date. Do not use foreclosure sales or "short" sales, as most locales won't consider them.

3. Check your home's status for any factual errors your town might have for your home. For instance, if the tax record says you have four bedrooms but you only have three, include that in any appeal, as that fourth bedroom automatically increases the assessed value of your home. Look for mistakes in the tax record -- no one else is going to do it for you.

4. You will most likely have to attend a hearing to dispute your value. After yours is scheduled, it might be a good idea to sit in on someone elses, just to see how the proceedings work. The more familiar you are with the hearing the better off you'll be when it's time for yours.

5. Beat the deadline. Most locales allow you to dispute an assessed value for only a period of time after the date the value is determined. Make sure you meet that timeline. For example, if your town says you only have 30 days after Jan. 1 2010 to appeal your 2009 taxes -- make sure you beat that deadline, or you will be out of luck.

6. It's worth it. In the past, I have heard homeowners and investors say the time it takes to dispute an assessed value isn't worth the savings. But consider this: Most locales do not re-assess every year. So if you can get your value adjusted, the tax savings might very well be for multiple years, not just one. And remember, multiple years of savings on mulitiple properties -- if you're an investor -- could mean a substantial boost to your cash flow.

The down housing market has affected everybody who owns property; you simply may not have the equity you had at the market's peak. But if you have a chance to use the down market to reduce your taxes and boost your cashflow, you are making the situation a bit better.

I have devoted a lot of time to studying wealthy people, so I pay attention to the Forbes magazine list of the 400 wealthiest Americans when it comes out.

This year, the 400 are a bit lighter in the wallet than they were a year ago. Last year it took a net worth of $1.3 billion to make the famous list. This year, it took "only" $950 million. The recession has affected the wealthy, too.

An interesting piece on Forbes.com that went with the list says that the best way to eventually make the list is to own your own business. Of the wealthiest 400 Americans, 274 were self-made entrepreneurial types. Of the top 10 on the list, six of them made their own fortune (as opposed to having family money). The lesson to me seems clear: Own your own business.

The Forbes online article also features answers to questions on 22 different topics by eight of the self-made billionaires on the list. The topics range from their take on national health care, the state of the stock market, where they'd invest in real estate right now, their biggest investment blunder and even how much vacation is the right amount each year. The answers are interesting.

I was particularly struck by R.J. Kirk's answer to the question "Describe your life in five words." Kirk, who made his way to billioaire in pharmaceuticals and investment management, answered:

"I decided to be happy."

Powerful stuff. I think a lot of people think about what we think will MAKE us happy -- winning the lottery, getting a better job, living an easier life. But a look inside the thinking of a self-made billionaire shows us his different mindset. "I decided to be happy."

Doesn't this seem like the first step toward financial freedom, taking control of the process? And couldn't all of us make this decision, regardless of what endeavor we're pursuing? It's something we should think about. 

Income for Life Members, I just wanted to share with you what to look for in this month's Income for Life Newsletter for October, which should be arriving shortly if you haven't gotten it already.

This month features a re-designed format! It's the same 12-pages, but I've tweaked it a little so that I can bring you more information, education and entertainment. I think you're gonna love it.

Also, In this month’s Income for Life CD Audio Series, you’ll get to hear how Jim Pockross, author of "Confessions of a Real Estate Mini-Mogul" built a real estate empire starting with nothing. He overcame adversity such as arson and today owns and manages over 270 units and enjoys financial independence.

You’ll get to hear a few funny stories and a few struggles Jim encountered along his path to financial freedom. In fact, you’ll learn:

1. Why he selected apartment buildings as his primary investment vehicle.
2. Various ways he structured partnerships to raise funds to buy larger properties.
3. How to build your self-confidence
4. A safe, sound investment approach

If you haven't checked out the exciting October Newsletter, be sure to do so ASAP!

Not yet receiving the jam-packed Income for Life Members-Only Newsletter? There's an easy fix -- just click here.

I've written on this blog before about signs of life in real estate markets around the country and about trying to "time the bottom" of the market in the Income for Life monthly newsletter. Unfortunately, I believe there are many investors who are waiting, trying to time the market, and are probably passing on good deals as a consequence.

Now, as always, I am not saying we are at the bottom of the national real estate market. Of course, there really is no "national" real estate market -- national statisics are just a conglomerate of various local markets, and individual markets are the ones that matter. But there is evidence in some markets that the bottom is approaching, or has even already arrived.

There are certain things to pay attention to in each market when you're trying to time the "bottom," which is really more a trough in a cycle. Those factors are new housing permits, mortage defaults, existing home sales, foreclosure sales and interest rates. According to Robert Campbell, an expert on real estate cycles, these are the factors to consider when evaluating whether a market is headed up or down.

Here's the thing about cycles: When things are going south, they keep going south but at a slower pace before they  turn around. For example, you might read that the number of housing starts in your area last month is down 10 percent from a year ago. But if it was 15 percent the month before, 17 percent the month before that and 20 percent the month before that, the rate at which they lagged last year's stats is slowing. These are numbers that don't always show up in news stories.

For example, the number of foreclosure sales in your area was probably up last month compared to the same month last year. But chances are, the number was higher the month before, and higher still the month before that. So the rate of foreclosure sales is slowing, even if the newspaper says they're "up," compared to last year.

With that in mind, pay attention to some recent numbers that could signal the market is about to take an upturn in your area. Housing starts nationally were up 1.5 percent in August from July, which means that in some markets, at least, builders are building homes again. If you're trying to time the market, you need to see if this is occurring in your area, because it is a sign things could be on the upturn.

Also pay attention to where prices are in your area. If they are on the rise, chances are you missed the "bottom," which is OK because A.) It's nearly impossible to time the exact "bottom;" and B.) Because most homes still represent fantastic pricing.

But here's something else to take note of regarding prices: Remember we said that the downward pace of data will slow before going back up? Well, a recent Forbes.com article, has a very interesting look at markets around the country where prices aren't necessarily going up, but the number of homes on the market that suffer price cuts is slowing.

For example, some of the markets hardest hit by the real estate bubble burst -- Las Vegas, Phoenix and Miami -- are showing fewer and fewer price reductions. According to the Forbes study, the percentage of homes with price reductions in these markets is down 24, 18 and 12 percent, respectively, since the beginning of the year.

Looking at price reductions can help you determine whether the first-time homebuyer tax credit, loosening credit, foreclosure prices, etc., have helped sales enough that sellers don't have to keep price-cutting their homes to sell them. Where I live -- Cleveland, Ohio -- for example, has had a flat level of price reductions. The percentage of homes on the market with reductions has largely gone unchanged over the past six months or so, indicating that sellers still must cut price to sell. This, of course, is usual information for determining whether real estate might soon appreciate, AND when you're negotiating the price on a home purchase.

So I continue to think now remains a great time to invest in real estate in most markets. And I also think that those of you sitting on the sidelines, waiting for the market bottom before getting into the game, might want to get those warm-ups off.

NOTE: I'd love to hear about what signs you've seen in your local market that either suggest a bottom is near, or a long way away, or even come and gone. Every market is different. What have you seen in your area? Leave a comment and let me know!

No doubt, you've  heard or read the phrase "Success leaves clues." I've mentioned it before, I'm sure, that failure also leaves clues. I'm wondering if people are paying attention to those clues.

I read a statistic today that said during this current recession, the number of millionaires in the United States has dropped by 18 percent. That is a huge number.

I'm also fairly confident that those 18 percent will be just fine. In fact, they will regain millionaire status in a short time and will probably actually exceed what their net worths were heading into the recession. Why do I think that? Because people who achieve what must be achieved to attain millionaire status have something in common:

They learn from failure. As I said, "Failure leaves clues."

And so as our financial system as a whole (hopefully) takes some lessons away from this recession, so will the millionaires who have endured a few recent bumps. I don't know what all those lessons will be -- maybe more diversification, less speculation, lower-risk tolerances, etc . -- but the millionaire mindset will be "What has this taught me?" And they will use the knowledge re-make and then keep their millions.

Winston Churchill once issued one of my favorite quotes of all time: "Success is going from failure to failure without loss of enthusiasm." I think that if you can manage to view failures as lessons, then you have a much better chance of maintaining the enthusiasm that Churchill talked about.

What if you, as a baby, had completely given up trying to walk after falling the first couple of times? You'd never walk, right?

Instead, you kept getting up, time after time, until you were able to wobble around slowly at first, then eventually run. If you've watched a baby trying to walk, I think you've seen the enthusiasm from failure to failure that Churchill mentions. That baby never gives up, never loses his or her enthusiasm, despite "failure" after "failure."

So what happens to that persistence as we get older? Why are we, as children, more persistent, more determined than we are as adults?

You have to answer that question for yourself. I honestly think part of becoming a millionaire is never losin that drive you had as a child. Think about all the "failures" you have growing up -- when you're learning to walk, ride a bike, throw a ball, tie your shoes, whatever -- did you ever stop trying? Chances are you can now do all those things. Somehow, as a child, your ability to self-correct and your determination and persistence carried the day.

I think those who have the millionaire mindset as adults are the ones who never lose those quailities from childhood. If at first they don't suceed, they try and try again. It's why many millionaires have failed businesses, bad investments, even bankruptcies, in their pasts. They have these failures and they learn from them, they BENEFIT from them. Those failures enhance who they are, what they know, what they're prepared for going forward. The failures are part of their success.

Is it difficult for you to see it that way? It shouldn't be. 

Even a baby can do it.