Obtainer Trainer!

By Theo Carter

A 1031 tax exchange is a method used by property investors so that they may indefinitely defer tax liability on a property's sale. This is accomplished by transferring the rights to a property that one would like to sell to an intermediary, who then holds on to the sale proceeds and uses them to purchase a replacement in compliance with the rules set out in Section 1031.

Although the current popularity of the 1031 might lead one to believe that it only recently came on the scene, this is untrue. Actually, the history of the 1031 stretches all the way back to 1921, although the original concept was significantly different than what we currently think of as an exchange. The 1031 Exchange truly came into its own in the 1970s, which saw a host of significant changes in the manner that these exchanges were regulated. These modifications paved the way to a more powerful conception of the 1031 process and generated greater interest among real estate investors.

The capital gains tax deferral an exchange grants to the taxpayer might, at first, appear to represent a gift given by the government, however it is, in reality, closer to an interest free loan, because the taxpayer is expected to repay the money gained from the tax deferral by paying capital gains taxes upon the subsequent sale of a replacement property. Additionally, this interest-free loan may be kept by the investor indefinitely; an investor may elect to conduct any number of exchanges before ultimately making the decision to make an outright sale, on which capital gains taxes must be paid.

Section 1031 exists as a mutually beneficial arrangement between the investor and the United States government, providing a benefit for the U.S. economy in addition to the individual taxpayer. By looking upon the transfer of money in an exchange as representing an extension of an existing investment rather than as a separate transaction liable to be taxed, investors are given the opportunity to transfer their money into the most profitable possible investments. This, in turn, helps to elevate the economy by bolstering the growth of new jobs.

Like anything else, the 1031 exchange has skeptics. Some advocates of change in Section 1031 will argue that the tax free profit gained by to the taxpayer in the exchange process represents an unreasonable advantage. Another frequent concern is that the strict deadlines imposed on some aspects of the 1031 process could promote an atmosphere of frantic buying, resulting in an increase in the cost of replacement properties. These criticisms, however, are only tenuously linked to reality, and the odds that Section 1031 will go through significant changes in the foreseeable future are slim. Looking at the big picture, most will concede that the 1031 exchange is greatly beneficial to all parties involved, as it allows taxpayers increased profits on the sale of property while also promoting job growth and consequently promoting the greater good of the U.S.. There is no reason to doubt that the 1031 tax exchange is destined to be a part of the investment world for years to come.

About the Author: Many Types Of Investment Property Qualify For A 1031 Exchange. Consult With An Expert Who Can Facilitate A 1031 Deferred Exchange To Maximize Your Tax Savings. More Information Is Available At http://www.Top1031Exchange.com

Source: www.isnare.com

Nationally, about two of every three college students has a loan to pay for tuition and expenses. Many graduates with loans have told pollsters they are putting off important decisions, such as buying a house or having children, until they can retire the debt. Others (nearly one-third, according to one survey) have moved back with their parents. In addition, educators worry students will forgo rewarding but low-paying careers, because of this money crunch.

To me, what immediately jumps out, is the woeful lack of cash flow management learned, despite graduating from the best institutions of higher learning, even though, graduating, "cum laude" and "summa cum laude".

Public officials worry about the balance between the need to keep taxes low and the need to make higher education affordable.

It is true, someone needs to be worried, with an eye toward India, China and other emerging nations whose college graduation rates are climbing. But is it the role of government to fund education K through College. Apparently, presidential candidate, Barak Obama, thinks so. He has made such a program a plank of his campaign.

For now, in an attempt to ease the credit crunch, the major student loan lenders held an auction of student loan backed assets.

What happens if you hold an auction and nobody bids? Answer, you might not be able to afford to go to college! Here's what happened recently:

* Fitch, Moody's and S&P are the ratings agencies. Banks issue bonds (securities) and pay the ratings agencies a fee to give these securities AAA ratings.

* Ambac, MBIA, FGIC, and ACA are bond insurers. Banks buy bond insurance to guarantee that investors in their AAA rated bonds will always get paid, either by the bond issuer or by insurance.

Although, somewhat, arcane, you must understand what a CDO is. The subjective opinion of the value of a particular CDO determines if some entity wants to buy one, and consequently, if you can afford higher education.

CDO stands for Collateralized debt obligations. They are a form of credit derivative offering exposure to a large number of companies in a single instrument. This exposure is sold in slices of varying risk or subordination - each slice is known as a tranche.

A Need For Greed Was The Seed.

It's now turning out that the ratings agencies took fat fees from the banks to give AAA ratings to many, many CDOs and other bonds that are turning out to be near worthless. And it turns out that bond insurers took fat fees to insure many, many of these same bonds, and can't afford to pay off the insurance on them.

When the dominoes fall, they fall on you.

Now let's take a look at the domino effect that's going to keep many from going to college in the fall:

Step 1: Fitch downgrades some Ambac assets

On January 18, 2008, Fitch Ratings issued a press release saying that it was lowering the rating on many Ambac's assets (not the securities that Ambac insures, but the assets that Ambac owns for itself):

"The decision to downgrade the IFS rating by two notches, coupled with the continuation of the Negative Rating Watch, reflects the significant uncertainty with respect to the company's franchise, business model and strategic direction; uncertain capital markets and the impact of Ambac's recent decisions on future financial flexibility; the company's future capital strategy; ultimate loss levels in its insured portfolio; and the challenges in the financial guaranty market overall."

This could happen to any company these days, and it usually means that the company tried to make a lot of money by investing in mortgage-backed securities that were turned into near-worthless CDOs.

Step 2: Fitch downgrades some bonds insured by Ambac

Once Ambac's assets were downgraded, it meant that Ambac could no longer guarantee that it will be able to pay off on all its insurance policies.
CDOs insured by Ambac have been purchased by all kinds of organizations around the world. Many of those CDOs would have had BBB or CCC ratings without Ambac's insurance. But with Ambac's insurance, they received AAA ratings, since they're doubly protected: The bond investor would receive payment from the bond or payment from the insurance policy.

But if Ambac's ability to pay insurance was degraded, then the bonds insured by Ambac were degraded as well. And that's what happened.
On January 18, 2008, Fitch Ratings issued a second press release saying that it would downgrade the ratings on many "reinsurance transactions" insured by Ambac:

"Fitch Ratings downgrades 420 classes of asset-backed securities (ABS) Additionally, the ratings remain on Rating Watch Negative by Fitch. This action follows Fitch's downgrade of the ratings on Ambac Financial Group, Inc. and its affiliated entities (Ambac)."

The press release then included a very long list of downgraded contracts from many different types of organizations. It's quite a list, but here's a taste of the organizations affected: Ballantyne Re, Babcock & Brown Air Funding, Capital One Auto Finance Trust, Hertz Vehicle Financing, AmeriCredit Automobile.

The largest group of organizations on the list had names like: Access to Loans for Learning Student Loan Corp., Alaska Student Loan Corp., CollegeInvest, Connecticut Higher Education Supplemental Loan Authority, Michigan Higher Education Student Loan Authority.

In fact, there are similar names of student loan organizations from Maine, Iowa, Massachusetts, Missouri, New Jersey, North Dakota, Texas, Pennsylvania, Rhode Island, Utah, Ohio and Vermont.

And so, what's apparent is that a lot of student loans were in trouble.

Step 3: Student loan bond auctions fail

These student loan corporations do the same sorts of things student loans that mortgage lenders did with mortgage loans.

The student loan lenders bundled then together, divided them into tranches, and sold them to investors through auctions. Since they're sold through competitive bidding at auctions, and since the interest rate depends on the amount the bidder pays, they're called "auction-rate securities." With the money obtained from investors at these auctions, the lenders could then offer more student loans.

What happens if you give an auction and no one shows up? That's what happened when the lenders tried to auction off their student loan securities. In most cases, there were no bids. Nobody was willing to buy them.

And why would anyone want to buy them? They may turn out to be worthless. Fitch Ratings had just downgraded many of these securities (see Step 2 above), and there's no way to know how much to bid for them, since there's no way to know whether or not they'll turn out to be near-worthless.

And so, many student loan lenders have no way to sell off their old student loan securities, and so they have no way to get money for new student loans. That's how the 'credit crunch' works.

The short term consequences are being felt nationwide. Exemplary of the crisis are the situations in:

Michigan:

The state of Michigan has suspended one of its student loan programs indefinitely, shutting off one avenue for students to pay for college and raising troubling new concerns about the stability of the student loan industry nationwide.

Blaming a credit crunch rooted in the collapse of the sub-prime home loan market, Michigan will not offer new loans through MI-LOAN, a program created in 1990 to help bridge the gap between federally subsidized loans -- which are capped -- and the rising cost of tuition.

The suspension of MI-LOAN could be a sign of what's in store for other nonfederal student loan programs, commonly called private loans or alternative loans, financial experts say, and the fallout could narrow options for students seeking help.

Huge losses in the sub-prime loan industry have damaged the ratings of companies that offered bond insurance, which protect investors pumping millions into the bond market. Failed attempts elsewhere to sell investments this week foreshadowed to Michigan officials they would have difficulty selling bonds to generate the capital needed to make new loans.

On top of that, the government has cut subsidies to federal student lenders. The fear, some university leaders say, is that combined forces will put more lenders like MI-LOAN out of business, forcing students to turn to more high-priced ones.

The federal government puts annual caps on how much students can borrow from it each year, ranging from $3,500 for freshmen to $5,500 for seniors.

The problem is that the cost of education has skyrocketed. In Michigan alone, the average yearly cost of public university tuition and room and board is now about $15,400. And that's not including the cost of text books, transportation or other related expenses.

To fill the gap, students have turned in droves to private loans, which are commonly provided through banks, credit unions and state agencies. In 2005-06, students borrowed $17.3 billion in private loans, compared with $1.3 billion a decade earlier, according to the College Board.

"The emergence of the private loan industry is because the federal loans haven't kept up, and the best way to solve the problem isn't to prop up the private loan industry it's for the federal government to pay for loan levels that are adequate for students," said Mark Delorey, Western Michigan University director of financial aid.

One can only note with horror that Mr. Delorey's empty-headed comment comes from a man who's state is nearly bankrupt, has high taxes that drive away employers, creates high unemployment and high crime, all because government is not "propping up" private industry. Instead, Michigan, California, the failing economies of the rust belt and the Northeast, try to recreate the failed nanny state of the Soviet Union.

Michigan state leaders said they just didn't have access to the money to keep their program running.

Iowa reports:

The Iowa Student Loan Liquidity Corp. says it won't be able to properly fund loans for the 2008-2009 school year because of the nation's credit crunch.

Iowa Student Loan, a West Des Moines-based nonprofit lender, is the second-largest source of higher education funding for students in Iowa, providing funding help to more than 68,500 students. In the 2006-2007 academic year, it held approximately $350 million worth of loans. It's unclear how much could be available to students this fall. Some experts say that students and parents might be asked to have co-signers, higher credit scores or additional proof of income to secure their private loans.

Iowa Student Loans has asked banks in the state to keep student loans in their portfolios rather than attempting to resell them.

"We're working with our lenders to ensure there isn't a shortfall in Iowa even if national circumstances don't improve later this year," said Jack Wilkie, a spokesman.

New Hampshire:

Tara Payne of the New Hampshire Higher Education Assistance Foundation the leading student loan provider in the state said, ""At this point, we're still going strong -- providing the loans, still able to make those commitments -- but honestly, if something doesn't help us do that, either by the federal government or banks that step up, it will impact our ability to make loans come May or June."

Vermont:

In neighboring Vermont, the Vermont Student Assistance Corp., a nonprofit public agency that originates and guarantees student loans, says it has funds to keep making loans for the next few months but needs to raise $200 million in June and July for the next school year. In the meantime, the failed auction means that it will have to pay higher interest rates on $300 million in bonds it has already used for student loans.

Pennsylvania:

The acting chief of Pennsylvania’s student-loan agency told state legislators on Tuesday that his agency would temporarily stop making new loans through the federal guaranteed-student-loan program.

James L. Preston, acting president of the Pennsylvania Higher Education Assistance Agency, or Pheaa, said the agency had decided two weeks ago to suspend loans made outside the state, and now had decided also to suspend in-state loans, effective March 7.

Missouri:

The Missouri Higher Education Loan Authority (MOHELA), Missouri’s student loan agency, has suspended its loan consolidation and private lending services as the market for auction-rate securities backed by student loan debt continues to dry up. The changes could make it more difficult and expensive for Missouri students to finance their college educations.

Nebraska:

Nelnet Inc. (NNI), a Lincoln, Neb.-based lender, said it will stop offering new consolidation loans and will be "more selective" when originating other loans -- that is, it's tightening underwriting standards.

Texas:

In Texas, 'B On Time' Student-Loan Program Be Short of Money. A cash crunch has hit the popular student-loan program in Texas.

In Austin, Texas, the Credit Union Journal reported on January 11, that "with the specter of a soft lending market looming over loan originators in 2008, some credit unions are turning to lending software solutions to boost loan volume without adding additional staff." Translate that to mean non-human interpretation factors, like one's FICO score, will be more important than ever.

Utah:

The Deseret News reports that student debt in Utah is at an all-time high. The average student graduating with a $15,000 debt.

California:

San Diego.-based College Loan Corp., the eighth-largest student lender in the nation, recently said it will no longer offer federal student loans, focusing instead on the private market.

If the situation doesn't ease in coming months, student lending experts say, borrowers can expect:

* Higher loan costs.

* Fewer lenders, which could mean tens of thousands of college students scrambling at the last minute to find money.

* Tougher standards that could prevent some students from borrowing at all.

The easy-money blitz for students has been threatened on a variety of fronts:

Student loan defaults are up. The biggest student lender, Sallie Mae, reported a massive $1.6 billion loss last quarter, thanks in part to spiking default rates, and plans to set aside an additional $700 million to cover bad loans this year.

Although the U.S. government guarantees lenders will be reimbursed for federal student loans, the bulk of Sallie Mae's losses were from private student loans, which aren't guaranteed. This crisis isn't as bad as the one more than 10 years ago, when student loan default rates topped 20 percent (it's about 4 percent now).

As investors become increasingly spooked about the credit crunch and the rising risks that loans will go bad, they're avoiding buying bundles of loans, known as asset-backed securities, that are a major source of funding for some student lenders. This aversion applies even to federal student loans despite the government guarantee. Several recent auctions of federal student loan debt have failed, meaning that investors who hold the loans couldn't find any buyers. Without this critical source of funds, some lenders can't make loans.

Not all lenders get their money from investment markets.

SLM Corp., the biggest student-loan company, is poised to secure a new $31 billion line of credit extended by Bank of America and JPMorgan Chase.

Spokesman Tom Joyce says there's "no chance" current credit-market conditions will damage its ability to make loans this year. Even so, the company commonly known as Sallie Mae, struggling after years of stellar growth, has said it will tighten credit requirements for borrowers and emphasize making higher-interest private loans over those that are federally backed.

Sallie Mae currently charges interest rates ranging from 5.5 percent to 13 percent on private loans, depending on the borrowers' credit standing. Sallie Mae, recently eliminated its "nonstandard" private loan programs, about 3% of its $164 billion student-loan portfolio, aimed at borrowers with negative credit histories because a disproportionate number of the loans defaulted.

Even lenders that don't rely on the asset-backed-securities market are paying more for the money because of the credit crunch. Lenders will pass those costs along in higher fees and fewer discounts.

Some lenders have already cut back on federal student loans, and more may follow. Congress trimmed lenders' profits last year by reducing their federal subsidies by about $20 billion. That, combined with higher costs of funds, has persuaded some lenders to stop making certain federal loans or to concentrate on the private loan market. (Unlike federal loans, private loan rates aren't fixed and can range up to 19%. These loans grew in a single decade from less than 5% of the student loan market to more than 20%.)

Many lenders are becoming pickier about who gets money. Some lenders are signaling they may loan less, or nothing, to institutions that don't have a high graduation rate, such as for-profit and vocational schools. The notion here is pretty simple: Education works to boost your income only if you actually get a degree, and folks who fall short of that mark may not make enough to pay back the loans.

That means schools with relatively high dropout rates "are going to feel pinched."

That might save some people from racking up tens of thousands of dollars of debt they can't repay and can't shed (unlike many other unsecured debts, student loans typically can't be erased in bankruptcy court). But it may cost others "the opportunity to do something they've always wanted to do."

Another significant change has to do with credit scores. Federal student loan programs typically don't use credit information, but most private lenders in the past have required a minimum FICO credit score of 675, Walker said. (The traditional start of the subprime market, by contrast, is 620 on the 300-to-850 FICO scale.)

"Now they're tightening up lending criteria so that instead of 675, 695 will be the minimum.

In addition, lenders are likely to add fees that reflect borrowers' creditworthiness. Though people with the best credit scores might pay no fees, those with shakier credit could pay fees of 3% to 10% for a loan.

Three ways to cope

Clearly, it's a new world for student borrowers. So what's a college-bound student to do? Here's your game plan:

Don't procrastinate. As soon as you get your financial-aid letter in the mail, start investigating possible lenders. Remember to exhaust federal student loans before turning to the private market, since federal student loans have fixed rates and are more flexible than private loans.

Bug your financial-aid office for advice. Some aid officials got black eyes for steering students to certain lenders in exchange for kickbacks. But financial-aid offices are still the best place to go.

There's a link at this blog, for those registered, to go to a directory of more than sixty lender sources.

Get a co-signer. If you have to use private loans -- and many students do because the most you can borrow in federal loans for an undergraduate education is $23,000 ($46,000 if you're an independent student or a dependent student whose parents have been denied PLUS loans) -- burnish those credit scores or get a co-signer who already has. A co-signer with great credit can help you avoid fees and win a much better rate on your loans, which can save you thousands of dollars.

Experts said anyone planning to borrow should be sure to fill out the Free Application for Federal Student Loans.

And don't get me started on auto loans. Auto loan delinquencies have jumped to a 16-year high, according to the American Bankers Association (ABA). That delinquency rate is thought due to the growing stresses in the housing sector and because of more lenient underwriting standards which have existed.

Have you ever wondered how your, $60 a fill-up, cash flow out is spent. It is spent on buying relatively cheap real estate.

Of course, "relative", is relative to whom you're talking about. In this instance, the relative is the rich uncle who owns the oil fields of the Middle East. While this country is in the grip of environmentalist wackos who prevent the extraction of our own natural resources, that hasn't stopped the communist Cubans, in association with the communist Chinese, from drilling oil reserves between Cuba and the Florida Keys. The American hater Venezualans happily sell their product in our poverty stricken, used to have refinery jobs, slums. And while their citizens chant, "Death To America!", the ruling folks, in the Middle East, relieve us of our wealth. But I digress.

In a relatively very small area of Clark County, Nevada, not even truly, Las Vegas, but in Paradise, NV, there is a seventy-six acre development called, City Center. If you have trouble judging what 76 acres is, think a moderate size Walmart complex and parking lot. Now that acreage is oft-referred to as the most expensive privately financed development in U.S. Described as “a city within a city,” the $8 billion development will eventually include more than 4,800 hotel rooms and 2,700 luxury apartments in towers.

Prices for condos range from anywhere from $500,000 to $12 million. About half of the units have been sold. Last August, Dubai World invested $2.7 billion for a 50 percent stake in the CityCenter project, and committed another $2.4 billion to buy MGM Mirage common stock.

Recent penthouse sales at the massive MGM CityCenter, which is now half-owned by Dubai World, think oil-rich Abu Dabai, set new records for price-per-square-foot in Las Vegas, at prices ranging from $1,500 to $2,400 a square foot. Property records indicate the previous record for Vegas was about $1,300 a square foot.

On the other hand, Las Vegas and Nevada are leading the nation in depressed housing prices and home foreclosures. Do you think those in the penthouses are solely buying penthouse doodads, or do you understand that they are buying, also, relatively low cost real estate, (the median price for a single-family home is $198,700), and foreclosures so that someone else pays for their housing, while simultaneously, your gas pump cash, pays for their investments.

California had the highest total number of default and foreclosures with 57,158 properties, more than double the year-earlier figure and was up 7 percent from December.

Joining the gaggle of homes in foreclosure is Michael Jackson's Neverland Ranch.

Michael’s Jackson’s Neverland Ranch property at 5225 Figueroa Mountain Road in Los Olivos is in the stages of foreclosure with a tentative auction date set for March 19 at 1 p.m. at the north door of the Santa Barbara County Courthouse, 1100 Anacapa St. in Santa Barbara. According to the notice of the trustee’s sale, Financial Title Company, San Francisco, can sell the property to the highest bidder.

Jackson, who owes $24,525,906.61 on the property, can still pay off the debt by March 19.

The auction sale would include the house, a mock-Tudor mansion, as well as everything associated with it: all personal property inside, all fixtures and appliances, furniture, and "all merry go round type devices," any rides, games. The auction literally includes every single thing that is or isn't nailed down. While, at one time, it boasted a fully-fledged fairground and zoo, the animals have reportedly been removed since Jackson left.

Other significant real estate facts revealed during February, 2008 are:

* U.S. home foreclosures jumped 90% as mortgages reset

* Bank seizures of U.S. homes almost doubled in January

* Repossessions rose 90 percent to 45,327

* Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57 percent.

* About $460 billion of adjustable mortgages are scheduled to reset this year

* About $190 billion in subprime adjustable mortgages are slated to reset this year

* More than 233,000 properties were in some stage of default last month.

* Home prices in 20 U.S. metropolitan areas fell in December by the most on record, dropped 9.1 percent from a year earlier.

* Nationwide, home prices fell 8.9 percent in the fourth quarter from a year earlier, the biggest decline in 20 years.

* Nevada, California and Florida recorded the highest foreclosure rates among the 50 states, RealtyTrac said.

* Foreclosure filings in Nevada continued to lead the nation, with 6,087 properties in default or having been repossessed, 95 percent more than in January 2007 and 45 percent less than in December.

* Florida had the second-highest number of homes in default or foreclosure with 30,178 in January, more than double the figure for the prior year and 3 percent less than in December.

* Arizona, Colorado, Massachusetts, Georgia, Connecticut, Ohio and Michigan rounded out the top 10 states worst off in terms of missed payments and property seizures

* Cape Coral-Fort Myers, Florida, had the highest January foreclosure rate among 229 metropolitan areas.

* Stockton, California, had the second highest, followed by the Riverside-San Bernardino area.

* New York was 30th with 0.06 percent of households facing possible foreclosure.

* Banks may be forced to resell as many as 1 million foreclosed properties this year

* More than 1 percent of U.S. households were in some stage of foreclosure during 2007.

* The median price of an existing home fell 4.6 percent to $201,100 from January 2007.

* The median for a single-family home dropped 5.1 percent to $198,700,

* Condominium and co-op prices fell 1 percent to $220,400.

Fannie Mae and HSBC Finance have joined a U.S. Treasury Department-led effort to offer 30-day foreclosure freezes to give delinquent borrowers more time to arrange payment plans.Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. have initially agreed to participate in the effort.

Data derived from published reports compiled by
-- RealtyTrac Inc., a seller of foreclosure statistics
-- MGIC Investment Co., the country's biggest mortgage insurer.

The AP reported today that sales of existing homes and prices both fell in January. This was the sixth straight month the two criteria fell.
That was the slowest sales pace on record.

Median home prices were also down and many analysts predicted further price declines in the months ahead given high levels of unsold homes.

The National Association of Realtors said Monday that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units. That was the slowest sales pace, going back to 1999, and was seen as evidence that the steepest slump in housing in a quarter-century has yet to hit bottom.
The median price of a home sold in January slid to $201,100, a drop of 4.6 percent from a year ago. Particularly alarming, analysts said, was the fact that the inventory of unsold homes jumped to a 10.3 months' supply, meaning it would take that long to sell the 4.19 million homes on the market at the January sales pace.

That was just below a two-decade high of 10.5 months hit in October. During the peak of the housing boom in 2005, the supply of homes relative to sales stood at 4.5 months.

An economist was quoted with the obvious conclusion that, "Eventually, sellers will end their denial and realize that if they want to unload their homes, they will have to cut prices even more."

Analysts said one of the problems was a rising tide of mortgage foreclosures, which is pushing even more unsold homes back on the already glutted market.

Sales of existing homes fell by 12.7 percent in 2007, the biggest decline in 25 years, and are down 20 percent from their all-time high set in 2005, the final year of a five-year housing boom that saw sales and prices soar to record levels.

Over the past two years, housing has been in a steep downturn made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to their multibillion-dollar losses on mortgages that have gone into default.

As is usual, the herd opinion of those who will stay broke because they buy high and sell low was reflected in the statement of an economist who said, "With prices expected to continue dropping and banks leery to make loans, few prospective homeowners feel now is the time to buy."

That sentiment is the exact opposite of that held by savvy investors who realize that a down market is the best time to buy whether by "subject to", assignable lease/option, short sale, buy to hold for rentals, and other strategies.

It is said that profit is made when you buy a property. That means if you obtain it for the right price, you will be able to extract your profit when you sell it.

Of course, you must not pay more than the property is worth. But, how do you determine what a property is worth?

Utlimately, a property is worth whatever the buyer will give you and that you will accept. Along the way, everything else is a guess. Some guesses, though, are closer to the value than others. There are various measures against which you might estimate the value of a property. Among which are:

1. The Tax Assessor's Valuation. Every jurisdiction has a tax assessor who places a value on a property to determine how much property tax the "owner" should pay that year. Owner is in quotation marks because no individual ever truly owns their property. They lease it from the true owner, the government, when they pay their property tax. Doubt that. Fail to pay your property tax at your peril.

Sidebar: the common thought is that the "real" in real estate means its not imaginery. Not so! That real is the Spanish word for "king". Real estate means the king's property.

Happily, because there is so much real estate and relatively few tax assessors, the tax assessor's valuation is frequently less than the true market value. That rule, as with any pertaining to real estate
is not written in stone. If a prior occupant has trashed a dwelling, the tax assessor's value may be significantly higher than the market value.

2. The BPO (Broker's Price Opinion). This is what a bank estimates an REO (real estate owned) on their list might be worth. It is often the result of an inexpensive and cursory comparative analysis.

3. The CMA (not the Country Music Awards, but the Current Market Analysis). This is a more detailed comparative analysis which takes into consideration the square footage and location.

4. A Certified Appraisal. This is a more detailed than the CMA. It is detailed, multi-paged, analysis with quantifiable evaluation of the property and its systems (heating, plumbing, power, etc.) based
upon recent sales in the area.

5. Drive-by appraisal. A value as competent as the the cursory look the beholder's experience allows.

6. Comparative valuation as derived from various internet websites devoted to that task.

7. FHA appraisals, and even more stingent, VA appraisals, done by approved certified appraisers are the most comprehensive and regulated.

When glancing at any real estate investment menu, the first thing encountered is an alphabet soup of government agencies, or government chartered entities. Among them are:

HUD The United States Department of Housing and Urban Development, is a Cabinet department of the United States. Although its beginnings were in the House and Home Financing Agency, it was founded in 1965 to develop and execute policy on housing and cities. It has largely scaled back its urban development function and now focuses primarily on housing.
The department was established on September 9, 1965 when President Lyndon Johnson signed the Department of Housing and Urban Development Act (PL 89-174) into law. It stipulated that the department was to be created no later than November 8, 60 days following the date of enactment. The actual implementation was postponed until January 13, 1966, following the completion of a special study group report on the federal role in solving urban problems.
HUD is administered by the United States Secretary of Housing and Urban Development.

FHA Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965
The Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance.

Fannie Mae (FNMA)
Federal National Mortgage Association. Federally chartered, stockholder owned corporation supporting secondary market for FHA, VA, and conventional mortgages.

Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. Federally chartered stockholder owned corporation supporting secondary market for conventional mortgages.

VA The VA Loan Guaranty Service is the organization within the Veterans Benefits Administration charged with the responsibility of administering the home loan program to U.S. military veterans.
for extensive information visit: http://www.hud.gov/offices/hsg/fhahistory.cfm

There are at least 10 ways to acquire real estate. Can you think of more? I left out drastic measures like warfare;-)

1. Inherit
2. Tax Sale
3. Purchase
4. Exercise a lease purchase option
5. Gift
6. Auction
7. Short sale
8. Subject to
9. Foreclosure
10. Purchase an option from another

Or, failing to plan?

The problem: At the so-called age for retirement, sixty-five years old, 90 out of 100, folks are unprepared to live comfortably. They will be either totally dependent on someone else. Have you visited a nursing home, recently? Or, they will be forced to continue working to scrape by. Have you greeted your future, at the doorway of a Walmart, recently?

That is, if they are not among the 5 out of 100, who are dead by their theoretical sixty-fifth birthday!

Of course, you say, that won't happen to you, you're just fine. Oh really! How many greeters at big box stores, or still ”supersizing” your order at a fast-food joint, do you think planned the “golden arches” to support their “golden years”.

What do government supported statistics say is the future of those who plan to fail because they fail to plan?

On the other hand, of the 1 out of 100, who are more than financially independent according to the government's criteria of earning $36,000, taxable dollars per year, seventy-five percent of them have attained, or maintain, their wealth because they wisely invested in real estate. What will you do, if you aren't in a state with a lottery, or a casino, or even worse, your rich relative doesn't know you exist, or despises you!

Before you begin, you should be aware that real estate is a pathway on which it is easy to lose your shirt, as well as, the rest of your attire, if you don't have the proper education, and supportive cash flow beforehand.

That is why we recommend that before you plunge into real estate investment you armor yourself with the knowledge contained in Robert Kiyosaki's books, “Rich Dad, Poor Dad” and “Cash Flow Quadrants”. Play the game, Cashflow 101 regularly, and attend at some level the real estate investment training available through We Train. You Obtain!

May the profits be with you!

Today's pearl is "sandwich leasing". Unlike a menu item at a cheap restaurant, this refers to an arrangement whereby, you long-term lease option to purchase, with the right of ASSIGNMENT, a property, from a property owner, then short-term sub-lease and short-term option to purchase, the same property to another, potential buyer. At the same time, you arrange for the owner, not you, to maintain and repair all major cost items, at their expense, and, arrange for your tenant to maintain and repair, at their expense, all minor cost items.

First, and foremost, this blog is composed and edited by a real estate investor, who believes what is contained therein, to be the truth. That being written, you should not believe anything therein, without external confirmation by a realtor, an attorney, an accountant, or your own experience. Due diligence is your responsibility.

All information and materials contained on this website are provided without warranties of any kind, either express or implied. This website is updated periodically, but may not always contain the most current information. The information and materials on this website may not be complete, and from time to time, may contain inaccuracies and errors. The information and materials on this website should not be used for any business purpose and should not be relied upon unless you have thoroughly and independently verified that the information is accurate and appropriate for your particular purpose. Neither wetrainyouobtain.com, its parent entities, or subsidiary entities, nor any officer or employee or agent of wetrainyouobtain.com, its parent entities, or subsidiary entities, shall be held liable for any losses caused by use or reliance on any of the information or materials on this website. The information and policies on this website are subject to change without notice from wetrainyouobtain.com, its parent entities, or subsidiary entities.
Any and all claims, representations, or testimonials made in this product and the related materials are based on the unique experiences of the individuals making the representations. No money was paid to any individual making a testimonial; however, the testimonials represent exceptional results – not the results of an average individual.

The use of the information in this product does not guarantee that you will achieve the same results that others have achieved. We cannot promise or guarantee specific results. Most individuals will not make as much money as the individuals who are making testimonials here. You should not assume that your results will be the same as anyone else’s results. Some individuals will not make any money. Results are dependant on you, your skills, your personal situation, the market, and your effort level. Simply purchasing product from wetrainyouobtain.com, its parent entities, or subsidiary entities, or associate entities without additional substantial effort will not result in success.