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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Tradelite who wrote (2448)	4/24/2002 8:34:15 AM
From: Tradelite	Respond to of 306849

Book review...from www.inman.com ___ Unusual book compares stock, bond and realty investing Tuesday, April 23, 2002 By Robert J. Bruss Tribune Media Services VALUE INVESTING IN REAL ESTATE, By Gary W. Eldred (John Wiley and Sons, New York, 2002), $24.95, 268 pages. Available in stock or by special order at better bookstores, public libraries and www.amazon.com. It's hard to explain Gary W. Eldred's scholarly tome "Value Investing in Real Estate." In it, he attempts to justify why real estate surpasses stocks and bonds as a long-term investment. The author has documented his research well, even going so far as to conclude investors will eventually flee the stock market for real estate investment. As I studied this creative real estate book, I tried to figure out where Eldred was heading and what he was hoping to prove. He begins by explaining the investment theories of the famous Benjamin Graham and historic reasons why people have bought stocks. Though the first few chapters have virtually nothing to do with real estate, don't get turned off. Be patient. The book gets more interesting. The author does slam many theories about the stock market, such as its purported 11 percent average annual return. He even revives the scandal of the Beardstown ladies whose false 24.4 percent annual stock market return, which sold more than 800,000 of their books, was really only about 9.1 percent annually. Finally, in Chapter 3 the author begins explaining "The Case for Real Estate." After several pages of boring charts, which lose all but the most diehard engineer readers who love details, Eldred eventually comes to the conclusion, "Value investors should choose real estate." This new book reminds me of my college days at Northwestern, where we were constantly writing term papers. After receiving a few B's and C's, I learned the key to earning A's was a lot of footnotes showing I had done "research." Eldred seems to follow the same formula, with many footnotes to show the sources for his statements. In Chapter 5, the author makes a dramatic change in style, from professorial theory to practical reality. He shares some personal real estate experiences to justify his bias toward real estate investments. Eldred starts using phrases like "the magic of leverage" and even the worn-out "location, location, location." Eventually the book gets to topics such as "The Ins and Outs of Market Value," referring to real estate, not stocks. By the second half of the book, Eldred has evolved into a "born again" real estate investor. Why he spent the first few chapters talking about the stock market in boring detail, when the book's topic is obviously real estate investing, is hard to understand. Eldred is a superb author of some of the best practical "how-to" real estate books about home buying and real estate investing. But this one is dramatically different from his earlier books. His goal is obviously to prove real estate investing is more profitable over the long term than stock market investing. But he bounces between the stock market and real estate so often it's hard to keep track of what he is trying to prove or disprove. This is a thinking-person's real estate investment book. It is not for the "how to make a million dollars by next Friday" crowd. One especially profound statement that caught my attention is "all properties are fixers." By that the author means virtually every property needs some work that will add to its market value. In today's real estate market, Eldred suggests the best way to profit from real estate is to add value by fixing up a property. That is what he means by real estate "value investing." "Value investors don't wait for market appreciation," Eldred profoundly says, adding, "Through savvy purchases and property improvements, real estate investors can create their own appreciation." Chapter topics include: Value Investing: The One Best Way; The Case Against Stocks for Retirement; Real Estate Risks and Returns; The Enterprising Investor; The Ins and Outs of Market Value; Is the Property a Good Buy?; Look Beyond Market Value; Predict the Future; and Create Value Now. This is one of the most unusual real estate books I've ever read. It can easily be used as a college textbook in a real estate investment course. Or, it can be a personal guidebook for novice and experienced realty investors who want assurance they are doing the right thing to add profitable improvements to increase property market values. On my scale of one to 10, this excellent book rates a 10.

To: Tradelite who wrote (2448)	4/24/2002 8:52:26 AM
From: Tradelite	Read Replies (1) \| Respond to of 306849

Credit card debt vs. home equity loan ______________ Loan consolidation: Yes! You gotta love lower payments and a tax break By George Saenz • Bankrate.com Most of us can run up credit card debt without even knowing exactly how we did it. We look at that statement with the big numbers and try to remember where the money went. A few dinners here, some clothes there, a short weekend getaway, late charges and, finally, over-the-limit fees. Then add lots of interest that your parents used to be able to deduct from their taxes but you can't. What makes it worse is that when you're on a fixed paycheck, it's difficult to pay off that debt incurred in good times past. The best solution is to get a clean break by rolling that debt into a home equity loan. Why tap home equity? Most home equity loans are taken either to: Make improvements that add to the value and enjoyment of the home, or Refinance the good life that you incurred on the plastic you carry in your wallet. Story continues below If you are borrowing to build a new kitchen, you feel OK about the borrowing, since you know you're adding value to your home. And if you end up with a new kitchen, perhaps you'll spend less money in the long run on eating out. However, when you're borrowing to refinance credit cards and consolidate your other loans, the decision gets more difficult. A lot of people find themselves with far more credit card debt than they can handle. If you're in this situation, start arranging to refinance the debt into a home equity loan. In fact, if you're really feeling financially daring, add enough money to get that boat that you couldn't get when you were maxed out on the credit cards. That's a joke, but this isn't: Remember that you're already in debt with the credit card companies. Want a home equity loan? Check rates in your area. Refinancing's many benefits Refinancing your debt into a home equity loan doesn't increase your debt. It doesn't add a dime to what you already owe. It just moves the debt. By refinancing, you're shifting the debt from various credit cards with differing due dates to one lender at a lower interest rate with a fixed repayment plan. In addition to the convenience of consolidating payments and payment dates, you create a tax benefit like your parents had before 1987, when they could write off credit card interest on their taxes. The major downsides to this strategy are that it leaves you with refreshed credit limits on the plastic that you carry in your wallet and puts your home at risk if you don't pay. If you're not careful, you will wind up facing the same problem down the road. Actually, many years of practice tells me that most people will wind up in the same place, since we don't change our ways. However, at least by refinancing you've given yourself a break and have for a period the psychological benefit of knowing that you're credit card debt-free. In addition, you'll have the financial benefit of paying a lot less interest, not to mention the cash you'll save by making the interest expense tax deductible. And you'll also probably think harder about what you charge on your cards, so you don't have to face this decision again. When you get set to refinance you'll want to find the right loan and also set a timetable for having the loan paid off as soon as possible. When I say getting the loan paid off as soon as possible, I mean at least paying off the old debt before you rack up another round of credit card debt that you'll need to refinance. Home equity loan vs. HELOC For this reason, I recommend that if you're refinancing debt, get a home equity loan rather than a home equity line of credit (HELOC). A home equity loan is a fixed amount that you borrow to be paid off over a certain number of months (I recommend 36, and no more than 60 months). A HELOC is like a bank account where you continue to write checks on the equity in your home as opposed to writing the checks based on actual money in the bank. A HELOC does not have a period in which it will be paid off, since you can continue to borrow against it, similar to a credit card. Bankrate offers calculators for figuring loan payments and can give you an idea of the best interest rates in your area. Before using these resources, you should figure out how much debt you have. Also figure out how much you've been paying every month on these revolving debts. Let's say you have $25,000 in debt you've been paying $500 to $600 a month on, and the amount of debt has been the same for a while now. If you refinanced that into a four-year home equity loan at 8.5 percent, your monthly payment would be $616 and you'd get it paid off. Of course, if you use your entire budget to repay the home equity loan, it doesn't leave you any room for paying the monthly minimum on future credit card charges. This means that those payments will have to come from future raises or odd jobs until you've paid off the old good times. Use that tax break wisely Actually, part of the payments should come from the reduced taxes you'll pay as a result of deducting the interest on your taxes. In the first year of the loan in our example above, the interest paid works out to $1,915. If your combined federal and state marginal tax rate is 33 percent, your tax savings will be $630, or a little more than $50 a month. That sounds like a monthly minimum payment on a new round of debt to me. Of course, you could stop spending. But how likely is that?

To: Tradelite who wrote (2448)	4/24/2002 11:01:51 AM
From: bozwood	Read Replies (3) \| Respond to of 306849

Very typical, Tradelite. All you decide to comment on from my post is one sentence. Previously, you had thrown out there that people are safe with a home equity loan or line because the second lienholder must get permission from the first lienholder before foreclosure proceeds. I reply that you are completely wrong and that your comment is irresponsible at best, and this is what you pull from my post? Again, very typical of you. You are great at moving on to things you THINK you are right on. You wrote: <<<That is probably the strangest thing I've ever read or heard on this particular subject, Boz..... but if you believe it's better to keep paying for the most expensive money in the world and avoid borrowing the cheapest money in the world,go ahead and be happy in your belief.>>> See if you can follow my logic, Tradelite. A person paying 18%-24% on credit cards has, to say the least, a sub-prime credit rating. Now, if they are able, they go and get a home equity loan or line to pay off those credit cards. This person now has no credit card debt, but full use of those cards again (the lending institution does not make them close the cards), and obvious trouble handling credit in the past. However, they now have their house on the line, their full credit card limits restored, and, if they believe someone like you, no chance of losing their home. That, to me, is not someone I would counsel to roll their credit card into a home equity loan. Get it? Now, if that line of thinking is strange to you, I can't really say I am suprised. And, before you claim the above can't or doesn't happen, I have seen it happen. Not just once either. By the way, there are many offers for locked rates of 6.99%-9.99% on credit cards for someone with good credit, but that wouldn't fit well with your thesis, would it? Boy, Tradelite, if I didn't know better I would think you were a mortgage broker as well.

To: Tradelite who wrote (2448)	4/24/2002 7:14:33 PM
From: JBTFD	Read Replies (2) \| Respond to of 306849

re: "the most expensive money in the world" There is another trend that I feel is criminal. That is these payday loan places that charge interest at annual rates of up to something like 360%. Now that's got to be the most expensive money in the world. Whatever happened to usury laws? PS. I agree with you that it is a smart move to decrease your interest rate exposure as much as possible, unless you are planning on defaulting anyway.

To: Tradelite who wrote (2448)	4/26/2002 12:22:46 PM
From: assetlogic	Read Replies (1) \| Respond to of 306849

<<It reminds me of an outrageous myth I saw purported on another SI thread about real estate in the past few days----which was that, somehow, appraisers take into account refi activity in a neighborhood and that a refi mortgage appraisal somehow becomes a benchmark for property values in the neighborhood, therefore driving up prices. This is pure junk-thought. >> If there are comparable sales used in the re-fi appraisal reports, then those could be indications of current values, not the re-fi itself.

To: Tradelite who wrote (2448)	4/30/2002 2:10:33 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 306849

trade, clark howard recommends not rolling over one's credit card debt into a home equity loan for a very specific reason. many people will just recharge their cards (the behavior that caused the initial problem didn't just change!) to the limit and now they have the same problem with a home equity loan to boot! so, there is a reason not to take the lower interest option - the school of hard knocks to learn a fundamental lesson. having said that, i would always recommend the cheap money to those disciplined and savvy enough to make good financial choices. <<Also, if someone is paying 18-24% in credit card rates, the last thing, likely, that they should be doing is rolling their credit cards into a home equity loan.>> That is probably the strangest thing I've ever read or heard on this particular subject, Boz..... but if you believe it's better to keep paying for the most expensive money in the world and avoid borrowing the cheapest money in the world,go ahead and be happy in your belief.