The Creating Wealth Show Blogcast

While everyone’s attention has been focused on the Millennials and their housing choices, it turns out that it may be those famous Baby Boomers who wield more influence in today’s housing market. According to new article from the Bryan Ellis Investing Letter, research from Merrill Lynch reveals that the “magic age” for housing choices is not those post college years, but one much farther away: age 61. That’s the age when, according to Merrill lynch analysts, people really feel free to choose where they want to live. This “Freedom Threshold” comes at a time when people are able to let personal preferences and not job or family responsibilities dictate where and how they live. That “golden age” defined by Merrill Lynch falls on the threshold of the traditional American retirement age, typically either 62 or 65. At that point, homeowners are looking ahead to a retirement that’s potentially another quarter century or more long, and they want it to be on their own terms. The freedom to choose exactly where you want to live isn’t easily accomplished at other ages. Factors like jobs, family obligations and money drive those kinds of decisions at younger ages. For the Millennials born between the 1980s and 2000 or so, choices about housing are driven partly by choice – as a group, they tend to fear being trapped by owning a home when other parts of their lives are subject to great change. But those choices are also limited by economic necessity, such as having to relocate for work, facing limited job opportunities or struggling with student debt. Fast forward a few years, and somewhat older individuals are making housing choices based on jobs and family. Buying a house and staying in it may not be a matter of personal preference, but of factors like proximity to well paying work, schools or other amenities. Once the nest is empty, these homeowners may feel free to make other choices, but with growing families and career demands those choices end up being postponed. That, say the researchers at Merrill Lynch, brings us to that magic age of choice, 61. But what people do with the freedom that lies ahead is as varied as the individuals themselves. Some might opt to downsize, selling off a large family home once children are grown and gone in favor of a smaller place. Others might choose the opposite route, upsizing from a small house to a larger one that can accommodate visits from family and friends. And still others opt out of the homeowner role entirely, choosing to rent a place that offers amenities and takes care of repairs and lawn maintenance. Moving into a mobile home, or hitting the road in an RV or living abroad for a part of the year also appeal to some. Whatever housing choices these new retirees and near retirees make, they mean movement in the housing market – more movement than in other age groups. And since the Baby Boom generation is second only to the Millennals in size, that “magic age” for housing choices has the potential to drive significant changes in the US housing market – and create new opportunities for investors in rental real estate. People now nearing that Freedom Threshold aren’t looking for “retirement” or “active living” communities. Only seven percent of those surveyed by Merrill Lynch wanted that kind of living arrangement. They want to live in vibrant, diverse communities close to the amenities they want, such as shopping, dining and entertainment. Though age related services are somewhat important, such as proximity to health care and the opportunity to stay at home rather than move into assisted living facilities, that’s not as much of a priority for this age group as you might expect. They’re active, engaged and eager to enjoy life. That’s a trend worth watching for income property investors. The choices made by those who now have the freedom to design their home life will affect the number and kind of homes available to buy as well as their prices. Those choices also open opportunities for investors who want to attract tenants of that age group to their rental properties. While all eyes are on the Millennials, once again, the Baby Boomers are stealing the show. And investors willing to keep an eye on the changes they bring to the market can find new ways to build wealth through real estate, as Jason Hartman advises.

The recovery from the much publicized housing crash of a few years ago may be hitting a wall, thanks to declining numbers of a group that’s essential to a robust housing market: first time home buyers. Although the US housing market continues to show encouraging signs of emerging from the rubble of the 2008 collapse, its long term recovery depends on those first time buyers, who inject new life into the market not just by purchasing new and resale homes, but also by spending money after the purchase on a variety of consumer goods and services. Otherwise, the home buying and selling cycle becomes a closed loop that depends on existing homeowners making the move to sell their houses – and that’s slowing down too. Overall, the number of US homeowners is at its lowest level in over two decades. And according to new figures reported by Business Insider, the number of first time buyers stands at just 29 percent, down from 40 percent in 1980. Although real estate professionals and market watchers cite a number of factors keeping people from buying their first home, the main reasons are both simple and hard to address: availability and affordability. One sigh of a recovering housing market is the demand for homes to purchase, and in many areas of the country, demand is outstripping the inventory of available homes for purchase. That’s one reason for the steady rise in home prices – another sign of recovery. But the scarcity of homes for purchase, along with those rising prices, mean that first time buyers can’t find homes that they can afford. The shortfall in available housing has its roots in the wave of foreclosures that followed the housing crash, which pushed millions of homeowners into foreclosure. As those foreclosure proceedings crawled through the courts and financial institutions, the properties involved stayed off the market. The “foreclosure pipeline” cleared in fits and starts over the next few years, with some periods of higher inventory followed by shortfall. The problem was complicated by the efforts of mortgage servicers and brokers holding title to those foreclosed properties. After the crash, institutions including government mortgage giant Fannie Mae and major banks auctioned off their foreclosure holdings quickly in batches to large domestic and foreign investment companies, which used them as rentals. Those sales kept thousands of homes out of the hands of residential buyers as well as individual investors. What’s more, increasing numbers of existing homeowners, who might in past years have followed the typical pattern of buying a starter home and moving up to a bigger house as careers and finances matured, are opting to stay put. These homeowners are choosing not to sell for a variety of reasons. Rising home prices may mean that a seller could lose money on a sale, thanks to changes in capital gains taxes and trends in home values. And current low interest rates make refinancing and holding onto an existing home a more attractive option than buying another one. For those reasons, there’s a short supply of the lower priced starter homes most first time buyers can afford in the areas where they want to live. Most first time buyers are younger, with a median age of around 30. They’re largely members of that cash strapped millennial generation that’s burdened with student debt and unsure about their employment future. They’re reluctant to take on the commitment of a mortgage and a permanent residence – and they’re putting off life steps like marriage and family. For many, there are other hurdles too. Even though mortgage lending standards have loosened to encourage more first time buying, for those with heavy debt and uncertain finances, qualifying for a loan may be hard. And even if it’s possible to qualify, making that down payment requires resources they simply don’t have. Another factor is location. Lower cost housing tends to be in less desirable areas, far from the city centers where work and social life take place – and potential home buyers may not want to take on long, expensive commutes in order to own a home. The obstacles facing first time homebuyers aren’t limited to residential buyers. They also affect solo investors hoping to get started in income property investing. Equalizing access to housing and opening up more home for purchase may be a long term effort, but for now, the shortage of available homes to buy may keep the rental markets humming – and that’s good news for investors willing to diversify their holdings in multiple markets, the way Jason Hartman advises.

Fifteen years can seem like a pretty long time – and the year 2030 sounds like a date from a science fiction novel. But the future is now – and, as a recent article from Business Insider reports, today’s emerging trends will shape the investing landscape of tomorrow. According to Business Insider, KPMG, the international tax and financial advisory consortium, recently released a report detailing likely changes in the financial and investing fields over the next fifteen years, and their potential impact on the world of investing in all its forms. While many of KPMG’s predictions are directed to investment firms and financial advisers, investors in income property can find new opportunities by following the future too. The research conducted by KMPG finds four factors that shape megatrends in investing – and in just about every industry: changes in demographics, technology, social behavior and the availability of resources. Those “big picture” shifts affect a variety of smaller changes that lay the groundwork for a very different investing landscape. The seeds of those megatrends have already been planted. Trends shaping the investing world of today are only expected to accelerate heading into the next decade and beyond. Among them: changing dynamics in the provider-consumer relationship, increased use of mobile technology and social media, and psycho-technological innovations like virtual reality applications and gamification. We’ve already seen how the Internet and social media have changed the way people buy real estate. It’s possible to find properties online and do the entire buying process without the need for any kind of real estate professional. Buyers and renters can search for properties anywhere, anytime, and innovations in virtual reality technology allow them to take customized virtual tours and even “try on” various décor and remodeling options. The use of social media and online contacts also points to a shift in attitudes about doing business. In a world where fraud and scams are easier than ever, trust and authenticity are essential – and businesses and individuals who cultivate credibility and honesty stand out. It’s also a world of increasing audience engagement, as buyers and sellers become more independent and willing to educate themselves rather than depending on advisers and other professionals to make their decisions for them. In fact, by 2030, some financial professions may all but disappear, their place taken by independent consumers with the tools to do the job themselves. The investing world of the future is also likely to be far more mobile and global than ever, as technology puts people in touch from around the globe and transactions can be conducted with the click of a mouse or the keys of a smartphone. The investing world of a few years from now will also be affected by changes in available resources. Current climate events like the ongoing severe drought in California will push development and real estate prices in new directions, and the current shortage of available homes for purchase could create major changes in who buys homes, and where. The availability (or lack thereof) of energy sources also plays a role. The recent drop in oil production hit some oil dependent cities hard, and other changes in the supply of energy and other resources, combined with other economic and social factors, could mean major changes in real estate and other kinds of investments. Changing demographics, along with changes in societal values, may also mean big shifts in how people buy, save and allot their resources. In fifteen years, today’s “millennials” will be approaching midlife – and they’re now the largest demographic group in the US. Their choices – and those of other generations too – are shaped by changing values about consumerism, the environment and other issues. For investors, the world of 2030 may look a lot like the one of 2015, only much more so. It’s a future that belongs to those who are willing to take charge of their investments, stay flexible, and keep on learning – Jason Hartman’s keys for investing success for today and for tomorrow.

No more real estate agents? In the brave new world of real estate, agents, brokers and just about every other part of the traditional way of buying and selling property could be going the way of the dinosaur, thanks to innovations in virtual reality and artificial intelligence technologies. Online access and social media have already brought big changes to the world of real estate. Most real estate agents and other professionals involved in real estate transactions do business online, and Internet listings bring buyers and sellers together from all over the world. Online listings can also feature photo galleries and virtual tours offering video walk throughs of properties up for sale. Add to that the reach of social media. Buyers and sellers can connect on Facebook, get real time updates from their agents vie Twitter, and mobile devices let all parties stay connected all the time. Those tools have already marginalized whole groups of real estate professionals, as buyers and sellers are more and more able to conduct business themselves. But as a recent Forbes article notes, the next generation of these technologies have the power to affect how the world does business in many ways. And the widespread application of VR and related technologies on the real estate market could end up not just marginalizing, but also virtually eliminating, these “middlemen (and women)” altogether. The notion of the virtual home tour isn’t particularly new. A number of companies have been offering that kind of experience for some time, using video to capture detailed views of property up for sale. Prospective buyers can then contact sellers or their agents to go further. But the next generation of virtual reality technology takes that concept to new heights. Thanks to new applications developed by Sony, Microsoft and a number of other heavy hitters in digital innovation, it’s now possible to virtually be present in a particular place – even if you’re hundreds of miles away. New imaging technology also makes it possible to "try on” new hairstyles, glasses and even faces prior to plastic surgery. And within the next few years, applying that kind of technology to real estate could produce the ultimate in virtual home touring. Applying VR technology to the world of real estate has the potential for bringing buyers and sellers together in ways that essentially eliminate the need for a third party such as a real estate agent or a broker. As they can now, prospective buyers would be able to browse home listings anytime, from their own homes – but thanks to sophisticated VR applications, they’d be able to ”visit" the property and see any parts of it that interests them, rather than view a pre-recorded video tour. What’s more, the new generation of VR tech would allow them to customize their experience. Just as it’s now possible to upload a photo of yourself and preview new glasses and new noses, prospective homebuyers could upload images of their furniture or wall hangings to virtually try them out in the home under consideration. They’d also be able to virtually paint the house, preview landscaping options and add features like a pool. With unlimited time and options to choose, potential buyers would learn more about the house and its potential than a physical tour with an agent could ever offer. Many of those options are made possible by advances in artificial intelligence. AI technology gives us “smart” devices and apps of many kinds, from options to remember our passwords to simple recommendation technology that offers new choices based on a user’s previous purchases or selections. Applied to virtual reality driven online real estate listings, the platform could offer browsers more listings based on their previous searches and customize them with a user’s preferred features. If someone’s ready to buy, the interface could allow users to place a bid, contact a seller, and conduct most pieces of the transaction without ever leaving the site. With some aspects of the new tech already in place for other applications, the new world of real estate could arrive within the next couple of years. It may be premature to count out agents, brokers and mortgage managers completely. But the new world of virtual reality and AI technology has the potential to put control over the transaction in the hands of buyers and sellers and eliminate dependence on “experts” who may be incompetent or downright criminal. And that, as Jason Hartman says, is the cornerstone of smart investing.

The “Millennials” have been in the headlines a lot lately – and not for good reasons. Alternately criticized for their values and work ethic and pitied for their crushing load of student loan debt, this generation of new and recent college grads seems to be facing a bleak financial future. But a young real estate investor is proving that smart money management can pay off handsomely – even for those cash strapped millennials. A recent article from NextShark profiles 27-year-old Brian Maida, who bought his first house two years after graduating from college. Now, with two properties under his belt, he's anticipating a comfortable retirement from his investments. His journey from income challenged new graduate to investor/entrepreneur demonstrates that you’re never too young to start investing. Millennials – those born between about 1985 and 2005 – now make up the largest demographic group in the United States, eclipsing even their famous predecessors the Baby Boomers. By most accounts, they’re a generation in trouble, too. New college graduates now leave school with an average of $10,000 in student loan debt. They struggle in a tight job market to find work in their fields, and many end up wither spending their entire working life paying off those debts or defaulting completely. In the workplace, too, millennials struggle with a culture that’s often at odds with their values and lifestyles. Employers used to dealing with a more traditional kind of worker who understands and respects the formalities of the 9 to 5 world claim that their millennial-age employees don’t seem to get it. They see no reason for restrictive work hours and dress codes, and they prefer communicating electronically than in person. It’s perhaps no wonder that the mainstream work and social culture despairs of the millennials. And many of them despair too, stuck living with family and friends to make ends meet and delaying traditional milestones like marriage, children and home purchases. But that doesn’t have to be the case. Students are finding alternatives to taking out massive student loan debt to finance their education, such as using alternative avenues to get college coursework out of the way before enrolling, and taking advantage of free programs and scholarships instead of loans. They’re turning to entrepreneurship rather than traditional employment, too, seeking funding from crowdsourcing, creating online companies that require little by way of physical resources, and attracting investors eager to back an innovative idea. They’re also investing – and that’s what makes Brian Maida’s story an example of turning some of the stereotypical downsides of millennial life into a lucrative upside – and a model for others to follow. As NextShark reports, the New Jersey native opted to live at home after graduating from college, like many of his peers. While that’s seen as an indication that the person in question simply can’t make it on their own, Maida put his time to good use, saving up enough to buy his first house. Then he leveraged that investment to buy his second property a few years later – and now, a few years shy of 30, he’s looking toward buying a third. The takeaway for cash strapped millennials (and anyone hoping to build long term wealth from investing)? Trim expenses wherever possible, maintain a sensible budget and keep your credit clean. Careful saving can result in a down payment in a relatively short time – and once that first property is yours, its earning power can be leveraged for a mortgage to buy the next. For new graduates who are struggling with college loan debt, the picture may be a little trickier, but not impossible. Loan defaults and late payments create a blight on credit scores, so it’s important to work with lenders and investigate restructuring and loan forgiveness options. Millennials may be getting more than their share of bad press. But young investor Brian Maida shows that careful money management and a willingness to learn the ins and outs of the investing process can open doors for the start of a long-term career in rental real estate. And his strategies echo Jason Hartman’s essential advice to investors of any age: to get educated, stay in control of the process – and leverage the power of a mortgage’s “good debt” whenever possible.

Is the red-hot rental market getting ready to cool down? The US housing market continues to recover, fueled by promising numbers for employment and other consumer sectors. But major shifts in the housing landscape may be changing all that, as the balance tilts between renting and owning houses in 2015 and beyond. The devastating crash of 2008 that left the housing sector in tatters and created conditions for dramatic changes in the way Americans choose and maintain places to live. When a combination of reckless lending and unprepared buyers led to large-scale mortgage defaults and foreclosures, the effects were felt throughout all aspects of the housing industry. Among these effects: shortages of available houses to buy, tougher mortgage lending standards, and a boom in the rental market. Now, though, the consequences of all these things are tipping the balance in the housing market again – and that may mean changes in strategy for investors building a portfolio in rental income property. Though the housing market began to recover in 2009 and beyond, home buying stayed relatively flat – but rental demand began to surge. A sluggish economy with an uncertain job outlook meant that homeownership was out of the question for many people. Not only that, in the aftermath of the housing crisis new lending standards imposed by the government made it more difficult to qualify for a mortgage. What’s more, there were fewer houses available to buy. Construction of new dwellings ran behind demand, and exiting homes were either tied up in foreclosure proceedings or auctioned off in bulk to international investor consortiums. American home buying fell to its lowest levels in over two decades. But for all these reasons and a few others the rental market was heating up. Those who couldn’t qualify for houses or who hose not to buy for reasons both personal and economic were seeking out rentals in markets across the country. And as demand increased so did rents. But now, according to new data from the giant real-estate database Zillow and reports from other industry watchers, the rental market may be hitting its limits. In markets large and small, two trends may be responsible for the lowdown. Rents have been steadily rising in the years after the crash, until in some markets they’re currently at or near record levels. That’s not just in high end high demand areas like Los Angeles and New York – it’s a trend in mid range and smaller markets too. And while local and state laws may put caps on the amount that landlords can raise rents in a given year, property owners can keep raising rents within those parameters. In previous years, that might have been a self-defeating tactic for the landlord/entrepreneur who wanted to keep a property rented. Tenants could always choose to move rather than pay the increased rent. But now, there’s a shortage of rental dwellings in many markets. The decline in homeownership and the increased demand for rental housing means that tenants are to an extent captive audiences, forced to pay whatever rent their landlord imposes because there’s no place to move. That’s partly because of a surge in home buying by international investors with cash. In a move similar to the one that contributed to a shortage of homes for purchase after the housing crash, these groups are buying up single-family homes and complexes. Though new stats reported by Zillow show that for many people, owning a home is half as expensive as renting, some renters who could buy a home are choosing not to – perhaps spooked by the specter of the housing collapse. Still others may be ready to take the plunge into home ownership – if they can meet down payment and credit requirements. What does all this mean for investors working to build wealth in income property, as Jason Hartman recommends? The slowdown in home buying means more properties available for investors to purchase. And that means new opportunities to meet the continued demand for rental housing from a tenant pool that isn’t shrinking.

It’s often said that the devil is in the details. But for investors, attention to some things that may not seem so significant can make a big difference in long-term returns. That’s the topic of a recent article and infographic from Visual Capitalist, which points out how very small tweaks to an investor’s mindset and strategies can yield more wealth. And it’s also what Jason Hartman has been saying all along: Invest early. Diversify your portfolio. Minimize risks. Keep expenses down. Though these four simple keys apply to investors of all kinds, they’re especially relevant in the world of real estate, where it’s all too easy to fall into believing myths about investing or get swept away by enticing deals and promises of big money fast. It’s commonly believed that investing is something done later in life, not an option for the young, or for those who don’t have a lot of resources ready to hand. But waiting to begin your investing career until you’re “old enough” or prepared enough can mean that you never begin investing at all. And since income property is an asset that increases wealth over time, investing early may be the bet way to lay a foundation for long-term wealth. Investing early might mean setting your investing plan in motion at a young age by establishing good credit, setting aside money to cover investment related expenses and learning all you can about the process. Or it can mean taking that first step toward buying your initial investment property once you’re financially able to do so, rather than waiting for that next promotion at work, or the date of your retirement. Diversifying your investment portfolio may not be a small thing, but putting the idea into your investing plan just might be. It may be tempting to put all your investing eggs into just one asset basket, but that can be risky if market conditions change. It’s smarter to be open to buying properties in as many different markets as possible as a hedge against precisely that – being an “area agnostic” as Jason Hartman calls it: one who isn’t blindly attached to any one market but is open to promising investments wherever they might be. Not only does a diverse portfolio offer a safety net in the event of a sudden crash, it also creates opportunities that wouldn’t necessarily be available in just one area: different tenant pools and economic conditions allow investors to rep profits in very different ways. “Risk” doesn’t mean the same thing to everyone, and some investors are more risk accepting, or risk-averse, than others. There’s risk involved in every investment, of course. But investing success depends on avoiding needless risks and doing what you can to minimize the risks you do face. Educating yourself is a basic way to do that – and it helps you stay in control of your investments. One needless risk many investors take is to leave their investing efforts to other people. While it’s important to get good advice from qualified people, the more you know, the better you’re able to evaluate that advice – and decide if those offering it are competent and honest. Keeping the dollar signs out of your eyes is another way to minimize risk. Get rich quick promises and deals you must jump on immediately may be enticing but they carry great risks. Evaluating your tolerance for risk is something every investor should do – and so is resolving to avoid needless risks. Keeping your expenses down is also key to investing success. Leveraging the power of debt is one way to do that. Using up all your savings to buy an “investment” property can end up being costly. Buying your investment properties with a fixed rate mortgage that’s covered by monthly rent payments reduces your risk and makes your own savings available for other uses. Paying attention to other ways to cut expenses can also help boost your investing returns. Managing investments directly rather than paying management companies or property managers can keep money in your pocket – and so can getting multiple estimates for repair and maintenance work. Being mindful of ways to cut expenses is a small action that can boost investing returns. Successful investors build wealth by taking both a long and a short view of the process. Some things may be out of your control – but the little things that make a difference are ones that any investor can do.

Online real estate transactions now account for over half of all housing purchases in the US alone. The Web offers a place for buyers, sellers, agents and investors to do business that bypasses the traditional “brick and mortar” style of doing business – and it’s changing the game for all concerned in ways both good and bad. The online world of real estate takes many forms. Only databases provide a place for agents to list their services and properties. Buyers can search by price, location, agency and more. These sites serve agents and brokers who make the initial contact with a prospective buyer through he online portal, but then the rest of the transaction takes place in the traditional way. Those big online listing sites also serve a new breed – real estate agents, buyers and sellers that exist only online. The entire property transaction can take place electronically, without any parties ever meeting in the physical world. Online transactions are fast and convenient. They can be conducted from anywhere in the world – an appealing prospect for investors interested in buying properties abroad or those who want to diversify their portfolio at home – a strategy Jason Hartman recommends. But as a recent article from Business Insider reports, those very features are creating conflict between “brick and mortar” real estate agencies and those doing business purely online. The parties involved in the current conflict are UK_based OntheMarket and a host of competitors angry at the site’s success at poaching their clients with lower listing rates and more services. While that might not seem like much oaf a concern to housing market watchers elsewhere in the world, it points up the fact that online real estate transactions continue to play a major role in both commercial and residential real estate purchases throughout the world. And because that’s true, all parties involved must learn how to navigate the ups and downs of this rapidly changing landscape. The world of online real estate includes options as diverse as massive databases of properties and agents, auctions, agency and individual agent websites, and private transactions conducted directly between buyers and sellers through classified ads and even social media. Transactions can be conducted completely online, or go offsite into the physical world after the initial contact is made. Title searches and many other aspects of closing a deal can be done online too – and thanks to social media all parties can stay in frequent, real time contact. Properties can change hands via online funds transfers to private accounts or sites like PayPal in virtually any currency – even Bitcoin. But s the frustrated agents in the Business Insider piece point out, bypassing the tried and true system of buying and selling property comes with its own set of risks. Entities that exist only online can be legitimate –or not. They can vanish in a heartbeat, often after collecting large amounts of money from unsuspecting investors with dollar signs in their eyes. That’s what happened in a recent scam in which a bogus real estate investment company sold eager investors on a plan to buy up cheap houses in distressed Detroit – and then vanished, taking investors’ funds along. Because the entire operation was conducted online, once it closed up shop, the investors who had been bilked had virtually no chance of getting their money back. The online world is home to other scammers, too. In a variation on the old “Nigerian prince” scheme, scammers post up heart-tugging ads about hardship and tragedy, begging for someone to sell them a property outside their country. Gullible investors put up money – and never see it again. Listing scams also abound. Scammers snatch legitimate listings from the large databases and relist them under their own name, selling and re-selling the same property over and over again until someone catches on. The new popularity of using Bitcoin for online transactions of all kinds – not just for real estate – also opens the door for scams. Bitcoin can be used for just about any transaction that both parties agree upon, and that includes buying and selling homes and other big-ticket items. It’s becoming increasingly favored for international transactions, especially when one or both parties hail from countries with unstable currencies. But Bitcoin is anonymous and untraceable. If a deal goes bad there’s no recourse for either party. There’s no way to stop a check, trace a deposit, or do any of the things that can protect a transaction involving traditional currencies. And bypassing the safeguards of traditional process creates risk too. While real estate professionals, buyers and sellers of the traditional variety may complain, but online property transactions are claiming an ever-bigger piece of the real estate pie. In this ever-changing world full of conveniences – and risks – it pays for investors to take Jason Hartman’s advice to stay informed – and in control. (Featured image: Flickr/mikhailchurykin) Source:“Real Estwate Agents Are Waging War Against the Internet.” The Economist via Business Insider. businessinsider.com 20 Feb 2015 Read more from Jason Hartman: US Dollar Is Most Crowded Trade in the World Cash Flow Investment

If you put your money on coffee and cattle in 2014, you might be smiling all the way to the bank. But if you backed crude oil and gas – well, not so much. That’s the verdict from Business Insider’s recent charting of the performance of what it claims are all the major asset classes in the world. It’s a complex, visually striking chart that lays out, in shades of green and red, which assets showed a profit at the end of the year, and which didn’t. While the results are striking in some ways and strange in others, the chart is most notable for what it left out: that most stable and consistent of US asset classes – real estate. Business Insider’s chart lists coffee as the most productive asset of the year, followed by cattle and a variety of foods, precious metals and other commodities, which makes for some strange rankings. Palladium performed better than cocoa, but sugar outdid platinum and soybean meal yielded worse returns than lean hogs. High performers and low ones intersect at the boundary of orange juice and gold, and the chart predictably bottoms out with energy products such as oil and gas. But where is real estate? As Jason Hartman points out, real estate is no only a perennially desirable asset, it’s also one of the most protected, with a long list of tax breaks and exemptions that don’t obtain with any other kind of investment. The housing crash of 2008 put real estate front and center in the public’s awareness. Millions of homeowners lost their homes due to foreclosure and loan defaults. The US real estate market struggled to recover, with massive numbers of homes stuck in the “foreclosure pipeline” and unavailable for sale. Houses were flipped and banks penalized for bad lending practices. Mortgage standards tightened. Economic conditions prevented hopeful homebuyers from getting a loan. Through it all, though, smart investing in income property continued to yield returns – and as other assets such as precious metals and natural resources hit heir limits, opportunities in real estate continued, thanks to low interest rates and thriving local economies outside of the major real estate markets. Real estate is always in demand. Everybody needs a place to live. And because conditions since the housing collapse have put homeownership out of the reach of many Americans, demand for rental is surging. Lending standards are tighter and so are constraints on budgets for things like down payments. People who might have bought a home in previous years are now forced to become long-term renters. Add to that tenant pool the expanding numbers of people who choose to rent rather than buy homes, and it’s clear that current conditions are opening new opportunities for investors. Tax laws are always changing, but even so, real estate remains the most tax-favored asset an investor can have. Depreciation, repairs, and ongoing maintenance are among the deductions a rental property owner can make. Some exemptions and deductions pertain to homeownership in general, while others are specific to investment property. In some situations, investors can even write off periods of vacancy when the property isn’t yielding a return. What’s more, rental real estate will keep yielding returns for the life of the investment. With a mortgage paid by tenant rents, investors can keep their own money secure for other purposes. Risks are assumed by the lender, who can accommodate situations like natural disasters with loan grace periods and adjusted terms to help property owners get through a tough time. The Us real estate market is many markets – and not all of them are created equal. Opportunities await Investors who can diversify their holdings into those mid range markets with opportunities for growth in thriving local economies. And those opportunities aren’t available with assets like precious metals, which have a limited potential for returns over the over the long term. The 2014 overview of how major world assets performed makes for interesting reading. But without the heaviest hitting asset of them all – real estate – in the mix, the results may not mean much. For investors hoping to make long-term profits, income property trumps palladium and orange juice every time.

More than half of American children live with a single mom. That’s the finding of a new study on the changing demographics of American culture – and those numbers, and the economic realities behind them, mean new challenges and opportunities for rental property investors. The new findings by researchers from Princeton and Harvard aren’t really new. The trend toward single-mother households was first noted in studies dating from the 1960s. And while research into the impact of that rend focused mainly on the outcomes for children, the shift from the traditional two-parent household has implications for a multitude of other sectors – especially rental housing. Early research into the growing number of households headed by unmarried women with children looked largely at inner-city households, mainly characterized by a black mother receiving public assistance. But as the new studies point out, that’s only one part of the single-mother profile. As home ownership stays out of reach for many struggling Americans, this kind of household is likely to play a major role in shaping the future of the growing rental market for years to come. Single mother households take many forms, and the only thing they really have in common is that the sole support of the household is an unmarried mother of dependent children. But that mother might be an urban teenager struggling with poverty and a lack of education, a suburban college graduate left to cope after a sudden divorce, or a midlife professional woman who made the choice to have a child without a partner. These households don’t fit the traditional picture of a solid American family. And for many of these single moms, that picture is completely out of reach. Varied profiles aside, single-mother households tend to be less affluent and less stable than those with two parents – and two incomes. Single mothers may be struggling to make ends meet in the wake of a divorce or separation from the children’s father. They may have been forced to leave a violent home. They may be juggling a low paying job (or more than one), school and child care with little support. And buying a house may be a virtual impossibility – even with new lower down payments available on mortgages from government lenders like Fannie Mae, Freddie Mac and the Department of Housing and Urban Development. These households aren’t the only ones feeling the economic pinch – and fueling the demand for rental hosing of all kinds. The pool of renters has seen dramatic growth in the years since the fabled housing collapse of 2008 as homeowners lost their houses to foreclosure. A downturn in employment meant that more people couldn’t qualify for loans or make mortgage payments. And the shifting demographics of American society created new groups of people who just aren’t interested in home ownership: the millennials, who are struggling with student debt and postponing marriage, and retirees, who are selling homes in favor of smaller dwellings, greater mobility and access to amenities. All these groups offer both challenges and opportunities for investors working to build wealth with rental properties. Recognizing just who these new renters are and what they want is a key to creating a stable base of long term tenants for a long term ROI. How can investor/landlords accommodate the growing number of single-mom households? Like those other growing tenant groups the millennials and the seniors, single mothers look for safe housing near schools, daycares and public transportation. Though it’s against fair housing law to target – or shut out – any particular group, property owners can list kid friendly amenities and advertise rentals in appropriate places. Because many of those households are headed by lower income, typically young mothers, some investors might want to consider working with HUD and other agencies on programs like Section 8 housing, which assures regular rent payment sand a steady stream of tenants. Section 8 waiting lists are long, sometimes taking years, as renters can remain on the rosters indefinitely. Domestic violence accounts for a large percentage of single mothers forming their own households, too, and domestic violence advocacy services may work with landlords to help clients with move in expenses such as deposits and first and last months’ rent. Letting these agencies know that you’re willing to rent to their clients is another way to create an ongoing tenant stream. The cultural landscape is constantly shifting. Investors who stay informed and diversify their holdings will be able to take advantage of those changing trends = and build wealth in the new year and beyond. (Featured image:Flickr/wonderworks)

Interest rates that continue to run low and rising prices make the housing market pretty hot right now. Banks are offering attractive mortgage packages, too. But, say some market watchers, it’s hotter still for buyers who can pay cash. To compete in the cash wars, what’s an investor to do? Recent data crunched by DataQuick reveal that the number of homes bought with cash has been rising steadily over the last few years, with cash transactions accounting for as much as 30 percent of home sales in some major markets. The reasons? Although hosing prices are rising, in many areas they’re remaining low enough to put a cash purchase within reach of many buyers. When home prices hit higher levels, that excludes most c buyers except those backed by large investment groups. Now, lower-cots homes, especially foreclosures, are available to residential homebuyers as well as startup investors. Foreign buyers also account for a significant percentage of cash sales. Whether buying fur investment purposes or just to have a vacation home, well-off foreign buyers are finding American real estate a secure place to put their money. Cash ales bypass complicated financing issues and make for a quick sale. Sellers love cash sales. The sale moves quickly without glitches related to financing and there’s no worry about defaulting on mortgage payments down the line. Given a choice of a buyer with cash in hand over a qualified buyer with a loan, many sellers opt for the cash, leaving the “typical” homebuyer locked out. Where does the money come from? Some cash buyers are backed by third party financial groups or individuals. But, say real estate pros, still others have raided retirement accounts and investment portfolios, rolled over money from a previous home sale, or tapped into inheritances. Younger buyers may even turn to parents for a cash boost. While cash sales are quick sales, cash buyers miss out on the benefits of using other people’s money and being able to “refi till you die,” as Jason Hartman says. They lose the tax breaks that come with long-term mortgages and lose leverage over the lifetime of the purchase. But Ilyce Glink, managing editor of the Equifax Finance Blog, points out that in many sales, cash is only a bargaining chi Offering cash gets a buyer’s foot in the door and catches a seller’s attention, according to Glink. Ad once a buyer establishes the ability to back the purchase with cash; they can go out and get a traditional mortgage to actually carry the sale. Used wisely, cash can offer a competitive edge in today’s housing market. But as Jason Hartman advises, mortgage debt can be a “good debt” that frees up that cash for other important needs.

We recently mentioned that the Platinum Properties Investor Network believes in a real estate strategy that is exactly opposite of flipping. We think that the strategy of buying and holding prudent rental properties over a long period of time offers tremendous advantages, one of which is the ability to refinance your loan mortgage time and time again. “But wait,” you say. “I thought the goal was to pay off the mortgage.” Not so fast. That’s what most people think - and that is not it at all. As you property gains value (typically doubling every seven years), you can refinance the loan for more than the original purchase price and use the additional money to re-invest in even more rental properties, thus increasing your portfolio by leaps and bounds as the years roll past. The key to the whole thing is that the net proceeds are not taxed! The reason for this is that you are not required to pay taxes on loans. In a refinance situation, you are taking out a loan, not selling a property. Voila! No taxable event has occurred. Take the extra money and use it for living expenses so you don’t have to work. Take a vacation. Do whatever you want, though we think it’s a great idea to plow it right back into more income properties.

When it comes to your real estate investments, it’s good to be a control freak. This is not what talking head hosts will tell you on the cable financial shows. They want you to drink the Wall Street Kool-Aid and do your best zombie imitation as you follow the broker of your choice's advice down the hemlock-laced path. The surest way to become a spectacular failure as an investor is to give up control of your portfolio to someone else. We’ve talked before about the three essential problems with this, especially when it comes to stocks, bonds, mutual funds, and the flat-out con game on The Street. The first thing to do is get out of the aforementioned traditional investments. You will not get wealthy. You’ll be lucky to break even. It’s not a fair game. You will lose when you meddle with this incestuous brand of finance. Here’s why you should be suspicious of your stock broker. 1. He might be a crook. Need we say more? You only have to take a quick glance at the headlines practically any day of the week to find the latest financial scandal.2. He might be incompetent. Once again, a slam dunk for our opinion. Lehman Brothers, AIG, and the list goes on.3. He might charge high administrative fees. Chances are, any major broker WILL charge administrative fees whether your portfolio goes up or down, and they likely won’t be small fees either. So what’s an investor to do? Drop the stock market like a bad habit and review our free but unique rental property strategy documented onwww.JasonHartman.com. At Platinum Properties Investor Network, we’ll show you exactly how we’re making money in this economy.