Home repair giant Home Depot recently announced that its 2^nd quarter net income rose 14% from the previous quarter prompting an upward adjustment in expected earnings for the year.  Compared to the anemic GDP growth of only 1.3% in the same quarter the promising Home Depot numbers could mean one or both following scenarios are true:

1) Since big box stores like Home Depot and Walmart (who also increased expected earnings) tend to be good indicators of consumer spending as a whole, consumer spending could be on the rise.

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Now more than ever, housing as an investment seems to poin to the fact that there is so much opporunity in real estate investing .  The prices for properties are at lows we have not seen for more than a decade.  In the next 3 to 5 years we can anticipate a great comeback will be made on real estate that is purchased during this window of opportunity.

Weathering recessions and even depressions, real estate has rebounded and each time the values of properties continued to reach new highs.  This does not mean that we adopt a “bubble” approach to our investing strategy.  It simply means that we focus our attention on the underlying demand for housing.

At the present time, construction permits are way down simply because of the available housing inventory.  However, during the past year, the housing inventory has been tightening and in some areas of the country, construction developers are now again buying land at low prices in anticipation of a rebounding market.  Even rehab hard money is on the upswing as investors acquire REO properties, freshen up them and sell them for profit or rent them out for long term appreciation and rental income .  This is not difficult to understand because, when we consider the fact that the available housing inventory now stands at about 11 months meaning that it would be wholly low within that timeframe if there were no new construction.  Once the housing inventory reaches approximate 6 to 7 months, the market has changed from a buyers market to a sellers market.  Once the housing inventory is less than 6 months, it is considered a very tight market and housing prices begin to rise rapidly.

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Residential and commercial hard money lenders want to reduce risk.  One way for an investor to do that is to create an LLC or Corporation for the specific deal .  This is still an advantage for a borrower who can only obtain investment property financing a private hard money lender because of poor borrower credit . This type of loan can be a NON-recourse loan which means, that makes the entity, rather than you personally, liable for the borrowed amount .

Many private hard money lenders also prefer this type of transaction because the “entity” is clean, meaning it has no liens, judgments, and hidden liabilities, including mechanic liens potentially cloud the title of the property.   Another way for an investor to set up a non-recourse hard money loan is to put the property intot a self-directed IRA, which also defers the tax on profits and can be an excellent way to build retirement. A third way for an investor to set up a NON-recourse hard money loan is to set up a title holding trust or a land trust. Remember, private hard money lenders are asset based lenders.  Numerous options exist to get more or less the need for putting cash into the deal, including cross-collateralization, pledged notes guaranteed by other properties, buying right at the correct LTV, potent exit strategies, pocket buyers, etc .

The entity type you choose for your deal can give you greater flexibility.  For example, an self directed IRA can be “assigned” a contract by adding the words “and or assigns” in the purchase contract or making the offer on behalf of a self directed IRA.  This has been a great strategy also for deferring income tax on “flip transactions” because profit goes back into the designated IRA .

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Several weeks ago, the HMB gang made a group trip to Denver.

My partners had been there before and told me how beautiful it was, and I’d have to agree. But they also failed (purposefully, I’m sure) to fill me in on some very important travel tips. Here are some things I learned, and what you’ll need to know, if you ever travel to Denver:

-You have to drink 4 gallons of water a day to stay hydrated
-Running in Denver makes you’ll feel like you’re having a heart attack
-Alcohol has a much greater effect in high altitudes (let’s not get into how I know this)

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