A hedge fund manager, Andy Kessler, recently opined in The Wall Street Journal that, "Wall Street firms are actually down close to 15% for the year" and "Wall Street faces headwinds that will force its hand. We are at the bitter end of a 30-year interest rate cycle. Declining interest rates are the ideal environment for economic growth." [What's The Matter With Wall Street?]
So, how are declining interest rates and a declining Wall Street turning into "Main Street Opportunities?" When the stock market has to rein in its wild claims of gains, ordinary investors do better. When the stock market is riding high, many people (and their money) are lured into investing in stocks by the promise of large gains, especially fast ones. Of course the reality is that the only people making large gains are those who bought the stocks before the big run up and are now selling them to the average investor and pocketing wads of cash.
If the market has to dial back its expectations, investors are more likely to turn away from the siren song that wrecks them and pay attention to investments that seem a lot less sexy, but which actually are consistently producing better returns for investors. I am talking here about private mortgages and private lending.
What Happens to Your Money in the Stock Market? About ten years ago if you had put $10,000 into a stock fund that mirrored the Dow Jones Industrial Average, ten years later, you would have about $9,540 in your account. Zero growth in ten years. How is that possible? Because ten years ago the Dow was at 10,000. After that it went down and stayed down. Only recently did it climb back up to 10,000 again. Which means you would have had a decade with negative or no earnings.
What Happens to Your Money With Private Lending? In contrast, if ten years ago you had put $10,000 with a real estate entrepreneur as a private mortgage at just a 7% interest rate, ten years later you would have about $18,385. That is 80% more than than you would have in your stock market account. Which would you rather have, a $460 loss after ten years or an $8k gain over ten years? Why the huge difference?
Investing in dull and boring real estate private lending actually harnesses what Albert Einstein called "the most powerful force in the universe," compound interest.
Keep It Simple Silly - most real estate entrepreneurs prefer to keep things simple. They like simple interest and they like interest only. That means when you lend $10,000 to a real estate entrepreneur, most of them prefer that the loan is interest only and better yet, interest is paid annually instead of compounding. It makes it easier for them to keep track of costs of funds and it lowers their outgo slightly. For you it means you have a simple interest income calculation on your taxes. Then when the loan is paid off, you can clearly see the gains and the return of principal. Then you can do it all again.
In many cases, real estate entrepreneurs are looking to use your money for a year or less. Some may put it to work for longer periods. You decide if you want to keep getting it back and putting it back in, or if you like having it sit there and earn steady money for you. Either way, you can be in control.
What Real Security Looks Like One of the best aspects of this kind of private lending is the security you get compared to stocks. When you buy a stock, the value can fall to zero. Just ask those who held GM stock when it went bankrupt and was bought by the government. In contrast, when you invest in real estate you get a mortgage or a deed of trust on a real house. And the house is insured with you as a named beneficiary. This means that if the borrower stops paying you back, you can take the house. You can live in it or sell it, as you choose. If the house is destroyed, the insurance will pay you back what you are owed. Either way, you have significant and real protection against loss and your investment is unlikely to become worthless. You have no such protection with stocks.
Banks Are Doing it With Your Money Right Now If you are putting your money into certificates of deposit (CDs) or other savings accounts at banks, the reality is that you are already taking all the risks of lending to real estate entrepreneurs and getting none of the returns. Lending to real estate entrepreneurs for centuries has been the lifeblood of the banking industry. They take your deposits, pay you a few pennies of interest, and lend them out to real estate entrepreneurs and make dollars of interest - for them, not you. In recent years bankers too were lured into wild and risky investing schemes using derivatives and other arcane and complex calculations. Soon they will return to their roots, robbing you of your earnings by lending your money out to others. I suggest you rob them instead.
Cut them out of the lending game and take the gains for yourself. Become a private lender today and turn Wall Street Woes into Main Street Opportunities. For some free info on how private lending works go to http://www.robthebanklegally.com/. But, before you do that, go back to the paragraphs above on "What Happens to Your Money..." and add a zero to the end of each number. Then you will see just how powerful this private lending can be.
Tom ~
So, how are declining interest rates and a declining Wall Street turning into "Main Street Opportunities?" When the stock market has to rein in its wild claims of gains, ordinary investors do better. When the stock market is riding high, many people (and their money) are lured into investing in stocks by the promise of large gains, especially fast ones. Of course the reality is that the only people making large gains are those who bought the stocks before the big run up and are now selling them to the average investor and pocketing wads of cash.
If the market has to dial back its expectations, investors are more likely to turn away from the siren song that wrecks them and pay attention to investments that seem a lot less sexy, but which actually are consistently producing better returns for investors. I am talking here about private mortgages and private lending.
What Happens to Your Money in the Stock Market? About ten years ago if you had put $10,000 into a stock fund that mirrored the Dow Jones Industrial Average, ten years later, you would have about $9,540 in your account. Zero growth in ten years. How is that possible? Because ten years ago the Dow was at 10,000. After that it went down and stayed down. Only recently did it climb back up to 10,000 again. Which means you would have had a decade with negative or no earnings.
What Happens to Your Money With Private Lending? In contrast, if ten years ago you had put $10,000 with a real estate entrepreneur as a private mortgage at just a 7% interest rate, ten years later you would have about $18,385. That is 80% more than than you would have in your stock market account. Which would you rather have, a $460 loss after ten years or an $8k gain over ten years? Why the huge difference?
Investing in dull and boring real estate private lending actually harnesses what Albert Einstein called "the most powerful force in the universe," compound interest.
Keep It Simple Silly - most real estate entrepreneurs prefer to keep things simple. They like simple interest and they like interest only. That means when you lend $10,000 to a real estate entrepreneur, most of them prefer that the loan is interest only and better yet, interest is paid annually instead of compounding. It makes it easier for them to keep track of costs of funds and it lowers their outgo slightly. For you it means you have a simple interest income calculation on your taxes. Then when the loan is paid off, you can clearly see the gains and the return of principal. Then you can do it all again.
In many cases, real estate entrepreneurs are looking to use your money for a year or less. Some may put it to work for longer periods. You decide if you want to keep getting it back and putting it back in, or if you like having it sit there and earn steady money for you. Either way, you can be in control.
What Real Security Looks Like One of the best aspects of this kind of private lending is the security you get compared to stocks. When you buy a stock, the value can fall to zero. Just ask those who held GM stock when it went bankrupt and was bought by the government. In contrast, when you invest in real estate you get a mortgage or a deed of trust on a real house. And the house is insured with you as a named beneficiary. This means that if the borrower stops paying you back, you can take the house. You can live in it or sell it, as you choose. If the house is destroyed, the insurance will pay you back what you are owed. Either way, you have significant and real protection against loss and your investment is unlikely to become worthless. You have no such protection with stocks.
Banks Are Doing it With Your Money Right Now If you are putting your money into certificates of deposit (CDs) or other savings accounts at banks, the reality is that you are already taking all the risks of lending to real estate entrepreneurs and getting none of the returns. Lending to real estate entrepreneurs for centuries has been the lifeblood of the banking industry. They take your deposits, pay you a few pennies of interest, and lend them out to real estate entrepreneurs and make dollars of interest - for them, not you. In recent years bankers too were lured into wild and risky investing schemes using derivatives and other arcane and complex calculations. Soon they will return to their roots, robbing you of your earnings by lending your money out to others. I suggest you rob them instead.
Cut them out of the lending game and take the gains for yourself. Become a private lender today and turn Wall Street Woes into Main Street Opportunities. For some free info on how private lending works go to http://www.robthebanklegally.com/. But, before you do that, go back to the paragraphs above on "What Happens to Your Money..." and add a zero to the end of each number. Then you will see just how powerful this private lending can be.
Tom ~
Why Buy Retail?
http://www.buyahousebelowmarket.com/
See my latest blog about what we do at The Gold Seal Homes Group: http://www.youtube.com/watch?v=ACJx3wpKezQ
http://www.buyahousebelowmarket.com/
See my latest blog about what we do at The Gold Seal Homes Group: http://www.youtube.com/watch?v=ACJx3wpKezQ
Thomas K Sheppard has been successfully investing in real estate since 2001. A veteran of the US Marine Corps and more than 17 years in the banking industry, he is focused on helping 100,000 families to find quality, affordable homes. He buys, sells, and rents homes in the Charlotte, NC metropolitan area, including Mecklenburg, Cabarrus, Rowan, Union, and Gaston counties. If you are looking to buy, rent, or sell a home, condo, or apartment in those areas, or would like to learn about how you can help 100,000 families find quality, affordable homes, contact him at tsheppard@adbproperties.com or visit his website http://www.buybelowmarket.com/.
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