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Here’s a press release for Universal REO. What’s my connection to Universal REO - my buddy Dan is the CEO.

LOCAL DENVER COMPANY RELEASES NATIONAL WEB-BASED FORECLOSURE EDUCATION WEBSITE FOR REAL ESTATE AGENTS.

UniversalREO.com, a Denver-based company, is reaching out to thousands of real estate professionals across the nation by providing a ‘Resource Center’ for those trying to make a difference in the foreclosure epidemic. According to founder and CEO, Daniel Waterman, “UniversalREO.com is an unparalleled stratagem designed to unify the real estate foreclosure industry. Through the shifting of the REO (Real Estate Owned by Lender) paradigm to meet a more streamlined business model, professionals are enabled by technology and informative resources. Our objective is to elevate the standards by which REO professional operate on every level.”

By offering thorough education on the valuing of properties, the resources and tools on how to determine values, marketing tips, as well as where to obtain new REO business, UniversalREO.com is providing a service that not even real estate colleges offer. After spending years as an REO Specialist for the top REO Real Estate Marketers in the nation, Mr. Waterman realized his true calling as a teacher. His trial-by-fire education in technology was what gave him the foresight to provide this knowledge to the masses via the information highway.

In this “Web 2.0” universe there exist many one-offs offering overnight REO Business success schemes on the web. UniversalREO.com offers more. Education, Valuation, and Marketing are the keys to success in a real estate market flooded with properties for sale due to default mortgage payments. Cutting-edge concepts on moving these properties into the appropriate hands while maintaining value to companies like Countrywide Home Loans who recently took out an $11.5 billion dollar loan to aid their default mortgage deficit is the only way this country will ever jump back on track. By conveying knowledge through on-line video courses, eBooks, blogs, podcasts, certification, and connecting REO Management companies and direct lenders with the educated real estate agent, as well as the end consumer, UniversalREO.com is blazing new trails throughout the nation. UniversalREO.com currently covers over 50% of the nation for Real Estate Agent and Vendor clientele.

When I discuss retirement with mortgage clients the discussions either go like this….

“well social security won’t be there for me and I’m still recovering from the dot com bust and my financial planner is a complete moron and at the rate I’m saving, I’ll never retire”

or like this…

“I plan on retiring at 55-60 depending on what happens with my investments and my home’s value”

Your home’s equity is a solid foundation for retirement according to an article entitled Retiring on Your Home’s Equity

A recent study commissioned by Oakland, Calif.-based Bell Investment Advisors, found that seven out of 10 60-year-olds consider their home part of their retirement plan. Of that group, almost one in five — 24% to be exact — said their home’s equity represents half or more of their total savings.

Also included are the sources where current retirees will be drawing their retirement:

Wealth holdings of a typical household prior to retirement*:

Social security: 42%
Primary house: 21% of total wealth
Defined benefit plan: 16%
Defined-contribution plan: 8%
Financial assets: 7%
Business assets: 2%
Other nonfinancial assets: 4%

* Households headed by individuals aged 55-64. Source: Survey of Consumer Finances 2004.

More importantly, the article continues to discuss two ways to tap your equity when you retire including downsizing into a smaller home and keeping the profits and a reverse mortgage where you get a mortgage that pays you.

This article brings to light the importance of mortgage planning as a key component in your wealth management. Your home is your security blanket since it can be the largest asset in your estate. Your mortgage allows you to manage this asset. Obviously I just scratched the surface of mortgage planning but if you need more information, contact me.

Real estate is a hot topic on the web. One quick search for “real estate” on google nets you 275,000,000 results. That’s a lot of indexed pages on real estate alone. From blogs to news feeds, the amount of information on real estate is overwhelming. If you’re looking for non-location specific real estate sources start here:

• AOL Real Estate
• CNN Money Real Estate
• Forbes Real Estate
• MSN Money
• Real Estate Journal (Wall Street Journal)
• YAHOO Real Estate

With stories like “Business Card Confirms Real-Estate Salesman Is Eddie Money,
” the Onion would’ve made it to the front this list if they had a real estate section.

10 tips for using a mortgage as a financial tool

Here is a list of 10 tips to building and maintaining wealth, as well as the 10 most common myths about home equity, and the reality of each myth.1. Avoid the $25,000 mistake that ensnares millions of Americans. Myth: The best way to pay off a home early is to pay extra principal on your mortgages. Reality: No method of applying extra principal payments to your mortgages is the wisest or most cost-effective way of paying off your house. Strategy: Establish a liquid side fund to accumulate the funds required to pay off your mortgage, maintain flexibility, achieve substantial tax savings and accumulate excess cash.

The equity you have in your home can be a powerful tool in managing your overall financial situation. Your equity, the value of your home minus your existing mortgage, can serve as collateral for additional borrowing. While there are some risks with this strategy (as with any borrowing), home equity loans usually offer the attractions of lower rates, longer period to pay back, convenience and often tax benefits.

4. The return on equity is always zero no matter where your property is located. Myth: Home equity has a rate of return. Reality: Equity grows as a function of real estate appreciation and a mortgage reduction; however, equity has no rate of return. Strategy: Separate as much equity from your house as feasible in order to allow idle dollars to earn a rate of return.

9. Strategically refinance your home as often as feasible to increase your net worth. Myth: Equity in your home enhances your net worth. Reality: Equity in your home does not enhance your net worth at all. Separated from your home, however, it has the ability to dramatically enhance your net worth over time. Strategy: Set the stage to substantially increase your net worth. Refinance your home as often as feasible to separate equity and accelerate the process of accumulating the resources to cover all your debts.

10. Keep your mortgage balance high to sell your home more quickly and for a higher price. Myth: The amount of equity you have in your home has no bearing on how marketable it is. Reality: Your home may likely sell much more quickly and for a higher price if it has a high mortgage balance (low equity)—rather than a low mortgage or no mortgage balance (high equity)—especially in soft real estate markets. Strategy: Always maintain as high a mortgage with flexibility on your home as feasible to keep it marketable at the highest possible price should you want to sell the property.”

6. Use debt for positive leverage. Myth: Any and all debt is undesirable. Reality: Some debt, when managed wisely, can be desirable. Strategy: Use debt wisely as a positive lever for equity management purposes, conserving and compounding equity rather than consuming it.

2. Avoid expensive risks. Position yourself to act instead of reacting to market conditions you have no control over. Myth: Home equity is liquid. Reality: When you need it most, you may not have it. Home equity is usually not-liquid. Strategy: Separate as much equity from your property as is feasible, positioning it in financial instruments that will maintain liquidity in the event of emergencies and conservative investment opportunities.

5. Make Uncle Sam your best partner. Mortgage interest is your friend, not your foe. Myth: Mortgage interest is an expense that should be eliminated as soon as possible. Reality: Eliminating mortgage interest expense through traditional methods eliminates one of your best partners in accumulating wealth and financial security. Strategy: Use the difference between preferred and non-preferred interest expense to make interest work for you instead of against you.

As you can see there are many ways you can put your equity to work for you. It might be a good idea to check with your online Mortgage Broker to see how you would be able to benefit from some of these strategies.

3. Separate home and equity to increase safety. Real properties with high equity and low mortgages get foreclosed on the soonest. Myth: Home equity is a safe investment. Reality: A home mortgaged to the hilt or totally free and clear provides the greatest safety for the homeowner. Strategy: Separate as much equity from your home as feasible to achieve greater safety of principle and reduce the risk of foreclosure.

7. Understand the cost of not borrowing compare deductible versus non-deductible costs. Myth: lower mortgages, resulting in lower payments, mean lower cost. Reality: If you take opportunity costs into consideration, low mortgage-to-home-value ratios create tremendous hidden costs that increase the time needed to pay off a mortgage. Strategy: Choose to incur deductible employment costs rather than non-deductible opportunity costs, since you have no choice but to incur one or the other.

8. Turbo charge your wealth growth rate by creating homemade wealth. Myth: Borrowing funds at a particular interest rate, then investing them at the same or lower interest rate, holds no potential growth returns. Reality: You can earn a tremendous pro fit regardless of the relative interest rates by positioning your money in a tax favored, interest-compounding investment that earns a rate of return greater than the real net cost of obtaining the money. Strategy: Learn to apply the fundamental principle that highly profitable financial institutions use to accumulate and create wealth arbitrage. Employ equity to earn a rate of return higher than the net cost of separating that equity. By doing so, you will create tremendous wealth and substantially enhance your net worth.

Nearly 6 in every 10 home owners has more home equity than stock, bond, treasury or other securities derived wealth. They key to maximizing one’s wealth is to utilize one’s home equity to invest in asset classes which on average return at a rate higher than the tax-deduction-adjusted interest rate of their mortgage. For example, if you have a 5% ARM your effective interest rate after deductions is roughly 3.75%. You should speak with your tax and investment professionals about finding a strategy which allows you to invest at a rate higher than this, and contact us for advice on how to get you the money to build your financial future.

Editors Note: Due to the mortgage and credit crunch, many down payment programs are no longer be available. If you’re in need of a Denver mortgage contact us to discuss your mortgage options.

There are many acceptable ways to obtain some additional funds for a down payment and closing costs. First time home buyers and investors are more recently applying for 100% financing. If you have funds for a down payment and/or closing costs, this can help to reduce your interest rate.

A Secured Line of Credit such as a Home Equity Line of Credit (HELOC) can be used as a source of funds.

If down payment money is hard to raise for you and your family, talk to us about 100% financing and seller’s concessions.

If you are relocating at the request of your employer, find out if your company offers programs to assist in paying for part of the down payment and closing costs. Many large corporations have such programs as employee benefits. Even if you work for a small company that does not have such programs in place, you may still be able to negotiate for some relocation assistance.

The Genesis and Enterprise are two other programs that will help with down payment assistance. Some of the down payment programs are set up where they put a lien on your property for a certain period of time such as 5 years. As long as you own the property for this amount of time the lien will be released.

Each type of mortgage and lender has different guidelines for what are allowable sources for down payments. Consult with your mortgage broker as to what is the best place to start and how to track the funds for approval.

There are also programs available through non-profit and/or your local, state or federal government called Down Payment Assistance (DPA) programs.

Honesty is the best policy when getting a mortgage. Watch out for anyone who asks you to withhold information from the lender. Some home buyers might be tempted, for example, to fudge the facts about the source of their down-payment money. A lender will assume that the down payment comes from savings. If the money comes as a gift or a grant, that fact has to be disclosed — even if it means the borrower has to pay a higher interest rate or shell out for mortgage insurance.

Family is a great place to start. Talk to your immediate family, parents, brothers, sisters, grandparents, etc. they may be able to help you out with a Gift of funds. This Gift is not a loan, and they will often have to fill out a Gift Letter stating where the funds are coming from and how they are related to you. In some cases a bank statement from them may be required to source the funds.

Many states and cities have bond programs that provide down payments for homebuyers.

A good source for a down payment is money that people with 401k’s have already saved. Using money in a 401k for a down payment on a home, if done wisely can be just a good of an investment in their future. Real Estate normally is a low risk investment when compared to other types of investments. Homes usually appreciate over time under normal conditions. This appreciation over time can often outpace the gains made in a retirement account.

Another source for down payment assistance are grant assistance programs such as the Nehemiah program that you do not have to pay back! You can get as much as 6% down of the final contract sale towards down payment or closing costs.

One of the most popular ways to buy a home today is to have the home seller pay your loan closing costs. There are restrictions based on the type of home loan you qualify for but its becoming one of the most common ways to bring no money down.

Home buyers who are short on cash should negotiate to have the home seller pay for all or part of the closing cost. The advantage is that the buyer can purchase the house with less money. Take for example, a house selling for $300,000. A buyer offers $290,000 and the offer is accepted. The homebuyer gets a mortgage of 80% loan-to-value, with a 20% down payment, or $58,000. Assuming the closing costs is 5% of the loan amount, or $11,600. The buyer would need $69,600 ($58,000 + $11,600) in order to purchase the property. Instead of offering $290,000, suppose the buyer purchases the house for $300,000 and asks that the seller pays $10,000 towards settlement costs. The buyer then takes out a mortgage of 80% of the purchase price. With a 20% down payment ($60,000), 5% closing costs ($12,000), and the seller contributes $10,000 towards closing costs, the buyer needs only $62,000 to purchase the same house. In effect, the home buyer is able to get a bigger loan, without having to go over the maximum 80% loan-to-value set by most banks.

Talk to your real estate agent about seller’s concessions when discussing financing of closing costs on any new purchase.

Many loan programs allow for seller paid closing cost to pay for all the fees associated with the loan. This allows buyers taking advantage of 100% financing to literally walk to the closing table with no money at all and at times even getting a refund of earnest money.

Different loan programs will dictate how much you can receive from the buyer. This can be a percentage or it can be a fixed amount and is usually between 2% to 6%. The most common amount used is 3% on a average priced house. This is fully negotiable with the seller and some sellers may not be willing to give. The more motivated they are the better chance you might have. I would always start out with asking for seller contribution…it’s usually free money for you.

Did you know that sellers are allowed to pay for your closing costs and prepaids? Sellers are allowed to pay up to 3% (6% on some programs) of the sales price toward closing costs, prepaids and points. This helps you with cash needed at closing. It is important to remember that if you want a seller to pay closing costs, you must detail this in your offer to purchase the property.

Seller paid closing costs are a great loan feature, especially for the borrower who may not have all of their closing costs available to them. I frequently will pre qualify a borrower who does not realize that they are expected to bring their closing costs to the table. However, after I have had a chance to explain that seller paid closing costs are essentially financing your closing costs in with the loan have a very positive response.

Seller paid closing costs are the best way to bring zero money to the closing table. Your mortgage broker and real estate agent can help you structure your loan this way.

Why would a Seller want to pay the buyers closings costs? In a buyers market Sellers wanting to sell their home quickly often use this as an incentive for buyers to purchase their home. A benefit to the Seller is that this also increases the number of buyers that are able to purchase their home. Many buyers today lack the resources or savings to pay the sometimes hefty upfront closing costs of buying a home. Today, more Sellers are figuring in buyers closing costs when setting the price of their home, knowing upfront that to sell their home quickly they need to increase the number of potential buyers.

Seller concessions, which allow the closing costs to be paid, are subtracted from the appraisal price. The appraisal price must be large enough, to include the purchase price and the concessions.

There are several advantages to choosing a Mortgage Broker for your real estate financing needs rather than a local bank. One advantage is expertise. If you needed brain surgery, would go to a general surgeon or an expert who specializes in brain surgery? Mortgage brokers are professionals who specialize in one area of the banking / lending industry, real estate financing. We have access to more lenders, more loan programs, different types of loans, and specialty “niche” products than a local bank. In most cases your local bank is probably a large regional or national bank with many branches and services available. You may get passed along to another department, or get lost in a phone system before you ever talk to a loan officer. While to your mortgage broker you are more than just a number, customer service is important to any mortgage broker. You generally only deal with one person who will help you through the process. Maybe the biggest advantage and least recognized by consumers is that mortgage brokers deal in wholesale rates, while your bank deals in retail rates. Not only can mortgage brokers “shop” your scenario around for you but they are doing it in wholesale side of the industry.

If you are undecided between a local bank and a mortgage broker, ask yourself if you are the type that dislike comparative shopping, or a procrastinator, or in a unique financial situation that is not apprehensible to most banks, a knowledgeable and competent broker may be a of great service. Even if you intend to shop for a mortgage on your own, you should always compare what mortgage brokers can offer.

Wholesale rate is the rate banks offer through mortgage brokers. The interest rate and points obtained through the use of a broker may be lower than one would get by going to a bank directly. Since brokers do most of the loan processing and pick up all the marketing costs, banks reason that they can afford to offer a lower rate as a way of passing to brokers what they save on overhead costs and advertisement expenses.

The uniqueness of loan programs available to Mortgage Brokers can save you thousands of dollars over a bank. Some of these programs would be for situations like low FICO scores, high DTI (debt to income ratios) and other detrimental factors affecting your credit and throwing you into a non-conforming loan scenario.

Your local bank is not as likely to take compensating factors into consideration, when approving you for a loan. The Mortgage Broker, has several lenders that are willing to consider a loan applicant, even if they do have low FICO scores, or a high debt to income ratio. Some compensating factors that your mortgage broker may use to qualify you for a loan include: length of time at current residence (without having late payments), liquid assets, low LTV (Loan-to-Value), length at current job, and low payment shock (mortgage payment not increasing drastically over your current rent payment). The mortgage broker can also use a good letter of explanation (LOX) to help an underwriter overlook any negative factors with your loan scenario. This combined with the mortgage broker having more programs available to them, could make the difference of being in your dream home, or not!

A mortgage broker often has a larger network of mortgage lenders so they can often find you the best deal. The more product knowledge you have when shopping for a mortgage, the more power you have to get the best deal.

It is important to understand the difference between mortgage lenders and mortgage brokers. As a rule, mortgage brokers don’t make a decision whether to extend you a loan, and they don’t actually make the loan. They work as intermediaries between borrowers and lending sources. However this fact does not mean that you are paying a higher rate. Since mortgage brokers obtain their funds from a variety of sources, they can even save you money by shopping your loan.

Tips and useful information to help you determine how much your home is worth.

• The value of your home depends on a number of variables such as the Location, Size, Age, Condition, Layout, Features, and Construction?
• There are also many online services that can give you the estimated value of your home for a small fee. These services are generally very close to the actual value and are quite useful when trying to determine a property value. This type of search is called an AVM or an automated value search.
• Knowing the monetary value of your home will allow you to make an informed decision on what to do with your equity. Whether you want to upgrade into a more expensive home or take out some equity with a refinance, you need to know how much your home is worth.
• Most counties in the state of Ohio have county auditor websites, which you can find very easily by typing in the name of your county followed by “auditor” into any search engine. Once you find the site, most of them offer a free county property search section where you can locate a property in your county by owner’s name, address, or parcel number. After you have located your property within their site you can find a lot of the information regarding your home such as size, room count, lot size, total number of Bedrooms and bathrooms, year built, last and previous sale dates and amounts, and much, much more. Many of these auditor sites will even have a picture of your home along with a sketch of the layout. After researching your property information (which is actually quite interesting) you can look up other properties in your area, on your same road, or in your immediate neighborhood to give you an idea of the value of your house. Many of these county auditor sites also have a link that you can click within your own property report that will find comparable houses to yours, simply by clicking the link. Remember though the only way to get an accurate gauge of what your house is truly worth you will need to contact your mortgage broker to have them order an appraisal or order an appraisal yourself through a licensed appraiser.
• There are some other online sources that you may be able to check to get an idea of what your home is worth. Some city, county or state websites keep online records of property transfers. This information will give you a list of homes that have sold near you, and the price they sold for.
• Many online valuation models or AVM’s can be very misleading. As a former real estate appraiser, I have to say that the best and most reliable method of estimating the value of a particular home is thru comparable sales(comps). Although the MLS databases are the most widely used sources for finding comps, they are not the only databases around. Certain services, like RealQuest.com and The Redlink are databases that anyone can access for a fee. They can be pricey, but they are pretty up to date. Also check with local county tax assessor’s offices as they also keep recent sales information on hand. It is important to also understand, once you have the recent sales in the area, what you need to look in order to properly analyze the data. Some of the biggest items to look for include:-Sq. Footage-Age-Condition-Construction (Brick or Brick Front as opposed to Wood or vinyl siding)-Distance from subject property (if not in the same subdivision/neighborhood, then no more than .50 mile in most major cities)-Date of the comparable sales (no more than 6 months, in most cases)-Basement or Crawl Space/Slab?-Bathroom Count (yes, this is adjusted for)-Garage or Carport Although these items don’t include everything compared between the subject property and the comps., if you have comparable sales that are pretty close to your subject property in these areas, then those comps. are a good indication of the value range of your home.
• If you were to assume for a moment that someone would pay all cash for a property - the market value of a home by definition is the price at which you can sell the property providing you have a seller willing to pay that amount. Since very rarely do people pay all cash for the personal residence, the lender requires an appraisal which will be based on comparables.
• Your broker should be able to let you know a fair range on your property value. Brokers work with appraisers and should have no problem finding comparable sales in your area.
• One thing a competent appraiser has to consider in assessing the value of your property is the location and availability of comparable properties or “comps” that have sold in the last year. If the appraiser has to go more than a few miles, and in some cases from 5-10 miles, a lender may classify your home as “rural” based on the distance to get 3 good comps. If this classification happens, your interest rate will likely go up .25%-.50% or more.
• The appraisal also must draw on good comps usually with less than 20% of the value being adjusted for features like more square footage or acreage. Another area of concern with appraisals is how much acreage is with the property. Most lenders only allow value to be given to a house and 5 acres. Some allow 10 and a few allow up to 20. If you are looking to buy or refinance a house with over 20 acres, specialized “farm” financing may be necessary and it typically runs about 2% over conventional conforming mortgage rates.
• Farm financing can be obtained through the USDA. Some lenders will allow you to refinance if you can prove that the acreage is not being used as a working farm or as they call a hobby farm.
• The one single most factor in determining what a home is worth is the existence of good recently sold comparable properties. Without such comparables the establishment of what the home is worth becomes much less exact.
• Keep in mind that the value of a home is never a definite figure. It is what each potential home buyer perceives it to be. A potential buyer may fall in love with the backyard or kitchen and be willing to pay more for the house than another buyer. For this reason even a certified realtor or appraiser can only come to an approximate value. The house usually sells for more or less than the assessed value.
• You can get an idea of what your home is worth by hiring a licensed appraiser to appraise your home. This option will cost you money, however is the most accurate form in determining the value of your home. There are also some free ways of getting an idea of what your home is worth; Having a realtor do a market analysis, checking recent sales in your neighborhood, and using some online value estimate resources.

Here is a list of 10 tips to building and maintaining wealth, as well as the 10 most common myths about home equity, and the reality of each myth.1. Avoid the $25,000 mistake that ensnares millions of Americans. Myth: The best way to pay off a home early is to pay extra principal on your mortgages. Reality: No method of applying extra principal payments to your mortgages is the wisest or most cost-effective way of paying off your house. Strategy: Establish a liquid side fund to accumulate the funds required to pay off your mortgage, maintain flexibility, achieve substantial tax savings and accumulate excess cash.

The equity you have in your home can be a powerful tool in managing your overall financial situation. Your equity, the value of your home minus your existing mortgage, can serve as collateral for additional borrowing. While there are some risks with this strategy (as with any borrowing), home equity loans usually offer the attractions of lower rates, longer period to pay back, convenience and often tax benefits.

4. The return on equity is always zero no matter where your property is located. Myth: Home equity has a rate of return. Reality: Equity grows as a function of real estate appreciation and a mortgage reduction; however, equity has no rate of return. Strategy: Separate as much equity from your house as feasible in order to allow idle dollars to earn a rate of return.

9. Strategically refinance your home as often as feasible to increase your net worth. Myth: Equity in your home enhances your net worth. Reality: Equity in your home does not enhance your net worth at all. Separated from your home, however, it has the ability to dramatically enhance your net worth over time. Strategy: Set the stage to substantially increase your net worth. Refinance your home as often as feasible to separate equity and accelerate the process of accumulating the resources to cover all your debts.

10. Keep your mortgage balance high to sell your home more quickly and for a higher price. Myth: The amount of equity you have in your home has no bearing on how marketable it is. Reality: Your home may likely sell much more quickly and for a higher price if it has a high mortgage balance (low equity)�rather than a low mortgage or no mortgage balance (high equity)�especially in soft real estate markets. Strategy: Always maintain as high a mortgage with flexibility on your home as feasible to keep it marketable at the highest possible price should you want to sell the property.�

6. Use debt for positive leverage. Myth: Any and all debt is undesirable. Reality: Some debt, when managed wisely, can be desirable. Strategy: Use debt wisely as a positive lever for equity management purposes, conserving and compounding equity rather than consuming it.

2. Avoid expensive risks. Position yourself to act instead of reacting to market conditions you have no control over. Myth: Home equity is liquid. Reality: When you need it most, you may not have it. Home equity is usually not-liquid. Strategy: Separate as much equity from your property as is feasible, positioning it in financial instruments that will maintain liquidity in the event of emergencies and conservative investment opportunities.

5. Make Uncle Sam your best partner. Mortgage interest is your friend, not your foe. Myth: Mortgage interest is an expense that should be eliminated as soon as possible. Reality: Eliminating mortgage interest expense through traditional methods eliminates one of your best partners in accumulating wealth and financial security. Strategy: Use the difference between preferred and non-preferred interest expense to make interest work for you instead of against you.

As you can see there are many ways you can put your equity to work for you. It might be a good idea to check with your online Mortgage Broker to see how you would be able to benefit from some of these strategies.

3. Separate home and equity to increase safety. Real properties with high equity and low mortgages get foreclosed on the soonest. Myth: Home equity is a safe investment. Reality: A home mortgaged to the hilt or totally free and clear provides the greatest safety for the homeowner. Strategy: Separate as much equity from your home as feasible to achieve greater safety of principle and reduce the risk of foreclosure.

7. Understand the cost of not borrowing compare deductible versus non-deductible costs. Myth: lower mortgages, resulting in lower payments, mean lower cost. Reality: If you take opportunity costs into consideration, low mortgage-to-home-value ratios create tremendous hidden costs that increase the time needed to pay off a mortgage. Strategy: Choose to incur deductible employment costs rather than non-deductible opportunity costs, since you have no choice but to incur one or the other.

8. Turbo charge your wealth growth rate by creating homemade wealth. Myth: Borrowing funds at a particular interest rate, then investing them at the same or lower interest rate, holds no potential growth returns. Reality: You can earn a tremendous pro fit regardless of the relative interest rates by positioning your money in a tax favored, interest-compounding investment that earns a rate of return greater than the real net cost of obtaining the money. Strategy: Learn to apply the fundamental principle that highly profitable financial institutions use to accumulate and create wealth arbitrage. Employ equity to earn a rate of return higher than the net cost of separating that equity. By doing so, you will create tremendous wealth and substantially enhance your net worth.

Nearly 6 in every 10 home owners has more home equity than stock, bond, treasury or other securities derived wealth. They key to maximizing one’s wealth is to utilize one’s home equity to invest in asset classes which on average return at a rate higher than the tax-deduction-adjusted interest rate of their mortgage. For example, if you have a 5% ARM your effective interest rate after deductions is roughly 3.75%. You should speak with your tax and investment professionals about finding a strategy which allows you to invest at a rate higher than this, and contact us for advice on how to get you the money to build your financial future.

In recent years, it’s impossible to turn on the television or read the headlines without seeing a warning of impending doom. The media claims that the housing bubble is growing too big, and it’s about to burst! This pessimism has sold a lot of news stories, but it has also created many false concerns for first-time and move-up home buyers as well as investors. We keep hearing about this horrible catastrophe, yet the real estate market continues to boom. Why is that? Because the media neglected to consider one very important factor that is driving our current economic recovery: demographics.

The real estate boom began when mortgage interest rates fell into the single digits, making housing much more affordable. While this certainly contributed to home sales, there are additional causes we can isolate. Dr. David Lereah is a best-selling author and the Chief Economist for the National Association of REALTORS® (NAR). In a recent interview, Dr. Lereah revealed, “The biggest factor that affects real estate today, and has made it immune to some cyclical changes in the economy, has been demographics.”

The most significant and frequently mentioned demographic is the “Baby Boom” generation, which refers to children born in the years following World War II. Economic forecasting expert and author, Harry Dent, has written extensively about how property buying habits occur in a predictable fashion as a generation ages. From needing an apartment in college, to buying a starter home and eventually trading up to something larger, it is all cyclical. Since the Baby Boom generation is the largest so far, their impact has been far greater than the generations that proceeded them.

Now that Boomers have moved into their top earning years, they continue to push the housing market to new levels. They are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of home sales going toward second homes and 23% of sales going toward investment properties.

Demographic trends don’t end there:

• Immigration - There has been a large influx of immigrants over the past three decades. According to Lereah, it typically takes at least a generation for immigrants to become fully active in the home buying market.
• Children of Baby Boomers - This generation is now in their twenties and looking to purchase their first homes.
• Retirees - While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of disease, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.

In addition to the demographic factors listed above, real estate has been a rewarding investment. Stocks and bonds have not performed as well as investors were used to, while real estate has exceeded expectations. In an uncertain world, people are more comfortable investing their money in property which will appreciate.

So if the current boom can primarily be explained by the factors we just discussed, how do we know whether it will continue?

Dr. Lereah says, “We are in the Golden Age of Real Estate.” Even if the economy should slow and interest rates increase slightly in the coming years, the demand for houses is still strong. The biggest impact that such a change would have is to decrease the rate of price appreciation. While this may sound ominous, it really isn’t.

The media likes to refer to the real estate boom in terms of bubbles and balloons. In keeping with that analogy, Lereah indicates that local markets may react to higher interest rates by letting some air out of the balloon. The double digit price appreciation we’ve been experiencing could decrease over the next year or two to a more typical 4-6% range. This is still a higher rate of return than found in the stock market, all things considered.

So if you are looking to purchase a second home or investment property, where might be a good location to focus your attention? Ideally, where the Baby Boomers are planning to retire. The demand for housing in these areas continues to grow. Over the past year, some of the highest price appreciation took place in the resort areas of Florida.

The next time you turn on the television or read the headlines, be secure in the knowledge that the sky is not falling.

Additional Resources:
Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade - And How to Profit From Them - by Dr. David Lereah

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