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Safer Than Money In The Bank
People often act from preconceived notions and old habits rather than from facts and observations. Sometimes the perceived or imagined risk of an investment may not fit reality. There are plenty of examples of this happening right now.
For example, most people still think that money in the bank is the safest investment. Let's look at the facts. Each year we are having more and more bank failures. Even this January, the report was that there were more bank failures than for the same month the proceeding year. A person might argue, what about the fact that deposits are insured? A recent audit of the Federal Savings and Loan Insurance Corporation (FSLIC) showed it to be insolvent! Some savings institutions have been placed under "Management programs" to keep them operational even though they are insolvent.
The Federal Deposit Insurance Corporation (FDIC) insures savings in banks up to $100,000. There was a proposal to merge FDIC with its ailing cousin, FSLIC. This would probably drag the stronger of the two down rather than bringing the weaker one up.
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"Banks have such nice, safe-looking building..."
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In spite of the above information which has been published in the newspapers, people continue to put their savings in banks and savings and loans. Why? Habit. It's the easy way out. No thinking required. And the banks have such nice, safe-looking buildings.
To add insult to injury, our lending (savings) institutions are forced to loan money (savings) to bankrupt foreign nations. Brazil defaulted on over 100 billion dollars of loans and Argentina jumps on the bandwagon also. The answer? Lend them more money. Can you believe that?
Banks and savings and loans are living on an undeserved reputation for safety, coasting on their past record despite major changes in the financial climate.
Now let's look at owning mortgages and trust deeds. About all the average person knows about investing in notes is that once in awhile a dishonest broker sells investors (usually retirees) millions of dollars in mortgages and disappears with the money. Does this mean that notes aren't safe? Or that they are a poor investment? Let's look at the facts.
Notes are secured by valuable real estate. You can (and should) jump in your car and drive out and see the property itself. You can own a $20,000 note secured by an equity of $40,000, thus having 200 percent collateral. The average note today bears interest at 10 to 12 percent compared to 5 or 6 percent paid by the banks. So you can earn double the interest banks pay and have it secured by real property that you can see for yourself.
And here's the best part: you can buy your notes from "Unintentional Note Holders," people who sold real estate and carried notes as part of the sale, and buy at discount prices. This boosts the effective earnings to 15 to 20 percent or more yearly.
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"...the FSLIC is insolvent!"
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How does the safety of owning notes secured by real estate compare to owning the real estate itself? If we take a property mortgage with a first and second loan, and you own the second loan, your equity comes ahead of the property owner's equity! The property owner's equity always comes last. You could even consider owning a well-secured mortgage or trust deed (on property you wouldn't mind owning yourself if you had a chance) as the equivalent of an option. As long as the property owner pays you as agreed, you earn your 15 to 20 percent per year return with no more management than mailing the loan-payment book back and forth to the property owner.
In the event the property owner doesn't pay, for any reason, you can foreclose (exercise your option, in a sense) and the property is auctioned off. You get paid in full in cash if there is a higher bidder, or your get the property with your equity plus the property owner's equity thrown in as an additional bonus! With a well-secured note, the chances of getting the property back at auction are very slim because 1) the property owner would be a fool to let it go to auction, and 2) if it did go to auction, someone would bid enough cash to pay you off completely.
So let's re-evaluate mortgages and trust deeds versus money in the bank.
1) Do you choose your own investments? Yes.
2) Is the money you invest lent to bankrupt foreign nations? No.
3) What secures or insures your money? Your own inspection of the note and security property, a piece of real estate you wouldn't mind owning yourself. Not an insolvent insurance corporation.
4) Can you sleep easy at night? Yes, because you know that your payments are coming in regularly each month, the property is still there, you have insurance on your note, and you are in control.
Investing in mortgages and trust deeds is somewhat like playing the game of Monopoly. The playing board is a calendar with 31 days. We all move through those 31 days each month. The note owner has the calendar rigged with special squares: each note payment due date becomes a special square labeled "John Jones, collect $200," or "Sally Smith, collect $175." You love to mark off the days each month and land on those payday squares.
And next month? Well, pass "Go" and start it all over again!
People often act from preconceived notions and old habits rather than from facts and observations. Sometimes the perceived or imagined risk of an investment may not fit reality. There are plenty of examples of this happening right now.
For example, most people still think that money in the bank is the safest investment. Let's look at the facts. Each year we are having more and more bank failures. Even this January, the report was that there were more bank failures than for the same month the proceeding year. A person might argue, what about the fact that deposits are insured? A recent audit of the Federal Savings and Loan Insurance Corporation (FSLIC) showed it to be insolvent! Some savings institutions have been placed under "Management programs" to keep them operational even though they are insolvent.
The Federal Deposit Insurance Corporation (FDIC) insures savings in banks up to $100,000. There was a proposal to merge FDIC with its ailing cousin, FSLIC. This would probably drag the stronger of the two down rather than bringing the weaker one up.
--------------------------------------------------------------------------------
"Banks have such nice, safe-looking building..."
--------------------------------------------------------------------------------
In spite of the above information which has been published in the newspapers, people continue to put their savings in banks and savings and loans. Why? Habit. It's the easy way out. No thinking required. And the banks have such nice, safe-looking buildings.
To add insult to injury, our lending (savings) institutions are forced to loan money (savings) to bankrupt foreign nations. Brazil defaulted on over 100 billion dollars of loans and Argentina jumps on the bandwagon also. The answer? Lend them more money. Can you believe that?
Banks and savings and loans are living on an undeserved reputation for safety, coasting on their past record despite major changes in the financial climate.
Now let's look at owning mortgages and trust deeds. About all the average person knows about investing in notes is that once in awhile a dishonest broker sells investors (usually retirees) millions of dollars in mortgages and disappears with the money. Does this mean that notes aren't safe? Or that they are a poor investment? Let's look at the facts.
Notes are secured by valuable real estate. You can (and should) jump in your car and drive out and see the property itself. You can own a $20,000 note secured by an equity of $40,000, thus having 200 percent collateral. The average note today bears interest at 10 to 12 percent compared to 5 or 6 percent paid by the banks. So you can earn double the interest banks pay and have it secured by real property that you can see for yourself.
And here's the best part: you can buy your notes from "Unintentional Note Holders," people who sold real estate and carried notes as part of the sale, and buy at discount prices. This boosts the effective earnings to 15 to 20 percent or more yearly.
--------------------------------------------------------------------------------
"...the FSLIC is insolvent!"
--------------------------------------------------------------------------------
How does the safety of owning notes secured by real estate compare to owning the real estate itself? If we take a property mortgage with a first and second loan, and you own the second loan, your equity comes ahead of the property owner's equity! The property owner's equity always comes last. You could even consider owning a well-secured mortgage or trust deed (on property you wouldn't mind owning yourself if you had a chance) as the equivalent of an option. As long as the property owner pays you as agreed, you earn your 15 to 20 percent per year return with no more management than mailing the loan-payment book back and forth to the property owner.
In the event the property owner doesn't pay, for any reason, you can foreclose (exercise your option, in a sense) and the property is auctioned off. You get paid in full in cash if there is a higher bidder, or your get the property with your equity plus the property owner's equity thrown in as an additional bonus! With a well-secured note, the chances of getting the property back at auction are very slim because 1) the property owner would be a fool to let it go to auction, and 2) if it did go to auction, someone would bid enough cash to pay you off completely.
So let's re-evaluate mortgages and trust deeds versus money in the bank.
1) Do you choose your own investments? Yes.
2) Is the money you invest lent to bankrupt foreign nations? No.
3) What secures or insures your money? Your own inspection of the note and security property, a piece of real estate you wouldn't mind owning yourself. Not an insolvent insurance corporation.
4) Can you sleep easy at night? Yes, because you know that your payments are coming in regularly each month, the property is still there, you have insurance on your note, and you are in control.
Investing in mortgages and trust deeds is somewhat like playing the game of Monopoly. The playing board is a calendar with 31 days. We all move through those 31 days each month. The note owner has the calendar rigged with special squares: each note payment due date becomes a special square labeled "John Jones, collect $200," or "Sally Smith, collect $175." You love to mark off the days each month and land on those payday squares.
And next month? Well, pass "Go" and start it all over again!
Learn about the cash flow business! List your cash flow for free, informational articles, and find out how you can start investing in cash flows! Go to http://www.cash4cashflows.com/cash4notes4
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