Economic Outlook

"What if buying investment real estate were as easy as purchasing stocks, bonds or mutual funds. Imagine picking up the phone, calling your broker, and saying "I want two rental homes that fit the most popular profile in a high-growth housing market and I want you to handle the leasing and management for me." Now picture yourself "getting in" for as little as $3500 per home! "

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• Real Estate - The Millionaire Maker
• 3 Steps To Financial Freedom
• Why Florida Real Estate Will Continue To Appreciate
• Stocks Vs Real Estate - Why Real Estate Will Always Win
• Why Real Estate Will Continue to Appreciate In Value

The Millionaire Maker

Ray Kroc, the founder of the McDonald's franchise once shared with a group of graduate students at the University of Austin in Texas the following statement: ".hamburgers are what allow me to conduct my real business; Real Estate!" Real estate remains the most potent millionaire maker accessible to the masses in America today. Why then doesn't everyone become a millionaire real estate investor?

For all the tremendous benefits real estate has to offer, there are some disadvantages potential investors focus on and make the decision that it's not a viable investment vehicle for them. More often than not, the dynamics of these decisions will involve the fact that real estate investing is perceived as a "hands on" activity, real estate is cumbersome to acquire, and knowing what makes a sound real estate investment without exposing the investor to a high degree of risk is somewhat of a mystery to the average person.

However, behind these perceived "barriers to entry" lies an investment vehicle that can truly deliver on the promise of a secure tomorrow beyond any other form of investment, including stocks, bonds and mutual funds.

If you are like the majority of homeowners in the United States, most of your net worth is represented by the equity in your home, however, like most homeowners, as the value of their home goes up, so does their mortgage. Most people use the growth in their equity over the years to finance their lifestyles, not their future.

The Loan Corporation is one of the leaders in the industry that allow its customers to use real estate investing to create financial freedom and wealth beyond their dreams. We have created an investment vehicle that is safe, secure and most importantly, passive or hands off. We have used our expertise in the marketplace to give our clients, employees, friends and family an easy way to become independently wealthy.

The difference between the poor, middle class, rich and the wealthy is that the wealthy have assets working for them, the poor, middle class and to a large extent the "rich" work for their assets.

Why There Is No Real Estate Bubble In Our Investments

The irrational exuberance that produced the meltdown in the stock market in 2000 simply does not exist in the investment real estate marketplace where we invest. Our investments are valued as the result of cash flow. If market conditions drive the price beyond a certain level of support, we will simply not recommend the investment. To find out why we believe the price of investment real estate will continue to appreciate for years to come, please follow this link.

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The Loan Corporation Presents The Financial Freedom Investment

Step 1 Determine Your Objectives

How would you like an income of $10,000 per month coming in for the rest of your life regardless as to whether you worked a job or not? What if this income was adjusted to the cost of living and went up every year. What if you were able to eliminate all the debt in your life, including your mortgage in as little as 5 years? What if we could show you how to achieve both of the above objectives in a manner that involved little to none of your time, had little or no risk associated with it, and was as easy to get into as a stock?

The first step is for us to determine exactly how much income you want every month for the rest of your life and what your debt elimination goals are (if any). We will then tailor an investment strategy for you that will meet these objectives within a finite time frame. Our strategy will not be based on any unrealistic assumptions and will work in the background allowing you to live your life without making any sacrifices today but at the same time securing your tomorrow.

Step 2 Acquire Real Estate Investments

We will formulate a systematic plan for you that involves an acquisition phase, a holding phase, and a selling phase. Depending upon your objectives, we may mix some short term gain investments with some longer term income generating investments. The end result will be a portfolio of properties that delivers on the desired objective.

Step 3 Benefit From Your Investment

After a fixed amount of time, anywhere from 5 to 12 years, your investment portfolio will be able to sustain itself and you with an income that will last for as long as you choose to own it. Finally, your assets will be working for you and you will be truly wealthy!

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3 Market Dynamics That Will Keep Florida Real Estate Rising In Value for Years To Come

1. Baby Boomers. Between the years 1946 and 1964, the birth rate in the United States saw a marked increase from prior levels. As a result, this generation is going to be retiring in record numbers as well. Due to the fact that the high rate of birth was sustained over a period of 18 years, a sustained increase in retirees moving to Florida will ensure a strong demand for housing.
    

2. Technology. The advent of the internet has made telecommuting available to individuals that simply did not have that choice before. Families can now choose to live where they want to live rather that where they have to live due to proximity to work. The Florida lifestyle is more accessible (via telecommuting and the internet) to many that would otherwise not be able to take advantage of it. There are thousands of families moving down to Florida from colder harsher climates that would not be doing so were it not for the advent of the internet and email.
    

3. Outsourcing and Loss of Manufacturing Jobs Overseas. With these traditional high paying blue collar jobs becoming extinct in the United States , thousands of people are finding themselves unemployed and not able to readily find work in their field. These workers and their families are moving to Florida due to the better job market and easier lifestyle it offers them. As they move here, they will eventually be buying homes and creating more demand.

The one wildcard in a sustainable upward swing in real estate prices is where interest rates are going. Throughout 2004 and 2005 the Federal Reserve has been raising short term rates. However longer term mortgage interest rates have remained low. The market is somewhat resilient to interest rates moving higher, but only to a point. If rates on mortgages stay between today's level of 5.75% and a maximum of 7.500% then the real estate market will be relatively unaffected. If they go higher than 7.500%, then there may be some pressure on appreciation. This pressure will initially be felt on the upper end of the housing market (luxury properties) and depending on how high the rates go, may work its way down the chain to the level of investment grade (3/2 single family homes priced at close to replacement or building and land cost) properties.

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Stocks vs Real Estate - Why Real Estate Will Always Win!

Assets be they stocks, bonds, or real estate, provide their owners returns in two ways:

1. The rate at which their value increases every year (capital appreciation) and

2. The rate at which they generate an income for their owner (dividend or rent).

When comparing real estate to stocks it is essential to look at both forms of returns to the investor. Capital appreciation for stocks and real estate has many different underlying elements. However, rather than look at the myriad of complicated factors, we can look at a long term historical view to determine that, when adjusted for risk, both stocks and real estate appreciate at roughly the same rate. These cycles of appreciation may not be the same, but over time the returns are similar. On the surface it may seem that they are both equally good investments over the long run. We need to dig a little deeper to show you how real estate comes out on top. Have you ever wondered why banks will only lend you 50% of your stock portfolio to buy more stock, yet those same banks are happy to lend you 90% of the value of your real estate portfolio? Which investment do you think they consider more risky?

With assets, capital return on investment is based more on how much asset you control rather than own outright. You can usually control more than you own outright by borrowing money against your asset and leveraging it to produce a higher return. Its access to this leverage that magnifies your return on investment, and because real estate has greater access to leverage, your return is always going to be higher for a given underlying rate of appreciation. For example, let's assume you have $100,000 to invest. You can either invest it in the stock market or real estate. To maximize your return on investment you want to leverage your investment to the maximum degree to which you have access.

With stocks, you can borrow 50% of the value of your portfolio on margin. Your $100,000 investment would allow you to borrow an additional $50,000 for a total portfolio controlled by you of $150,000. If this portfolio appreciated by 8% for the year your capital return on investment would by $150,000 X 8% or $12,000. When compared to your original investment of $100,000 your capital return on investment for the year would be your original investment divided by the total return on your total controlled portfolio or $100,000 / $12,000 = 12%.

Most people assume that when the price of their real estate rises 6% they are earning a 6% return. But since they have invested only their down payment, their actual cash-on-cash return is significantly higher! With real estate, you can borrow up to 90% of the value of your portfolio. Your $100,000 investment allows you to control $1,000,000 worth of real estate! If your real estate portfolio appreciated by 8% for the year your capital return on investment would by $1,000,000 X 8% or $80,000! When compared to your original investment of $100,000 your capital return on investment for the year would be your original investment divided by the total return on your total controlled portfolio or $100,000 / $80,000 = 80%!

You can clearly see in the above example, that for a given appreciation rate, real estate produces an 80% return on your investment dollar and stocks produce a 12% return on investment.

Conventional wisdom however dictates that the higher the level of leverage the riskier the investment. We mitigate or contain risk in real estate investing by defining an investment "box". This box contains parameters that make the investment as risk averse as possible. By only investing in 3 bedroom, 2 bathroom, 2 car garage, brand new or late model single family homes at a price point 90% of the home buying public can afford in areas that are ripe for appreciation your investment is secure.

This asset provides a very basic need for everyone and that's shelter. We can do without certain company's stock in the marketplace but we certainly can not do without a place to live. A single family home can never go bankrupt like a companies stock can! By purchasing the right real estate investment and maximizing your leverage on it you can be assured of a solid long term financial freedom and wealth building strategy for you and your family.

The second way in which assets produce returns for their owners is income. For a stock, income is called a dividend. For investment real estate, income is called rent. The average blue chip or "safe" stock pays income or dividend at an average rate of 1.5% to 2%. That means that you would have to own or control $10,000,000 (ten million dollars!) worth of stock to realize an income of $150,000 to $200,000 per year! To control $10,000,000 worth of stock you would need approximately $7,500,000 and borrow 50% on that to get to the $10,000,000 number. 

Investment grade real estate produces an income or rent that is approximately 6% to 8% of the value of the asset. If you controlled $10,000,000 worth of real estate the income generated would be $600,000 to $800,000 per year! But it's your access to leverage that makes controlling $10,000,000 worth of real estate more realistic than controlling $10,000 000 worth of stock. With access to 90% financing, you can control $10,000,000 worth of real estate with just $1,000,000 vs. $7,500,000 you would need to control the same amount of stock!

It's these dynamics that the investing public is not privy to.

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The Financial Freedom Investment - Brings It All Together For You!

Real estate has always been viewed as a hands on business. Real estate brokers have not been looked at as "real estate investment brokers", but rather as individuals that are more interested in earning commissions than advising clients on the merits of real estate investing. That is a well founded belief when you see that most real estate brokers do not own any investment real estate!

The Loan Corporation is the first of what will be a wave of emerging organizations that harness the power that real estate investing has over traditional investments such as stocks and bonds and make it available to the consumer in a conveniently managed package. On resale homes we give our investor clients 50% of our commission back as a reserve account for their new investment home! On our pre-construction investment program we give investors 10% below market value opportunities to acquire real estate that fits our investment "box" and have eliminated the traditional down payment of 10% through a creative construction to permanent loan product. Our goal is to make owning investment real estate feel the same as owning stock. Although we can not guarantee future returns, we can certainly use our experience to help our clients avoid the many mistakes they could make should they decide to go it alone. Our customer relationships are long term. We offer strategies for "income for life" and strategies to take advantage of the rapidly rising Florida market for short term gain. We would be happy to show you in detail how both strategies work and answer any questions you may have. Call today to get your future secured!

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3 Market Dynamics That Will Keep Florida Real Estate Rising In Value for Years To Come

1. Baby Boomers. Between the years 1946 and 1964, the birth rate in the United States saw a marked increase from prior levels. As a result, this generation is going to be retiring in record numbers as well. Due to the fact that the high rate of birth was sustained over a period of 18 years, a sustained increase in retirees moving to Florida will ensure a strong demand for housing.

2. Technology. The advent of the internet has made telecommuting available to individuals that simply did not have that choice before. Families can now choose to live where they want to live rather that where they have to live due to proximity to work. The Florida lifestyle is more accessible (via telecommuting and the internet) to many that would otherwise not be able to take advantage of it. There are thousands of families moving down to Florida from colder harsher climates that would not be doing so were it not for the advent of the internet and email.

3. Outsourcing and Loss of Manufacturing Jobs Overseas. With these traditional high paying blue collar jobs becoming extinct in the United States , thousands of people are finding themselves unemployed and not able to readily find work in their field. These workers and their families are moving to Florida due to the better job market and easier lifestyle it offers them. As they move here, they will eventually be buying homes and creating more demand.

The one wildcard in a sustainable upward swing in real estate prices is where interest rates are going. Throughout 2004 and 2005 the Federal Reserve has been raising short term rates. However longer term mortgage interest rates have remained low. The market is somewhat resilient to interest rates moving higher, but only to a point. If rates on mortgages stay between today's level of 5.75% and a maximum of 7.500% then the real estate market will be relatively unaffected. If they go higher than 7.500%, then there may be some pressure on appreciation. This pressure will initially be felt on the upper end of the housing market (luxury properties) and depending on how high the rates go, may work its way down the chain to the level of investment grade (3/2 single family homes priced at close to replacement or building and land cost) properties.

Back To Top