For one thing, interest rates on bank CDs, money market funds, and even short-term Treasury securities are locked at abnormally low yields.

For example, one-year jumbo CD rates, are just 1.6% while many money market funds pay less than 1%, making life quite difficult for fixed-income investors right now. Other potential threats include soaring federal budget deficits and the chronically weak U.S. dollar.

The once almighty buck continues to lose value against global currencies … DOWN another 14% in the nine months ended September … and if the slide continues at this pace, it could easily lead to higher inflation down the road and potential lost value in EVERY dollar-denominated asset you own.

What options are available for fixed-income investors to deal with these challenges? Here are a few:

• Earn higher current yields from a broad mix of income-producing investments. Consider diversifying into a wider range of income producing securities such as corporate bonds or income securities with longer maturities.
• Capture gains from shifts in global interest rates. The low rates on safe, income-producing securities that we see in other countries is not necessarily as extreme as what we see in the USA, especially with government backed securities. For example, I was earning a fixed, secured 7.85% on a CD in Australia. And usually these securities can be purchased without having to travel to that country (I purchased mine on the Australian bank’s website).
• Provide a hedge against the falling dollar with international fixed income diversification. So, for example, even if you had owned British fixed income securities that were paying the same crummy, low rates that US securities are paying, you would potentially have made an additional 10 percentage points in gains just by fluctuations in the British pound against the dollar!
• Seek out “private” offers to invest / lend money for a business. In this cash strapped economy where bank financing is tight, there is no end to the opportunities you have to invest your cash in a new business venture where someone else is running the business, and you’re just the bank. As a side note, even though we generally feel more comfortable lending money to a friend / family member, try to be objective. You may trust they’re intentions are good, but is this really a good business and are they really the right person to manage it. Recently, for example, a friend of mine lent $250,000 to another private individual (that he had no prior relationship with) to start a McDonald’s franchise. Now, since the guy had long been in the fast-food business and he’s choosing McDonald’s (who has a track record, to say the least) rather than, say, Joe’s Hamburgers, I’d say my friend’s investment is safe.
• Seek out “private” offers to invest / lend money for cash-flowing real estate (office buildings, apartment buildings, long-term rental houses, NOT flipping!). This is certainly my preferred strategy but it always comes with the same warning: make sure the cash flow of the property is adequate to make a payment to you every month. Yes, we want to check the creditworthiness, financial condition, and experience level of the real estate investor you’re partnering with, but we are more interested in the investment itself and whether it is self-funding. No matter how well intentioned he/she is, we want to know that our payments will be coming from the profit of the property, not from the individual’s job income or life savings.

Not for the faint of heart, please don’t go this last one alone. Certainly Great Lakes Secured Investments LLC can provide you with up to five times the income of other fixed, secured investments collateralized by a property whose cash flow easily covers the payment due you every month.

Related posts:

1. UPDATE: ACHIEVING HIGHER YIELDS WITHOUT EXCESSIVE RISK
2. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
3. The Problem with Treasury Bonds as Fixed Income Investments

When it comes to foreign creditors selling off their U.S. Treasuries, it seems like they’ll always buy our debt because our bond market is the most liquid, safest warehouse for their money. In the short-term, that’s probably true. But the longer-term trend is much different. Like irresponsible teenagers throwing a party and trashing the house while their parents are gone, the Fed and Washington politicians don’t want to tell their constituency the ugly truth: that the current government spending spree is not only mortgaging America’s future, but will destroy the financial foundations of this country.

But over time, they WILL gradually lower demand for U.S. debt, pushing bond prices lower, and interest rates higher.

Why are foreign creditors trying to avoid U.S. debt? First, the U.S. government has adopted an unofficial policy of U.S. dollar debasement or, at best, an official policy of not-so-benign neglect. Second, despite a U.S. federal deficit that’s at least three times larger than the worst in history, there’s no plan to bring it under control. Third, the U.S. Federal Reserve is monetizing the debt with printed money, a classic cause of rising gold, rising commodity prices, and a declining currency.

Concern is rising sharply in places like China. The country has more than $2 trillion in reserves. Perhaps as much as ¾ of that is in US dollars. If the dollar keeps declining, so too will the value of those Treasuries, corporate bonds, and equities. In fact, the former vice chairman of China’s Standing Committee warned that concern is rising, and rising fast.

China’s Ministry of Finance also said that it would sell $900 million worth of government bonds soon. This is the first issue of Chinese government debt targeted at global investors. The idea is to increase international confidence in China’s currency and China’s bond market.

Please don’t disregard this important long-term trend. It’s going to lead to higher interest rates, whether the Fed and Treasury like it or not. That sounds like a good thing if you own those securities, but it’s not…remember, when interest rates rise, the value of the underlying bonds decrease substantially.

For those of you with a long-term horizon in your retirement planning, make sure you understand that it is a near certainty that US savings bonds and Treasury bonds will drop dramatically in value.

At GLSI, we offer up to 10.0% fixed interest, secured by real estate whose cash flow is nearly double that. And when we say secured, we mean secured by a 1st position mortgage. You’re not second or third in line behind other lienholders. Contact us for a truly fixed and secured investment!

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. UPDATE: ACHIEVING HIGHER YIELDS WITHOUT EXCESSIVE RISK
3. EARNING HIGHER INCOME IN A LOW YIELD MARKET

And yet every day of the week we hear about a supposedly simple purchase of a house, the cursory clean-up, and a quick, painless sale which yields the “investor” a healthy profit. But upon closer inspection it’s never really that simple. We ask “which bank will do the financing” and they act like it’s a trick question. In fact, it often never happens and the person simply doesn’t sell the house. Just like with Elvis sightings, it’s the next few questions that are hardest to answer.

Lot’s of attention is being paid to the price. People have even gotten smart about location. Not too tough to estimate construction costs, either. There are even comps out there now, albeit low ones. But the fly in the ointment—that thing which will prevent the flip from happening—is the new buyer’s bank.

It’s a simple thing called title seasoning. It’s a restriction that banks and Fannie Mae place on financing of properties whereby the current owner hasn’t been an owner more than six months (90 days in the case of FHA loans). In other words, if you buy the house, do a cursory clean-up to it, and then try to sell the house immediately even for a small amount more than you paid, you’re going to run into trouble with the buyer’s bank. They probably will refuse to approve the loan or even accept the application.

It’s supposedly a little easier if you do a full re-model of the home. In such cases, it is said that banks may waive the seasoning requirements, because you can justify the higher value of the home with receipts showing how much money you invested into it. But what if you’re doing some of the work yourself—will they allow you to price your own labor? And what if the house really doesn’t need that much work? And even if you completely transform the house, you may have to sit on it for many months before a bank will even look at a buyer’s mortgage application.

With the kinds of mark-ups traditionally expecting with wholesaling, it’s gonna be pretty tough to justify sitting on a house for 6 to 12 months longer than you have to. That adds a whole bunch to your cost basis and kills most of your potential profit.

So once again, there is no magic bullet called “wholesale” or “flipping”. Once again, despite all the romance and drama given to the idea of flipping houses, it is still not the one-size-fits-all solution. If you plan on buying houses and cashing out within the first year, at least for the time being, you should be looking for CASH buyers.

Great Lakes Secured Investments holds and manages property for long-term cash flow. By eliminating the unknowns of flipping, we share in the cash flow with investors. Because the cash flow of the property far exceeds the interest cost and operating costs, the investment feeds itself. The income can always pay the investor up to 10.0% fixed!

Related posts:

1. REAL ESTATE FOR THE SECURITY CONSCIOUS INVESTOR
2. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
3. So You Want To Be A Real Estate Investor?

In even more unfortunate news however, the dragging stock market has garnered near universal acceptance that this recession is going to be longer and deeper than the consensus estimated just three months ago. In fact, investment firm Credit Suisse lowered its projected operating earnings for S&P 500 companies to $58. It had previously expected earnings closer to $70. The firm also released its overall operating earnings expectations for the S&P 500 in 2009; a 34% fall. In lowering its estimate, Credit Suisse analysts added a note of caution to the grim forecast: “We worry that while financial earnings have already seen considerable weakness, non-financial earnings have further to fall.”

Faced with such pessimism the S&P finished below the 800 ‘technical support’ level analysts have felt is critical in maintaining investor confidence. Add to that the shaken state of investor sentiment that came with news of Japan’s economy shrinking at an annualized rate of almost 13% in the latest quarter, and we can only conclude that economic news from the world over is reinforcing the notion that this recession knows no bounds and may be gaining fury.

Even in the face of promising news — as the market sank President Obama signed a $787 billion stimulus into law with a promise more could be on the horizon if needed – this grim perception is causing investors to seek cover from the storm.

Even with recent reports from credit markets indicating that the great credit freeze may finally be starting to thaw, it isn’t likely that investors will bet on nascent signs of improving credit with the housing market in turmoil.

With funds like Great Lakes Secured Fixed Income paying a 50% ROI it’s no surprise that in turbulent times like these, investors are considering their options for fixed, secured income investments instead.

After all, a fixed secured note of $32,000 at 10% APR (interest only) for a 5 year term would pay the note holder $267 per month. That’s a total of $16,000 in 60 monthly payments; a 50% ROI plus the original $32,000 investment back at the end of the term.

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
3. Interest Rate Volatility

Why is there this notion that “anybody can do it” and yet so very few actually do? Well, anybody can make hamburgers too, but there’s only one company that does it like McDonald’s, and that’s McDonald’s.

What gives? Why is that thing which is so popularized in shows such as “Flip That House” and on real estate infomercials and in seminars in reality more elusive than BigFoot or UFOs?

As one of the few who has beat those odds, I’ve pondered those questions for years, and I’ve distilled my answers down to the following list of things that I believe prevents most wannabe investors from ever being successful:

SELLING (“FLIPPING”) VS. HOLDING – Contrary to popular belief, very little of all real estate profits are made from buy low-sell high in short periods of time. Wannabe investors think you make money when you sell, but true investors know that you make it when you buy. And if you bought something that produces income on a regular basis, passively, why would you want to sell it? Unfortunately, talking about long-term hold isn’t as sexy as the flipping myth (you know, the one where they say “who needs tenants, toilets, and trash? You don’t need credit, partners, money, etc.—just flip it for quick cash…”) It may sell books and seminars, but it’s dead wrong. You’ve been lied to. Show me a person who claims to “flip” properties on a regular basis, and I’ll show you someone who’s either lying or doing something illegal. Wholesaling, as it is also known, is one small tool in a vast real estate toolbox, and the one which has the narrowest of applications. Almost always a solution looking for a problem; almost never a deal that closes.

VALUING PROPERTY BASED ON APPRAISED VALUE RATHER THAN ON INCOME – The bank’s, realtor’s, and appraiser’s model which says that a house is worth what other comparable houses have recently sold for is garbage. Why do you think the banking industry is on its knees right now? Because rather than looking at the income it produces (or what the borrower earns), they were focused on some other agenda, perpetuating the myth that house prices will go up forever. You’re NOT gonna sell the house whenever you want to anyway, no matter what you think, so what meaning does that appraised value have? It’s irrelevant! So is taxable value and assessed value. If the house doesn’t produce income, it’s because you paid too much for it and your payment is too high—it’s that simple. If the appraiser thinks it’s worth more, tell him to buy it. The house’s value is determined by rental income—period!!!

POOR CASH FLOW – This is more of a symptom than a problem. Usually it’s a function of bad location, paying too much, not understanding your true costs, or simply being naïve about the importance of cash flow in the first place. Cash flow is the fuel that keeps the engine running; if you want to be around long enough to be successful, you better have positive cash flow.

LOCATION – Most of the problems I hear associated with rental property are directly associated with a bad location. It’s very simple: we want to keep buildings full with people who actually aspire to live there. People don’t want to live in the ghetto. Get good people, and you’ll have minimal damage, problems, and vacancy. Conversely, if we buy only palatial estates on the golf course, we have a product that doesn’t appeal to the masses and will sit vacant too often.

MORE COMFORTABLE WITH CONCRETE DATA THAN WITH MORE SUBJECTIVE THINGS INVOLVING PEOPLE SKILLS – I’ve never borrowed money from a private lender or seller, leased a house to a tenant, or sold a house to a buyer except in a face to face personal relationship. People do business with other people. Wannabe investors seem to think there’s a cause-effect relationship or other mathematical ways to shorten the process or take away the unknowns. Math and data may be more predictable and less intimidating than meeting and building relationships with strangers, but you’re simply not going to succeed without quality people relationships.

MISINFORMATION BY AUTHORS AND SPEAKERS WITH AN AGENDA TO SELL YOU THEIR “EDUCATION” – Unfortunately, the authors and speakers in this industry have done a real disservice to individuals who might otherwise have become real investors, had they been told the truth: that this is a people business and a long-term proposition, not a data-crunching exercise and not an instant lottery ticket. Of course they do this primarily because it is easier to sell something to gullible “investors” by telling them what they want to hear than it is to tell the whole truth. The other unfortunate truth is most authors and speakers are not investors and are simply unqualified to know the truth.

Related posts:

1. REAL ESTATE FOR THE SECURITY CONSCIOUS INVESTOR
2. Why UFOs Are Always Out There and Why Real Estate is Always Easy to “Flip”…
3. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS