Archive for the ‘ Market News ’ Category

Another Loss For The Year – It’s Time to Cash in the 401k…

So, I was going over my personal financial statements today.  I make it a habit to do this at the beginning of every month, and being that it is the beginning of the year, I also like to spend some time looking at how we did over the past year with our finances.  I really had a good laugh when I took a look at how my 401k performed this past year (although I should be crying). 

At first glance, I thought I had done pretty good because my account balance is actually up from where it stood at the beginning of the year.  However, after looking a little closer, the reason my balance is up is because of the loan payments (I quit contributing 3 years ago) I made to the account.  If you take out my loan payments, I had a net loss of $429.53 for the year.  Really, a loss?!?!? 

So I decided to look into things a little further.  With my 401k I’ve taken a simplistic approach and I simply invest in the S&P500 because most funds don’t beat the S&P on a yearly basis and it really simplifies everything.  So, if you look at the S&P 500, we started the year at 1271.89 and it closed the year at 1257.60 for a loss of 1.1%.  So, it makes sense that I lost money.

But I didn’t stop there…I decided to look at my 5 year performance.  To my dismay the loss has been even bigger over the last 5 years – the S&P500 is down 11.3% since January 2007.

Okay, so I haven’t made any money over the past 5 years, so I decided to go all the way back to when I first opened my 401k.  I’ve been at my job since January of 2000, and I opened my 401k in April of 2000.  To my dismay, the S&P500 is down over 16% since April of 2000.  This represents an annual loss of approximately 1.3% every single year I’ve been investing in the S&P 500.  At this rate I’m doomed to be greeting shoppers at Wal-Mart. 

Honestly, this simple exercise of looking over my 401k performance over the last year has confirmed to me why Kelly and I have quit investing in the stock market and we’re putting all of our money into real estate. 

Now, let’s compare this putrid performance in the stock market with just one of our property investments – 630 Lydia in Pontiac, MI.

We purchased this property in August of 2010 for $17,500 (yes that figure is right).  When we purchased, we took out a loan of $12,000 on the property, so our actual investment in the property was $5500.  So let’s take a look at how we did with this property – here are the actual numbers from this past year:

Rental Income – $11,815.92

Property Expenses – $6,890.68

Mortgage – $1,320.00

Cash Flow $3,605.24

So we made $3,605.24 on this one property last year making a 65% return on our $5,500 investment – a tad better than what I got out of my 401k.  Perhaps I might be able to skip the Wal-Mart gig after all. 

Honestly, I’ve been thinking about cashing in my 401k for a while now and putting the funds into real estate.  Even with the penalties and taxes I would have to pay to cash it in, I’m confident I will be much farther ahead buying a few more rental properties.   After looking at the performance over the past year, I’ve decided it’s time.  The 401k is going to get cashed in and we’re going to be purchasing some more property.

Stay tuned…

2012
01/02
CATEGORY
Deals We're Doing
Financial Education
Market Analysis
Market News
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Real Estate Investors – The Time to Invest In Detroit and Southeast Michigan Real Estate is Now

With the burst of the housing bubble, home prices have fallen dramatically and Michigan has been one of the hardest hit markets in the United States. This might just make Michigan one of the best markets to invest in right now.

It’s no secret that the struggling automotive industry has caused widespread job losses throughout Michigan, and as a result, foreclosures have driven Michigan housing prices down more than 60% since 2006.  According to Realty Trac, foreclosures account for 33% of Michigan’s home sales through the 2nd quarter of 2010, and this trend is expected to continue through 2011. For real estate investors these foreclosures represent an excellent opportunity to purchase property at a steep discount.

The Michigan economy is not out of the water just yet, but there are some very encouraging signs indicating that things may be turning the corner.

1. Detroit‘s Automakers Are All Producing Profits

It is no secret that Michigan’s economy is heavily tied to the automotive industry. In recent years, the automakers have struggled tremendously, but the restructuring is starting to take hold. In the 2nd quarter of 2010 all three of Detroit’s automakers were in the black posting the following profits: 

  • Ford – $2.6 Billion 
  • General Motors $1.3 Billion
  • Chrysler – $183 Million 

This is welcomed news for the Michigan job market as these profits have already resulted in renewed investments into Michigan’s economy. The Michigan Economic Development Corporation reports that 17 of the world’s leading electric battery companies are investing $5.8 Billion into Michigan. This includes a $43 million investment by General Motors for a new plant that will manufacture the batteries for the Chevy Volt – the automotive industry’s first fully electric vehicle. These investments are expected to create approximately 63,000 jobs.

2. The State of Michigan Has Provided a 42% Tax Credit to Film Makers

In April 2008, the state of Michigan announced a 42% tax credit for film makers that produce films using Michigan workers. This has spurred a flurry of film making activity. Before the incentive, Michigan averaged five film productions annually. In 2008 thirty-one films were produced, and in 2009 thirty-five films were produced. This trend is expected to continue with the announcement of 3 major studios to be built in Pontiac, Detroit, and Grand Rapids. These studios alone are expected to bring 6500 permanent jobs to Michigan.

3. Investment in Renewable Wind Energy

Because of Michigan’s vast coastlines along the great lakes, the wind potential is phenomenal. Michigan has enacted the Renewable Portfolio Standard which requires 10% of the state’s energy demand to come from renewable resources by 2015. This standard is sure to drive investment into renewable energy resources in Michigan.

The Time to Invest in Michigan Is Now

All of this economic activity is sure to result in the appreciation of Michigan’s deflated housing prices. In fact, Yahoo Real Estate is projecting that the Southeast Michigan real estate market will appreciate by 33.1% by 2014!

For investors, the time to invest in Michigan real estate is now. Fortunately, investors do not need to live in Michigan to participate in this market.  Companies like Michigan Turnkey Investments are setting up cashflowing turnkey investment properties for out-of-state investors. These properties are solid investments that boast returns from cashflow in the range between 13% – 20% annually.  With these kind of returns and the prospect of heavy property appreciation, it’s a no-brainer – the time to invest in Michigan real estate is now.

2010
10/03
CATEGORY
Market News
regular
Turnkey Rental
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Turnkey Rental Properties in Pontiac, MI

In today’s blog post we are just going to give you an update on some of the things we have been focusing on over the past couple weeks.  We are changing our focus a little bit and we’re developing a business model for turnkey rental properties.  Our focus will be on Pontiac, Michigan, but we will look at any property in Southeast, MI.   So here’s what we’ve been working on to build this business…

Focus on Systems

First off, with everything we are doing in setting up this business we are focusing on systems.  Our plan is to have multiple properties in various stages of the turnkey process (negotiating, buying, rehabbing, tenanting, selling), and to manage all of this we need systems in place to ensure our operation runs smoothly.

Business Plan

Our first step is to lay out our business plan.  This plan has our ideas organized on all of the following:

  • A description of the product we are selling – Turnkey Rental Properties
  • Our pricing strategy for selling
  • A description of the “Target Property” we are trying to buy
  • Locations for where we want to buy
  • The price we need to buy for
  • Our formula for rehab
  • Our plan for how we will sell the properties

Marketing

We are putting together our marketing plans to generate leads for buyers.  We are going to focus on out-of-state and international buyers because they will benefit the most from what we’re doing.  Because of this, the majority of our marketing for buyers will be online.

Market Research

As we wrote about in our post “Getting to Know The Pontiac Real Estate Market” we are spending a lot of time researching the Pontiac market.  We are looking at homes, studying the rental market, and determining the best areas to invest in Pontiac.

Meeting With Investors

To fund our deals, we need money, and to do the kind of volume we want to do, we are going to need private investors backing us.  To communicate our ideas, we have put together a business plan that we are sharing with investors, and we are working with them on an equity sharing relationship in the business.

Business Structure

As with any business, you want to be setup correctly to maximize your tax benefits, and minimize your exposure to liability.  We are meeting with CPA’s to develop our business structure to accomplish these things.

So as you can see we’ve been very busy getting a bunch of stuff setup.  Stay tuned for more…

2010
09/30
CATEGORY
Deals We're Doing
Market News
regular
Turnkey Rental
Video
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