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Archive for June, 2009

Buying A Home When Rates Go Up

Many people fret the rising tide of interest rates. Youll hear things like Did I miss the boat? Is it too expensive now to buy a home? How can I afford the house of my dreams? Maybe I should wait! Maybe I should just rent for a while! Maybe the rates will go down in a few weeks.

Stop! Nonsense I say!

I bought my first home at close to 9. Buyers from the 80s told me I was getting in at a bargain and anyway who cares? I dont. I refinanced long long long ago. 9 is just a part of history now.

So heres 5 important points you need to keep in mind when the ebb and flow of interest rates ebbs up more than it flows down

1. Theres no better time then NOW!
2. Long Term Investing
3. Creative Financing
4. Uncreative Financing
5. Buying a Home when Rates go Down

1.Theres no better time then NOW!:

I know it sounds clich but its true. Theres no better time to buy then now. Why?

1. Because if rates are going up then the law of supply and demand insists that the rising price of homes will likely slow down.
2. Since appreciation slows down when rates go up this is an opportunity to buy at a perceived discount
3. Remember rates fluctuate and nothings forever. So its more important to get your darned foot in the door right now. You can always refinance later as rates ebb and flow back down. Youll still have the benefit of having gotten into the house at a lower discounted price and you can then enjoy both a low rate when you refinance alongside knowing that you got the house when prices slowed down maximizing the gain when appreciation revs back up again.

See what I mean? Dont wait. It only gets more expensive. Theres always no better time then NOW!

2.Long Term Investing:

If this is your first home then you have to think beyond the next year or so and move your frame of reference into a longer futuristic point of view.

1. Are you going to live in the same house for at least 5 years?
2. Most of us would answer yes therefore you need to be more concerned with real estate in the long term lets say beyond 5 years and you need to be less concerned with the short term rise and fall of rates. Youll drive yourself nuts otherwise.
3. 5 years is a pretty solid range of time for rates to go both up and down. In other words history proves that for the most part youll live through the ebb and flow of rising and falling rates as a homeowner and you know what? Youll survive; in fact youll thrive because youll enjoy a net gain in appreciation over the long term.

So rates go up and down in the short term but in the long term real estate always appreciates and that means that homeowners always win.

3.Creative Financing:

This is the good stuff. When rates go up opportunities abound. You see many homeowners builders and developers find themselves in more negotiable positions because of the laws of supply and demand. Surplus rises and buyers slow down.

1. If financing is an issue then you may be able to negotiate with the owner to carry the note and completely bypass more conventional lending institutions.
2. If affordability is an issue then perhaps youll find many more resales out there perhaps fixeruppers ready to negotiate for a lower price (Can you say built in equity?)
3. If discounts and incentives are your game then perhaps youll locate some developers anxious to move inventory with a flare for adding a rebate or doing youre landscaping or building that retaining wall you wanted.

The key here (and this is very important) is to find an excellent real estate agent. I cant stress enough how important it is to have someone on your side who understands the lay of the land. Dont go at it alone. Just go find someone knowledgeable who you can trust and who is ready and willing to roll up their sleeves and go to work for you.

4.Uncreative Financing:

As of the writing of this article rates are still very very low. Anything below 7 for a fixed rate in my opinion is totally workable.

1. Between 1979 and 1990 fixed interest rates ranged from 11 to 16 on average. This is highly unusual historically of course but it is an excellent benchmark when you evaluate how good or bad things are right now.
2. So as youre exploring your choices dont lose sight of the big picture. Getting your foot in the door is more valuable then being left out in the cold.
3. One other important point. For all those homeowners that purchased in the 80s do you think theyre terribly concerned now about the ebb and flow of rates? Do you think they kept their 11 fixed rate loan or do you think they refinanced when it dropped down to 6 (or paid the house off by now). Id venture a guess that virtually all of them; have a nice hefty bulky attractive pot of equity sitting on their front porch step today.

5.Buying a Home when Rates Go Down:

When rates go down of course its obvious that getting a loan and buying a house is extremely attractive.

1. But when rates go down there is a lack of homes on inventory.
2. Can you say Nonnegotiable or bidding war or oops sorryAlready sold!
3. When rates go down the seller is in the drivers seat and the buyer is running around with checkbook in hand yelling Where do I sign?

Keep that in mind. Which would you prefer? Personally I dislike high rates but I LOVE being in the drivers seat. I guess in the end youve just got to work with whatever environment exists today. Any way you look at it you cant stop and wait until the cards stack up in your favor. You just have to dive in and get started. If you like to be creative if you like opportunities and if you like to be in the drivers seat then rising rates shouldnt bother you in the slightest. Renting is more of a crime to your finances in the long run.

Weve enjoyed providing this information to you and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust and never turn your back on your own common sense.

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About the writer:

Tom Levine

Copyright 2005 by http://www.loansdirectory.org/ This article is available in full format at: http://www.loansdirectory.org/articlewhenratesgoup.htm Tom Levine provides a solid common sense approach to solving problems and answering questions relating to consumer loan products. His website seeks to provide free online resources for the consumer including ratewatch tips and articles financial communication news and links to products and services.

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Buying A Franchise

Buying a franchise is not for everyone. This guide will help you evaluate whether buying a franchise is right for you. It will help you understand your obligations as a franchise owner. Many people dream of owning and running their own business but are often let down by the reality of doing so.

By purchasing a franchise you often can sell goods and services that have instant name recognition and can obtain training and ongoing support to help you succeed. But be cautious. Like any investment purchasing a franchise is not a guarantee of success.

A franchise typically enables you the investor or “franchisee” to operate a business. By paying a franchise fee which may cost several thousand pounds you are given a format or system developed by the company (“franchisor”) the right to use the franchisor’s name for a limited time and assistance.

While buying a franchise may reduce your investment risk by enabling you to associate with an established company it can be costly. You also may be required to relinquish significant control over your business while taking on contractual obligations with the franchisor.

Outlined below are some of the main points you need to consider before buying a franchise:

Franchise fee: Your initial franchise fee which may be nonrefundable may cost several thousand to several hundred thousand pounds.

Royalty payments: You may have to pay the franchisor royalties based on a percentage of your weekly or monthly gross income. You often must pay royalties even if your outlet has not earned significant income during that time. In addition royalties usually are paid for the right to use the franchisor’s name.

Advertising fees: You may have to pay into an advertising fund. Some portion of the advertising fees may go for national advertising or to attract new franchise owners but not necessarily to target your particular outlet.

Controls: To ensure uniformity franchisors typically control how franchisees conduct business. These controls may significantly restrict your ability to exercise your own business judgment.

Terminations and Renewal: You can lose the right to your franchise if you breach the franchise contract. In addition the franchise contract is for a limited time; there is no guarantee that you will be able to renew it. A franchisor can end your franchise agreement if for example you fail to pay royalties or abide by performance standards and sales restrictions. If your franchise is terminated you may lose your investment. Franchise agreements typically run for 15 to 20 years. After that time the franchisor may decline to renew your contract.

Before investing in a particular franchise system carefully consider how much money you have to invest your abilities and your goals.

About the writer:

Matt Bacak became “1 Best Selling Author” in just a few short hours. Recent Entrepreneur Magazines eBiz radio show host is turning Authors Speakers and Experts into Overnight Success Stories. Discover The Secrets http://promotingtips.com

Buy And Hold: How To Perpetuate Your Investment Losses

A recent cartoon in my daily newspaper showed two guys sitting in a bar. One is saying to the other: I did learn something from my broker…how to diversify my investment losses.

While this struck me as funny there is certainly an element of truth to it judging by the number of tragic emails and phone calls I have received over the past couple of years.

This was brought home even more so by a reader who responded with strong disagreement to one of my articles. I advocate a methodical disciplined approach to investing in noload mutual funds. It keeps me invested during up markets and on the sidelines during down markets. It was exactly this approach that got me and my clients out of the market in October 2000 and put us back in to take advantage of the April 2003 upswing.

Judging from the readers email it appears that he works for a major bank and is adamant about Buy Hold and Dollar Cost Averaging. Maybe it’s the approach he has chosen and he doesn’t like hearing that the emperor is wearing no clothes. Nothing personal honestly but I find it incomprehensible that anyone after the bear market and the financial disasters most people experienced can even consider such theories. The results are just too black white.

Here are his three main points:

1. “There is no real feasible way to know whether the market is going to be up or down and when exactly to invest.
2. “The only logical way for an investor to make money is through the buy and hold approach. This method is used by Warren Buffett and he has consistently beaten the best with an average annual return of 29.
3. “Dollar cost average helps to hedge against the ups and downs of the market; moreover one should have been buying up stocks during the last 3 years though I do agree with your cashing out at in 2000. I do not wish to insult you but that seems to me more luck than intuition.”

It appears that the only thing that I can agree with him on is as he says there is no reasonable way to “know” whether the market is going to be up or down. However this statement also underscores that he is not familiar with trend tracking methodologies and the idea that one does not need to “know” or “predict” in order to make profitable investment decisions.

I’ve put together the composite for my trend tracking index in the 80s and it has consistently served me and my clients well by getting us into and out of the markets in a timely manner.

The reader cites Warren Buffett’s success. Sure he is legendary but remember that he made most of his fortune during one of the greatest bull markets. He is probably now considered beyond good and evil. But what about the numerous stories in the press over the past 3 years of the heavy losses he sustained in Coca Cola and other stocks by stubbornly holding on to this positions. When you have enough money invested in a wide range of holdings you become almost bullet proof. Do you fit in that category?

Furthermore Buffet has resources available that the investing public simply does not have. Saying that he is successful only because of his buy and hold approach and everyone following this technique will be too is an oversimplification and does not factor in all the issues.

How many nonmillionaires have enough spare capital to keep buying and holding and buying some more while stocks plummet? How long can they wait for the upswing when their costaveraged holdings will start to show a profit? Do the math! Yes the market will eventually turn up. But will it recover enough fast enough to reverse your losses in time to do you any real good? If you’re 20 then maybe. If you’re 60 who knows?

I have received countless emails and phone calls from individuals who have been led astray by brokers financial planners and others using buyandhold and dollar cost averaging. Stories abound of retirees having to go back to work just because someone told them that “the market can’t go any lower” or “let’s dollar cost average.”

As for his last point when I gave the signal to cash out on October 13 2000 it had nothing to do with either luck or intuition. I had no clue how good of a call that would be; I simply let my indicators be my guide. They pointed to a sell we considered and then followed through based on our experience. We held true to our philosophy and kept our emotions speculations fears or greed out of the equation. This disciplined approach is what I advocate.

This year it has led us to buy back into the market on 4/29/03. And my detailed analysis and evaluation of a range of funds led us to select some of the best; my top fund being up some 50.

So not to be cynical but to me dollar cost averaging is just a way to spread the pain over a longer period of time and to cloud the obvious with the hope the market will turn around tomorrow. After all it can’t go any lower. Can it?

About the writer:

Ulli Niemann is an investment advisor and has been writing about objective methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter please visit: www.successfulinvestment.com.
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