The Collected Works of Author and Blogger Larry Roberts

Archive for 2009

There is no perfect measure for any broad financial market activity. Markets for stocks, bonds and other securities are the most widely reported and measured financial markets. It is relatively easy to measure activity in these markets because all sales are recorded at a few central exchanges and the “products” are uniform (one share of stock is equal to another). In contrast, real estate markets are much more difficult to evaluate. Real estate transactions are recorded into the public record in thousands of locations across the country. Keeping an organized database of these records is such a daunting task that the title insurance industry has taken this responsibility as part of its business model, and many people are devoted to the…[READ MORE]

The Time-to-Payoff is the amount of time it takes to retire the debt used to acquire the asset (house). It is a handy tool of those who use Accelerated Amortization. When people examine investments, they often look at rates of return to compare between asset classes. Rates of return are a valuable metric. When thinking about retirement finance, rates of return become less important than steady cashflow. We need a new measure of success for reaching your retirement goals: Time to Payoff. Today, I want to look at another feature of cashflow investing: debt retirement. In Real Estate, Cashflow Investment and Retirement I noted, "... you can take the excess rent and put it toward the mortgage paying off the…[READ MORE]

Most people realize their dreams of home ownership when they purchase a house. This is not ownership; it is debt slavery. You don't own the property until the debts are retired. Real home ownership is the reward for those who master paying debts faster. Affordability is a measure of people's ability to raise money to obtain real estate; it is a function of financing. During The Great Housing Bubble, financial innovations dramatically increased the amounts people were able to borrow; unfortunately, Affordability Products Make Prices Unaffordable. The affordability was short lived because the loan programs themselves were unstable. The collapse of these loan programs resulted in a massive credit crunch that removed affordability from the market; prices fell. During The…[READ MORE]

Cure Rate When a mortgage holder gets behind on payments, they often "cure" the deficiency -- well, at least they used to. The cure rate in early 2007 was 45%; It recently fell to 6.6%. The cure rate is the ratio of the number of loans cured divided by the number of delinquent loans in the system. It is a measure of the percentage of loans each month that leave Shadow Inventory. It is a direct measurement of one of the methods of exiting the system -- the other being foreclosure. When a property goes delinquent, what isn't cured is a foreclosure. Cure rates are very low right now because there is so much shadow inventory in the system that…[READ MORE]

Now that the high-flying real estate market of the Great Housing Bubble has crashed, let's look back to an investment style of yesteryear to provide for retirement. Cashflow investing is the idea that stable inflows of money can be captured and diverted to you for a price. If you accumulate enough cashflow, you can retire. Stable Sources of Cashflow In retirement, what determines the amount of money available to enjoy for lifestyle expenses? Is it your wealth? Is it the equity in your home? Not really. It is the stability of the sources of cashflow you control. Many are obsessed with being rich when what they really want is unlimited spending power. People who have attained great wealth may have…[READ MORE]

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