It is expected (and clichéd) to set up, or even discuss, New Year’s Resolutions.  It’s almost as if, having decided how we are going to improve ourselves in the New Year, we are already mentally prepared to break our resolutions within weeks, if not days.  However, that being said, this is as good a time as any to review and reaffirm our guiding principles.  Here, in no particular order, are our “New Year’s Re-Resolutions”:

1.    Maintain the Strategic Vision
When developing a strategy for anything, the best method is to work backwards.  Think about what you want, and then you can plan steps to get it; taking action without clear direction is like trying to hit a moving target.  Be clear on the difference between a tactic and a strategy.  It can be very easy in uncertain and difficult times to want to change directions, or to take a wait-and-see approach.  Before making any move (or not), ask yourself if this fits your strategic vision. 

For example, you may have decided that the best tactic to achieve your particular investment strategy is safe, secure, long-term cash flow.  This means that you should focus your attention on new (or newer) construction properties (fewer maintenance issues), and possibly duplexes or fourplexes (if you have a vacancy, you will still have some income); you should not waste your time looking at foreclosures or properties that need to be rehabbed.  However, if you’ve decided that you want to leave your job yesterday, think about the fastest way to replace your earned income with passive income, and you’ll quickly realize that won’t happen by collecting single family homes.  But it will happen with commercial residential properties.

2.    Aggressively Seek Out the Opportunity
There is an opportunity to be had in every situation.  It is simply a matter of training yourself to look for them.  For example, it is abundantly clear to everyone that times are tough.  This economic catastrophe was triggered by the residential subprime mortgage meltdown.  There are now indications that suggest that this was the first wave, and the second one has yet to hit.  There have been analysts who have been talking about this scenario, but only recently has the mainstream media taken notice.  In a recent 60 Minutes episode, this situation was described in detail:  that there will be a second, larger wave of mortgage defaults as a result of two specific types of financing.  Now, the very prospect of this may make your heart pound and your palms sweat.  But recognize the opportunity:  Due to very unfortunate circumstances, more and more people will be forced to rent… the property that you own.

3.    Be Prepared to Act Fast
In one of our previous articles, we discussed how to take advantage of rapid changes in the lending market.  Mortgage rates are the lowest they’ve been since 1971.  In the short term, this will likely have a positive impact, as you will probably see lower monthly mortgage payments, which will then increase your net operating income.  But the question that you should be thinking about is how long will interest rates stay so low?  And how long will credit be available?  First of all, as the national and global economy continues to slide downward, financing options are drying up and will continue to do so; in addition, access to whatever credit is available is becoming more and more restrictive. 

Secondly, the United States is currently carrying a deficit of over $1.2 trillion.  And the next President has ambitious plans and tremendous hurdles, all of which will require even more money.  That money will have to be borrowed or printed.  The money that will be borrowed from other countries will undoubtedly come at a price of higher interest rates.  As a result, the American consumer will also have to pay higher interest rates for credit, and have to contend with the added element of inflation.

Thirdly, the mechanism for the secondary mortgage market is not solely dependent on the American economy.  It is very possible that foreign investors in the secondary mortgage market will no longer want to invest in mortgage-backed securities.  And if large banks know that they can’t sell bundles of mortgages anymore, they will have little incentive to issue credit to consumers.

4.    Add Value
Come to the table with something that sets you apart from everyone else.  We do this in the service we provide to our clients, we do this in our negotiations with builders and developers, and we do this in our dealings with our personal investment acquisitions.  Be generous and sincere.  Give something of value to the other party, and this will help to achieve your desired end result.

5.    Sustain Motivation and Discipline Through Education
There are so many things to deal with on a daily basis, it can be hard to stay focused and disciplined on your ultimate goal.  And the dismal state of affairs with the worsening economy certainly makes it hard to stay motivated.  That’s why it’s critical to take realistic steps to sustain your momentum.  Make a commitment to spend a certain amount of time each week dedicated to your continuing education.  Read as much material as you can; there’s a lot of information out there, so it’s important to learn how to sort through the junk to get to the good stuff.  And surround yourself with other people that share your vision and goals and enthusiasm.  Create your own environment that will help ensure your success.

 

Questions?  Comments?  Contact Us!

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Ofer Goldenberg is the Owner and CEO of Capital Growth Investment.