Thursday, August 9, 2012

Bond King Says Inflation will Damage Treasuries, Need Real Assets Like Land and Gold

Investors looking to preserve their purchasing power will have to avoid Treasuries and put their money in “real assets" such as stocks and real estate, Bill Gross, Pimco co-founder, told CNBC recently. “In the Treasury market all interest rates are on a negative basis,” Gross said. “Risk averse investors looking to hide in Treasuries will see a haircut relative to future inflation. ”If you want to maintain purchasing power you have to make the leap into real asset territory to get a real return.” He bases this from the potential Federal Reserve and Global Central Banks printing money to re-inflate their economies. This inflation will cause investors to move primarily to gold and silver. But also real estate maintains its value in inflationary economies. Real Estate should maintain its value and increase during inflation. Land maybe a better hedge against inflation as there isn’t any maintenance, and other losses like fire, or hazards. Land is a good asset to hold and wait for the economy to change in a more positive direction with jobs, and growing GDP(Gross Domestic Production).

Wednesday, August 1, 2012

Seller Financing “Owner will Carry” for California Land Loans and Buying a Home

Owner will carry for land is becoming more and more prevalent between buyers and sellers these days as banks are more reluctant to lend for land purchases. It is even more common today for home buyers. The owner will carry(seller financing) option was the norm decades ago when homes were much much less in capital cost, so buyers would pay for a home over time. It is very common today where land sellers will even offer the opportunity to buyers via MLS listings with their land listing brokers. It essentially works where an agreed price is made between a buyer and seller with an agreed interest rate. The buyer pays usually a higher deposit of say 10% and the interest rate is similar to the current rates of the day, but slightly higher than what you would get from a bank. Today’s rate would range from 5% to 7%. Some sellers want more, but unless you have the land parcel we suggest you pay a lower interest rate and not get gouged. The terms will be 3 to 7 years but could be longer. Most sellers we have found want 7 years or less. This is typically done via an escrow company once the terms are agreed upon. After escrow closes payments are then made directly to the seller or seller’s representative monthly until all payments are made in full. The buyer will receive title with a deed of trust attached. If the buyer fails to pay their monthly payment three months in a row then the seller can and typically will foreclose on the deed of trust. All buyers’ payments will be in favor of the sellers, so there will be no refund to the buyer. It is not any different than what a bank will do if a mortgage is not paid. Foreclosures happen all the time especially these days when many homes are under water. It is a very simple and easy process for a buyer to own land without a larger capital payment. It is essential when the buyers final payment is made to have a deed of reconveyance signed by the seller and recorded. If a deed of reconveyance is not recorded after the final payment then there will be a cloud on title. This will make it difficult for the buyer to sell the property later as title companies will not clear the title without a deed of reconveyance.