Rick Fitzgerald -The MultiFamily Expert

Wow, it’s been a wild ride this year so far. Multifamily investments and performance are all over the board depending on which survey you read.

One thing for sure is a real slow down in purchases most likely caused by the presidential election. Multifamily investors reap great benefits utilizing aggressive accounting strategies so any discussion among candidates about a tax increase generally slows down the purchase market.

Surveys have indicated that rents have leveled off for most areas. I think this is fair to say. It’s always more difficult to raise rents in this environment. However, demand may increase as more borrowers are turned down. Overall costs of maintaining even a rental home is more than many want to take on in money or time.

Most surveys reported that expenses are going up as well. I hope no one actually got paid for that survey result. That’s sort of “duh”. A lot of wholesalers and energy suppliers have imposed increases due to the energy costs. Is anyone going to lower them now that their energy costs are actually lower?

Long term results of the surveys all pointed to multifamily investments being one of the best to purchase or own. I agree with that if for nothing else, investors can’t buy investment that is as highly leveraged as multifamily.

Vote for somebody on Tuesday!

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I read a couple of articles that finally made me feel a little better about all the bailout talk and shenanigans going on lately.

If you are a home owner and fall behind in payments, you may be eligible for a new fangled program. If you are a home owner who struggles, makes tough decisions like not going to the doctor but make your house payments on time, you are out of luck.

The banking industry knows full well the next huge issue for them will be credit card losses. These losses cannot be blamed on anything or anyone except the lending decisions banks made to earn more profits. Consumers took to the cards sort of like the lottery. Can’t blame an alcoholic if he drinks the beer you gave to him can you? Then again, some can blame him. It’s his choice. No one made him drink.

So there is some ground swell to having bailout money set aside to enable the banks to forgive a large portion of the credit card debt consumers currently owe. This is not as simple as it may seem either. Any forgiven debt is actually considered taxable income so the IRS must sign off on the deal as well.

Forgiving the debt would help the consumer with a new start and option rather than adding a new bankruptcy stat and foreclosed home. It may be on my tax payer back to make that happen but we have bailed out some really rich folks this year. Can't say we have really bailed out the consumer yet that I can tell.

The credit card debt is on the minds of banks big time. And will further delay the economy and improved banking health if not addressed soon. And you know if the industry has introduced the idea, there is a lot potential losses coming out later about it.

A happy banker beats the heck out of an unhappy one. Just ask the Feds.

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I noted in a previous post, I’d like to be a fly on the wall in some of the Fed meetings. Well I wasn’t a fly, but I have found a little bank birdie who revealed some very interesting information regarding some of the Fed’s moves.

The birdie was actually a formal bank statement released to stockholders explaining their balance sheet along with insider banking knowledge of the Fannie and Freddie bailout and their bank losses as a result.

I blogged many smaller community banks were left holding the bag on Fannie and Freddie stock. In fact, they were encouraged to buy and allowed to count the asset to meet the Feds capital reserve requirement. The American Bankers Association reported about 27% of all banks held one or the other GSE stocks.

This particular small bank was holding just over $1M in Freddie stock and really miffed at taking the charge off. The Feds could have protected all bank investments with no more than a $15B exposure but they didn’t.

But they did protect Goldman Sach’s investment ties and others by nationalizing AIG to the tune of over $120B dollars. That’s what got the bank miffed big time. Fannie and Freddie stock were considered to be as safe as any investment. The takeover stated clearly to every financial institution and investors worldwide that nothing is safe now. And banks stopped lending to each other.

But that’s not what the little bank birdie was really crowing about. It was the Fed’s backdoor guarantee of the Japanese Bank Mitsubishi investment into Morgan Stanley. Morgan Stanley was reportedly negotiating with the Japanese bank when Lehman Brothers was failing. But that wasn’t all that true. The fact was according to the little bank birdie, they were negotiating with the Feds on preserving their preferred stock position fearing the Feds would make another drastic move as in letting them fail or taking preferred equity.

One analyst I spoke to regarding Warren Buffett’s $5B investment into Goldman Sach’s completely dismissed the notion he had received a back door guarantee from the Fed’s as well. He stated there is no way the Feds would make a private agreement like that because; well because that would be really, really bad.

That it would.

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I use a dozen or so sites to obtain information about the financial sector and in multifamily investments. I started to count the billions and billions of dollars that are being invested here and there and some more way over there.

My calculator just couldn't compute the numbers. You know it's a lot of money when you start counting trillions instead of hundreds of billions.

One analyst stated casually that one company would only require just over a $100 billion. When did we get so casual about $100 billion.

According to my calculator. I have to be honest, the numbers were so high that it boggled me mind. But I am confident that if we took the trillions of dollars promised to banks, investment banks, investors, insurance companies, GE Capital, GM, Ford, cities, counties, pensions, hedge funds, foreign banks, ......................(I'm sure I left someone out)

and invested that between every adult man and woman in the US, we would save the economy, stop foreclosures, feed the homeless and helpless. They even could tax us on the investment.

Someone get a better calculator and tell me how much of an investment per person that would be.

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Is PNC going to use some of the $700 Billion Fed money to buy National City? This may be difficult to prove but the idea is just very unsettling. There may be some good uses for this but using it to purchase another bank is just not what the doctor ordered. Nor was it in the minds of the Treasury or was it?

There have been so many historic moves and most likely moves that have never been made public. Keep an eye on the money trail and your fingers on the key board to protest the newest move by the banking industry.

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