William J Archambault Jr

Equity is supposedly the difference between what a property is worth and what is owed on it. Or is it?

Most of us have spent our lives seeking equity, but are we just snipe hunting? Does equity even exist?

Can equity exist in the present tense? Or is equity limited to the past and/or future tense?

You cannot prove the existence of equity with out eliminating it. While equity can be estimated it must be harvested, cashed out, converted to liquid assets to prove its existence and at that point it no longer exist. Subsequently, it is impossible to have lost equity with out selling a property. Homeowners and/or investors even those who owe more that their properties are worth have lost nothing unless and until they sell the property!

Elusive home equity without an immediate need to sell is a non-issue to home owners their monthly payments, the obligations they so willingly accepted to own their own home are unchanged. Even Adjustable Rate Mortgages only adjust according to the terms originally agreed to.
The supposed loss of equity without an immediate need to sell is a non-issue to long-term investors. Rents are determined by local markets and the benefits provided tenants not the landlords equity! The functional benefits of a property are unaffected by the fiscal cycles of property values.

Homes and rental properties wisely chosen retain their benefits regardless of the short term rising or falling of property values.

Like the mythical phoenix, equity always rises in the end! Thanks to the magic of amortization, equity always appears or reappears to those who wait.

Equity is always a blessing at the time of sale, but it is often a curse at the time of purchase! Equity requirements can and do limit real estate purchases. Would be buyers often find the required equity going up faster than they can accumulate the necessary savings. Excessive equity, witch can only exist at the time of purchase reduces the home buyers liquidity, available cash! Excessive equity at the time of purchase protects no one except the lender. Liquid assets, cash in hand protects consumers!

So how does this philosophical babble relate to today's real estate market?

Most homeowners have lost nothing, but opportunity. Those people that collect more cash at the time of sale than they put in at the time of purchase are winners even if they might have received more if they had just sold a year or two earlier.

Most homes were purchased for their functional benefits and those benefits go on regardless of equity.

Most rentals purchased for their cash flow and tax benefits continue providing those benefits.

Today's buyer's market has reduced the cost of real estate benefits to incredible bargains.

Selling a house or home when you still need its benefits, at this time without a compelling need is foolish.

Selling or abandoning a house or home because of little or no equity is stupid.

Denying yourself the benefits of real estate while waiting for the market to bottom out is foolish, providing you have a long term need for such benefits!

If you have need of housing or cash flow and have long-term stability, there may never be a greater time to buy and/or invest than today!

Bill

William J Archambault Jr

The Real estate Investment Institute

©REII2009

It was 1974 I was in a seminar in the Grand Hotel, before it became The Amway Grand, in down town Grand Rapids Michigan when Cavit Robert read this pome by an anonymous author it was relevant then it's relevant today.

 

                                            A Reluctant

                                                                Investor's Lament

I hesitate to make a list

Of all the countless deals I've missed;

Bonanzas that were in my grip

I watched them through my fingers slip;

The windfalls which I should have bought

Were lost because I over thought;

I thought of this, I thought of that,

I could have sworn I smelled a rat,

And while I thought things over twice,

Another grabbed them at the price.

It seems I always hesitate,

Then make my mind up much too late.

A very cautious man am I

And that is why I never buy.

When tracks rose high on Sixth and Third,

The prices asked I felt absurd;

Whole block fronts-bleak & black with soot

Were priced at thirty bucks a foot!

I wouldn't even make a bid,

But others did yes, others did!

When Tucson was cheap desert land,

I could have had a heap of sand;

When Phoenix was the place to buy,

I thought the climate much too dry;

"Invest in Dallas that's the spot!"

My sixth sense warned me I should not,

And that is why I never buy.

A corner here, ten acres there,

Compounding values year by year,

I chose to think and I though,

They bought the deals I should have bought.

The golden chances I had then

Are lost and will not come again.

Today I cannot be enticed

For everything's so overpriced.

The deals of yesteryear are dead;

The market's soft and so's my head!

Last night I had a fearful dream,

I know I wakened with a scream;

Some Indians approached my bed--

For trinkets on the barrel head

(In dollar bills worth twenty-four

And nothing less and nothing more),

They'd sell Manhattan Isle to me

The most I'd go was twenty-three.

The red men scowled: "Not on a bet!"

And sold to Peter Minuet.

At times a teardrop drowns my eye

For deals I had, but did not buy;

And now life's saddest words I pen--

"If only I'd invested then!"

We some times think we know so much more than those that went before us. We're often wrong! The only thing unique is extremes of the mistakes we continue to make. Think about the following in reference to today's problems.

"The ladder of success is best climbed by stepping on the rungs of opportunity." --Ayn Rand

Success isn't going to fall on you, you're going to have to climb your way to it. Don't pity yourself if you're at the bottom or in the middle of the ladder pity those at the top that have no place to go. Climbing is a way of life!

"One secret of success in life is for a man to be ready for his opportunity when it comes." --Benjamin Disraeli

You! Yes, you yourself have to prepare for the success you seek, be it emotionally, educationally, physically , or fiscally.

"Success consists of going from failure to failure without loss of enthusiasm." --Winston Churchill

We learn the hard way from our mistakes and education lets us learn the easy way from others mistakes, mistakes are inevitable to succeed you must keep going.

"Criticism may not be agreeable, but it is necessary. It fulfils the same function as pain in the human body. It calls attention to an unhealthy state of things." -Winston Churchill

Critics come in two forms. Those that say it can't be done are irreverent! Those that point out your mistakes and suggest another approach are invaluable! Both are necessary, the former for inspiration, you wouldn't want to end up like them, the latter for education, it often only takes a little hint to show you the way.

" The democracy will cease to exist when you take away from those who are willing to work and give to those who would not." --Thomas Jefferson

It hasn't changed! Today they tax us to buy the votes of those that don't pay taxes, at some point the tax payers are going to figure out it's a lot easer just to sell your vote than to be productive.

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." --Thomas Jefferson

The strange thing is that in 1802 when Jefferson saw this he only saw internal bank corruption, today we also have to deal with external corruption from the regulators and Congress. Banking is not evil, it's the catalyst of economic success. It's corruption that's evil!

Bill

William J Archambault Jr

The Real Estate Investment Institute

Have you ever considered what tenants miss?

Have you ever considered how important a home of your own is?

I'm talking about a home like an old fashion marriage, not serial monogamy as practice by so many. A home like Mom, not Dad's third wife. A home like our Grandparents kept or maybe your Great Grandparents.

The real estate market was a lot better and considerably more expensive when I first wrote those words. Today more than at any time in our history people question the logic of home ownership rather than the how!

My late Brother, Jack wrote about a home,

Grandmas' House

There was a time in our lives

As you well know,

When there was a special place

Called Grandma's House.

On a quite street

Lined with proud old trees,

Was an aged two-story house

That meant so much to me,

Called Grandma's House

It was filled with love

That grandparents and grandchildern share.

And it was felt by all

Who entered there,

You knew it was a grandma's house.

Grandpa in his favorite chair

Watching "Gunsmoke" on TV,

And Grandma in the kitchen

Wanting to play cards with me,

This was Grandmas House.

Aunts, uncles, and cousins

All gathered for a holiday,

Made Thanksgiving and Christmas

Unique in a way,

Know only to Grandmas House.

First Grandpa then Grandma

Sadly I say -have died,

And no one knows how much

We individually cried,

To loose what was special about Grandma's House

The memories are with me

As I age and I roam,

About the qualities essential

To make a house a home.

Shared by all at Grandma's House.

I'm thankful I knew my Grandma's House.

9-12-1982 ©Estate of Jack Archambault 2007

Bill

William J Archambault Jr

The Real Estate Investment Institute

I've avoided getting involved or studying reverse mortgages since they began. They held no interest for me, my students, or my clients. A good idea but an FHA program they rarely get it right. Worse they are not being marketed by those few FHA brokers/bankers I do trust.

Then I read a blog: Reverse Mortgages - Purchase a Home with a Reverse Mortgage - Part 7

If I read this correctly, a senior buyer/s can now biy a home putting 40% down plus closing cost, without qualifying and chose to make no mortgage payments!

If that doesn't raise your eye brows nothing will! Think about it. Snow belt retires finally sell their home and head to Poinciana but their $100,000.00 won't buy a home out right. Instead they buy last years $250,000.00 for $125,000.00 put $50,000.00 down and live for taxes and insurance just like they'd planed.

All I can say is WOW!

Bill

William J Archambault Jr

The Real Estate Investment Institute