Yes, I'm finally scared, how about you?

[furnishedowner]

Some of you have written at length about the worsening economy. I am not scared. I can cut staff, cut prices, make beds myself. I can mow the grass like I used to. I can pull all the furniture out of my units and rent unfurnished.

You wrote about the ever-increasing price of gas, materials and fuel oil. I can combine trips, walk 3 blocks to the market instead of driving, wear sweaters in winter, and sweat in summer.  I am not scared.

You wrote about the fall of the dollar, the fear of socialist restrictions, the rationing of food stuffs. I can plant a garden again, protest restrictions, cancel my September trip to Europe. I am not scared.

Now it is July again, and I am hearing a lot more talk. I am seeing it on the front page of the paper. I am listening to people I trust and admire. I am seeing it on news stations.

I am talking about the ELEPHANT IN THE ROOM. I am not a paranoid, but I am scared this time.

Will some of you weigh in with your fears? I need responses since I feel I am going out on a limb here. I will then say more. And yes, the Stock Market and real estate are all going to be affected.

Furnishedowner

[Liquidity]

I live in michigan so I have been seeing this beast for a while now. The housing market in michigan is a waste land. but its real good for buying.


I'm actually thinking a little optimistic right now, if oil prices stay back and maybe drop a little further and if the fed raises the rate soon we'll be alright. 

[fdjake]

You asked for it................

This is one of those times when the answer to your question isn't on the front page of the Wall st. Journal, it's on the front page of every local paper in America.

Oil prices have DOUBLED since last year!!!!!!!!  Any newly minted economist will tell you that the EMPLOYMENT ramifications of those increases take a SOLID 6- 9 months to be felt in any economy.  This has caused a slow down in building, shipping, sellling (of ANYTHING), business travel, vacations, airlines, trucking, manufactoring, ect.

With that knowledge and those FACTS, (none of this is opinion) the next phase of our economic down turn will be JOB LOSES!!
I could care less what the latest jobs numbers out of Washington say.  Those job losses are from the PAST!  I'm talking about job losses in the FUTURE!!! 

In my opinion this winter is going to KILL any economic activity left in the country.  I just received a letter from my heating oil supplier.  Let me quote a few lines to you. Remember this before you read it...I have been a customer for 10 years, this company does my annual service, delivers every DROP of oil I have ever purchased, and I pay within 10 days like clock work.... Here's the letter....

Dear  Loyal Customer,

Due to sky rocketing oil prices we have no choice but to implement the following changes to our billing policies.  We DEEPLY regret this but we are a small family run business with limited capital and a large customer base.  The average 250 gallon oil tank will now cost about $1250 to fill, last year that same tank full cost $600.   We can no longer afford to wait for payment for 30 days.  We will now require all payments to be made within 5 days or we will require a CREDIT CARD on file that we will BILL when a delivery is made."

How's that sound????  can't pay in 5 days???  Now you can pay $5.00/ gallon at 25% interest!!!!  This should REALLY help things!

Think things are scary NOW????   WAIT....Just wait....I truely believe we are headed for an economic slow down that NONE OF US have every experienced.

Want to know why Paulson and Bernanke are on capitol Hill DAILY???
They are setting the stage...WARNING our Goverment that..."In the near future numerous regional banks will fail."

I wrote a response the other day where I mentioned doing title work on 38 properties that were purchased BEFORE the boom that were being foreclosed on . NOT ONE of those homes had a PENNY of equity in it.  These are the people who keep our economy alive for the last 6 years. Remember the reports of how all the home equity was FUELING our economic EXPANSION??  WELL IT'S ALL GONE!!!   MILLIONS and MILLIONS of people REFI'D their homes to the point were they now have NEGATIVE equity.  Now they are Losing these homes.  THIS will cause the next round of REGIONAL bank failures.  People don't get EQUITY loans from a bank 10 states from their home.  THEY GET THEM FROM LOCAL/REGIONAL BANKS!!!!  The number of homes UPSIDE DOWN is actually HIGHER than the number of SUB PRIME borrows. 

Unemployment WILL increase as the economy slows.  Oil prices are NOT coming down to $50/ barrel.  ANYONE on the edge this winter is ALL DONE!

It's time to pay for the party this country had for the last 10 years.  A lot of people thought it would never end...Well it HAS..... The bill due, and if you don't/can't  pay it...

THEY TAKE YOUR HOUSE!!!!!

[propertymanager]

I'm already seeing long term tenants beginning to have a problem with paying their rent.  That's occurring because of high fuel prices and decreased hours at work.  I agree 100% with FDJake that a CRISIS will occur when winter hits.  The doubling of heating costs WILL destroy many people and I'm not at all sure what is going to happen in the rental business.  People are already doubling up in rentals as individual family members can't afford to live on their own.  When heating season hits, this will become much worse.

In addition, large job losses have already begun all across the country.  It's on the headlines of our paper nearly every day.  I don't believe ANY of the government numbers - they are all cooked in a fantasy stew.

Fasten your seat belts - it's going to be a rough ride.

Mike

[furnishedowner]

fdjake and Propertymanager,

Job losses, high heating prices, ever-increasing foreclosures...they will soon be hitting close to home. I am starting to discount rates here. Yesterday we slashed 3 1-bedrooms $150/month. They need rehab and I don't want to risk the money now. I want a cushion.

But that's not what I'm scared of...

It's interesting to hear of your regional downturns. Here we seem to be seeing more crime, more break-ins. Investing in home security should boom.

But that's not the elephant.

Furnishedowner

[phlemboy]

I think a lot of people will find out just how important having a minimum 6 months of cash reserves on hand is. Many people have no reserves and are one job loss away from financial ruin.

[tatertot]

The economy runs in cycles. It goes up, it goes down, it goes up again.

Now it's down, later it goes up.

It's a very good time for buy and hold investors to be grabbing up as much real estate as they can afford to carry. This is the starting point that is going to the origin of some very big fortunes.

This is not such a good time to be over-extended, and I suspect that a lot of OPM and leverage oriented investors are going to find themselves in trouble.

The oil prices are going to seriously slow down the recovery, and are going to push the economy a lot lower than it normally would have gone if oil had stayed about the same. OPEC is kicking us while we are down.

No matter. They've done it before, and we recovered from it.

It really doesn't matter what the "value" is on your properties until the day you sell.  If you can afford to hold and wait it out, you will be fine.

[fdjake]

Tatertot is right.  The economy is a huge circle.  He also points out the dangers of being OVER EXTENDED during what looks like bargain prices on homes. Again he's 100% correct.  Be very careful.  This is no where near over.  My feeling is property values will REALLY start to fall this winter.  Look no further than the REO market.  I don't see any bargains there NOW.  But............like the early 90's, the bargains will soon be eveywhere as banks have NO CHOICE but to DUMP their inventory of homes.

I know a lot of guy's here don't agree with the politics on www.itulip.com. Politics doesn't matter to me......being CORRECT in your predictions of future economic events MATTERS.  Itulip has had a VERY accurate track record of calling the next move in this economy.  I'm not saying I agree with everything they write, but take a look at the video they have at the top of the site now.

This is Argentina in 2001.  Sky rocketing inflation, a goverment incapable of making a decision (sound familiar?)  and a popualtion at the end of their rope.

This my be the scariest thing I've seen in the last year.  It's very similar to our current situation.  Again....I'm NOT saying this will happen...but it IS a possibility.  I'm seeing things in our country RIGHT NOW that my Grandfather told me happened during the great depression.

Isn't it IRONIC that the generation that LIVED through that is now so old that many people just write off their experiences.  My grandfather was apalled at the level of debt Americans ran up.  He could not get his mind around a $10,000 credit card balance.

A whole new generation is about to go to school.  They will not like these lessons, but they NEED to be learned.  Keep your heads guy's, this is NO JOKE what we have coming.  I would STRONGLY suggest that you get and KEEP a decent sum of CASH on hand in a place that you can ACCESS it no matter WHAT is happening. 

Think this is "sky is falling" stuff???

INDY MAC will cost the FDIC $8 BILLION...and that's just ONE BANK!!!

THEY ARE CURRENTLY WATCHING 90 OTHER BANKS

The FDIC has only $53 Billion at present.  If ONE BANK cost them $8 BILIION, and they're WATCHING 90 more!!!!! 

HOLY CRAP!!!!

Funny....not many people breaking my beans about doom and gloom these days!!  It's the SAME CIRCUS, DIFFERENT CLOWNS!!

[phlemboy]

So fdjake, do you think the bank REO's will increase due to the highly leveraged borrowwers? Is it possible the govt. would somehow step in to provide help to the borrowers? The reason I ask is because if the banks have a ton of REO's (liabilities) where there used to be mortgages (income), that would cripple a lot of banks. I suspect the govt. would step in to prevent a crash due to a large amount of bank failures. I also suspect that banks will be more willing to sell properties to investors in order to get the properties back in their income categories. When times get tough, the overextended borrowers will let the bank foreclose before they sell it for less than they owe. At this point, I'm working on building my cash reserves and reducing debt. My wife is a nurse and I'm a respiratory therapist. I feel comfortable with our income potential in tough times. Healthcare should be very solid. Is there anything else I should be doing? I just want to be in the cest position to not only survive but to capitalize on the coming opportunities.

[John_in_NC]

I will be the first to admit, most of this crisis is over my southern head. I also don't have a crystal ball like most of you guys.

With those disclaimers, my biggest fear has been losing my financing while these great deals keep presenting themselves to me. I just went under contrant with another small apartment building for 45 cents on the dollar tax value, and 42 cents on the dollar last sold price back in 2006.  More importantly is cash flows! I guess I better state those numbers,
Purchase price: 78K
Gross rents using market rent : 2000
Repairs, no more than 8K (I do almost all of the work)

And I bought this off the MLS!! I'm not smart enough to call the bottom, im pretty sure there won't be a bell going off then, but I am smart enough to know when I can make some $$ and I buy that as long as the banks will let me.

I know, cash is king, but I really doubt anyone on this forum has the means to sit back and buy up everything all cash when the banks stop financing.


So, what can I be doing to prepare for this? Any suggestions on alternative financing I can be working on when this in fact happens? (or if???)

[fdjake]

From what I've seen and heard from the guy's in North Carolina who post here that area never experienced the HUGE run ups in price that we had in the North East.  If people never saw their homes DOUBLE or TRIPLE in value in a 5 year period then they NEVER had the "equity" that people in my area had.  Notice I used quotation marks around the word equity.  These people HAD equity in their homes based on INFLATED PRICES.  Once those prices started coming down.....BOOM!!
BYE, BYE EQUITY.  If you happen to be one of the MILLIONS of dopes who REMOVED all that make believe equity.  YOU ARE NOW S.O.L.

I think you guy's in the Carolinas will be in MUCH better shape than my area.  The market, and thus the LOCAL BANKS  down there shouldn't see the blood letting we have across some parts of the country.  These banks have REAL value attached to all those mortgages, not the BS inflated numbers in New England from 2005.

If I were you, I'd be doing some real digging down there into local banks financials.  Even if you have to pay someone to look through the financials of say 7 local banks.  Having concrete, solid numbers and good loans is were you want to be now.  Those are the banks that will MAKE MONEY during this correction.  Seek them out and cultivate a business relationship with them. 

You have a proven track record.  Your rentals make you money.  A bank should be actively looking for your business.  In these times that may not happen.  YOU have to find them.  As long as your buying property like the one you just scored you should be fine.

Listen....if this thing gets REALLY BAD, which I honestly hope it doesn't,
getting financing for new deals will be the LEAST of your worries.  Keeping what you HAVE is going to be the game a whole lot of people will be playing.

[$Cash$]

Ran my demographics on various areas in the U.S. a few years ago when in my mind I saw the current market down turn coming.  Moved to North Carolina as it came up the Number 1 place to be for investing at least for my method of investing.  There are other great areas, but NC, just seemed like the place to be.  So when all the discussion about what is going on elsewhere come up in threads, I just kinda smile and think what problems?

Now let's talk about the price of gas for a moment.  I put a unit on my vehicle that converts water to fuel, so my vehicle runs on gas and the fuel generated by water.  I am paying $2.00 a gallon for gas based on the increased mileage from the unit I installed.

So, I guess it is all about how you look at things and what a person intends to do about it.

Yes, it really does run on water and gas, as I would not say this on a major discussion board unless it really did!

John $Cash$ Locke

[Liquidity]

Cash

Can you tell us more about this water converter ?? how much it costs, where you got it etc.....

 I have seen stuff about it online but i thought it wasnt available yet. I watched a video about a guy i think in ohio who has been working on and made a system that takes water and turns into hydrogen as an alternative to gas.

[Liquidity]

michigan didnt have the massive run in equity that other areas did. maybe around  50% increase in real estate during the big boom/doom years.


I believe being scared is good it keeps you sharp. Buy when you find real value and weather the storm. 

pray our government starts pointing us the right direction.
I think energy is our #1 problem right now. its the cause of inflation.

Somewhere the Amish are laughing their asses off right now 

[$Cash$]

Liquidity,

Glad to meet you.

The system has been on the networks for awhile now, it is where I first read about it, then for about 6 months did my research until I was ready to install one.  Truthfully when I first heard about it, I thought sure you can, but found out these people were not joking.

The basics, taken in part from my web site.

Convert your vehicle to run on Water + Gas with our Fuel Proxy HHO Boost System.
Our system converts Water to "HHO" (2 parts Hydrogen + 1 part Oxygen), then mixes with Gasoline to improve your gas mileage 20% to 50% depending on the system selected.
 
Rather than go into a long story in technical terms of what produces our HHO Fuel Boost product to improve your gas mileage, let’s keep it in simple terms.

Water contains Hydrogen (HHO) that burns just like gas does.  Through an electrical process we create HHO from water. This converted HHO is redirected to your carburetion system and then burns along with your gas.

What this means is you will use less gas as now your vehicle is burning inexpensive HHO mixed with the gas.



This above is what I developed call it the Fuel Proxy System, but you can check out this web site www.water4gas.com they seem to have a good handle on the system.  No affiliation whatsoever, only some info if you want to save some money on gas.

John $Cash$ Locke