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Guest Post: The Perfect Real Estate Investment
Submitted by Ramsey Su of Acting-Man blog,
You want to invest $100,000 in agency paper but find the yield to be too low. How can you increase your yield without assuming additional risk? Easy, here is how. You do not have to send me $19.99 for the tapes (plus shipping and handling) or spend $5,000 for my weekend seminar. This is a freebie.
First, go buy a house with your $100,000. Then sell the house to someone who has no money and only a marginal credit history, taking a loan of $120,000 in return. In real estate terms, this is called a 120% LTV loan (loan-to-value).
Instead of receiving interest on your $100,000 capital, your interest is now based on the $120,000 loan amount. For example, if agency paper is yielding 3%, your $100,000 would normally pay you $3000 interest. With this perfect investment scheme, you would in addition receive the 3% of $20,000, increasing your yield to 3.6%. Furthermore, if the house appreciates in value, you will receive the first $20,000 in addition to getting your $100,000 principal back. There is no risk because your rich Uncle Sam said he will guarantee the loan.
There is an even better way to monetize the loan. Brother Ben, who is as rich as Uncle Sam, said he will buy $45 billion of these notes at face value every month. Just sell the note to Brother Ben and pocket a $20,000 profit, all with no risk.
Honestly, this is more a scam than an investment strategy. The victim is the sucker who is paying interest on a 120% LTV loan on a house that may never be his unless the value appreciates by at least 20%.
In real life, this scheme is known as HARP. It is the Government that is victimizing borrowers by offering them this terrible deal, somehow convincing them that it is in their best interest to become a mortgage slave.
In closing, this short outburst is a byproduct of my other recent rants. I simply do not see how we can have a genuinely recovering real estate market before these wild schemes are removed.
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The Statue of Liberty was originally planned to be put in Egypt to celebrate the completion of the Suez Canal.
The land the statue is on today has a 1000 yr mortgage that is backed by the Fed with MBS.
The statue of Liberty is actually a man with ManBooBs!! And THAT'S WHY THE STATUE OF LIBERTY IS ALL AMERICAN!!
The term ALL AMERICAN actually comes from the patch of the 82nd Airborne denoting that the unit had Americans from every state in the Union. Hence they represented All Americans.
UST and MBS. Return free risk -Jim Grant
From the buyer's point of view he gets to stay for $600 (which more or less equal to equivalent rent) and when he can no longer pay he stays another two years free. If the house appreciates due to mega-printing he gets to keep both the house and the upside.
So both you and he are defrauding .gov or taking revenge on .gov
Bennie and The Fed are sweating over rising rates. MBS will get slammed!
http://confoundedinterest.wordpress.com/2013/06/03/grumpy-ben-increasing-risk-for-ginnie-mae-investors-fed-rising-rates-spreads-and-duration/
Your foot size, no matter male or female, child or adult is the same length as your forearm.
Dont believe 96? Put your heel into your elbow joint and see where your toes end, right at the start of your wrist.
Ta-Da, nearly as useless as the first one.
Holy shit, it's true.
Michelangelo's human dimensions
I woke up this morning with a boner, took a piss and the problem was gone.
A boner is only a problem if there's no woman to tend to it.
Hetero-sexist!
Golden arches !!!
who mops your floor?
Now it's in front of the city that Suez everybody
Pater Tanenbram's truthiness has been noted and logged in the NSA Prism database.
Yes, but what about the drone strike?
yup, this is how a small wound festers into gangrene eventually requiring amputation.
Thats OK because the stock market and the housing market "can only go up". Fundamentals don't matter and this time is different.
Fuck you, Bernanke.
Ahhhhhhh, it always feels so good.
It feels better when you know he's reading.
Thanks Meat Hammer- no comments section is complete until I read that!!
I think Bernanke gets a woody everytime someone tells him to fuck off. Sociopaths like bernank could give a rats ass what anyone thinks of them
"I simply do not see how we can have a genuinely recovering real estate market before these wild schemes are removed."
What are you talking about? The teevee told me we are in a housing boom. Get your facts straight man! Sheesh!
It assumes they want a recovering housing market. They don't.
"There are no markets, only manipulations...."
It's all about the next scheme to create a bubble. The banksters always push losses to the taxpayer.
It's become the wild west of finaicialization.
Uh...Nikkei anyone? That shit got smashed through the roof almost 5%!!
"There is no risk because your rich Uncle Sam said he will guarantee the loan."
Yet the majority of people say we aren't living under socialism...
The ONE thing they want, more than ANYTHING at all, is to get the public borrowing again.
What better way to do that than artificially propping up asset "values" so much so that anyone trying to afford a house has to borrow?
No, its worse. The schemes have to be unwound. There is a reversion to the mean. It usually means shooting to the other side for a period of time.
I stopped paying my alleged mortgage. Still in my home 18 months later. Fighting the banksters is fun if you have the time and smarts to know the scheme of "securitization" which clouded the title. My proof is that the alleged "lender" who tried to foreclose on me used a NOTE with no indorsement. Too bad I have a copy of the NOTE (from the ever so friendly but corrupt servicer "nationstar mortgage, LLC, aka stupid fucks) WITH an indorsement FROM the alleged lender in blank. So...I accused the lender of forgery and fraud. Of course the courts don't want to hear that! Hence the lack of action. I know they will come back with some story saying it does not matter but I KNOW it does and my pleadings to the court are only getting better thanks to the large foreclosure defense group out there. Fight the banks, fight the FED, fight the "free" market of Wall Street....DEFAULT....deny all debts under the UCC. I am no longer a debt slave and it is great.
But you can't spell for shit. Perhaps that's why you can't pay your mortgage. Low wage job?
Its "endorsement", not "indorsement".
most genouses are bad spellers. fact.
Another example of liberal help that isn't. It is in no way help to be indebted $120K on a $100K asset. I believe that these deals also extend the amortization beyond 30 years. If so, yet another example of, well, you know...
All those hedgie investors in s/f homes (by the 1000s) are going to be in for a rude awakening when their proforma 5% YOY rent increases do not occur. Ben: are your listening? We gonna need a bailout.
House prices average 193K
Household income average 50K
Historical "sustainable" ratio is 3:1
It is currently 3.86:1
$120K? What an amateur! Try $200K next time.