All Forum Posts by: Paul B.

Well, they're not ALL hypocrites, as I know you know. I think the truth is that, as a whole, the previous generation or two were (again, as a whole) in possession of a stronger work ethic while lacking the need for immediate gratification compared to today's 20-through-40-somethings. (See "Layaway vs. 12-months-same-as-cash" for more details!)

YMMV.

I've thought for some time that this would be a good business to get into. Does anyone agree? Disagree?

I am curious to hear others' opinions on how one would start and grow such a business. Would you contact the REO departments at banks? Third-party asset managers? Or does that depend on the size of the institution? I am guessing that smaller lenders may manage their REO internally. Wrong?

Along the lines of whether this is a good or bad business, is there any money in this? Are the fees pretty much set by the asset manager, or do they bid each property out?

I plan to do my own research, of course, but I am curious to hear what others think. Thanks!

While it's true that big corporations use subsidies and loopholes to lower their US income taxes, that doesn't mean they're not paying *any* federal income taxes -- they're just not paying them to the US. Multi-nationals spend billions of dollars each year shuffling income out of the US and into lower-tax countries.

Out of $2.2 billion in federal revenue, less than 10% (about $200 billion) comes from corporate income tax. That tells you how good these companies are at shifting their income out of the US.

As Bryan said earlier, corporations don't pay income taxes anyway; their customers do, in the form of higher prices.

As a result, I'd like to see the corporate income tax rate slashed to zero. Just think how many of the world's leading multi-nationals would set up HQ right here in the US. And the money that consumers presumably saved through lower prices could then be spent elsewhere or saved.

Thing is, lowering corporate tax rates to zero (or near zero) would be very unpopular politically. I can just see the "against" commercials now.

"John Doe wants to give corporations the biggest tax break in American history so they won't pay a penny in taxes, while YOU continue to pay your share. Whose side is John Doe on?" (Insert visual of cigar-chomping CEO teeing off at a country club here...)

I'm not sure what you're hoping to hear since I know you're a bright guy who understands well the need to state benefits when trying to convince someone to do anything.

If someone is even remotely savvy, I'm not sure why they would take 50 cents on the dollar for a note with a two-year balloon, unless they don't have the means to foreclose, in which case they could presumably sell the note to someone else.

Longer term loans should be easier to pay off early since some people would rather have cash today. But, with today's low interest rates, the reinvestment opportunities are weak, so they might not have any incentive to take the partial payoff.

What are your thoughts on why note-holders would go for this?

Thanks,

Paul

I think you have to look at just as you would owning a small business. The fact is that too many small business owners are really doing nothing more than creating jobs for themselves; they are not creating anything of true economic value.

By that I mean let's say someone invests $400,000 in a donut shop and their target return is 10% on their capital. At the end of the year, the shop has a $40,000 profit, which the owner takes to compensate himself for his time. He also figures it's about what he'd earn as a donut shop manager, so fair enough.

If that's the case, he's really earned nothing on his $400,000. He could have just as easily gotten a job as a donut shop manager without risking $400,000. So in fact, he has not earned an economic profit. (You could now get into things like the cost of capital, etc., but no sense making things more complicated.)

Therefore, I think when you're looking at your real estate investments, you have to assign some value to your time, and deduct that value from your profits to see what your "real" profit is from investing your capital.

If (1) you have $500,000 in equity capital tied up in real estate and (2) you're netting $200,000 a year from your efforts and (3) you spend 1,000 hours a year on the business and (4) you have other earning opportunities that would pay you $100/hour (and you could bill 1,000 hours a year at that rate), the value of your time is $100,000, so your true real earnings on your real estate capital are $100,000, or 20% of your $500,000.

Just remember, for the most part, people are good...people are nice. I think being a woman could be an advantage for you since I think people perceive women as inherently more trustworthy.

As long as you don't treat people poorly, they will often be happy to talk to you and help you.

I've seen property buyers come in and talk down to people, and that's a recipe for failure.

Remember, sugar instead of vinegar...

I think the term you might be looking for is "guarantor."

A non-recourse loan means exactly that: no personal recourse to the borrower; the lender can only foreclose on the collateral in case of default.

However, that doesn't mean the lender doesn't care about the borrower, especially if you're talking about a real estate loan. Perhaps the borrower is an exceptionally gifted real estate entrepreneur with a knack for getting things right.

It sounds like you're trying to assume a non-recourse loan, and with that, I wish you much luck.

My take is that you should simply incorporate in the state where you'll be doing business. There are costs associated with having a "foreign" entity.

I always find it interesting when people make claims about trends related to the Earth's weather based on data over 100 years when the Earth itself is about 5 billion years old. That's comparable to the span of a minute over a person's 100-year life.

Jim, if you are in Montgomery County, you should look up John Peterson at profitableproperty.com. He can direct you towards the best insurance options.