Meetup.com

Hello,

I have a meetup.com club, which I am trying to organize a meeting. The link to view the club is on this blog somewhere. I invite everyone to please join and learn more about investing. This is for every one's benefit and I look forward to share my knowledge, as well as learn.

Thank you,
John

Subject to deals

Investing in real estate is unlike investing in the stock market, or any other medium of investing. With real estate, you're able to execute deals that are unique, fun, and at times historic. Today I want to talk about a specific strategy of investing in real estate. Today I am going to talk about the subject to deal.

A subject to deal is very unique because it allows you to 1) utilize private financing and 2) limit your liability exposure. Over last few months, subject to deals have had a bad rap because of unethical and downright shady individuals. I'm talking about the scam artists that take advantage of people in need for the own benefit. A true subject to deal is a win-win situation for all parties involved.

So let's paint out an ideal situation. Let's say Joe owns a three-bedroom two-bathroom house. He's owned this house for over five years. Now Joe is like any other American, pays his bills on time, has a nice house, a good job, and a growing family. Like many Americans today, Joe just learned that he's going to lose his job. This is truly unfortunate because for this scenario Joe is going to have difficulties finding another job.

So days turn into weeks, and weeks turn into months. Joe starts to fall behind on all those bills, even his mortgage. Warning letters start to come in the mail, and Joe gets worried. Joe soon realizes that he's going to have to file for bankruptcy because he can't afford to pay off his house anymore. This is a horrible situation for anybody to be in. Fortunately there is a way we can help.

Before I go on any further, I would like to simply point out that if this strategy interests you, please educate yourself first before attempting to do it. Like with anything I talk about, I will not be responsible for anybody being stupid, ignorant, again stupid, and again ignorant. Please please please with sugar on top, seek the advice of a professional first before you do anything!

Like I said above this could be a win-win situation. Whether or not Joe likes to, he's going to lose his house. What we're able to do is help Joe save his credit. A subject to deal is a deal that is subject to existing financing; where we want to acquire a house without taking out a new mortgage. We negotiate a purchase price, and keep the existing mortgage in place, and make payments on that mortgage. We do not put our name on mortgage, in fact the bank should never know that were making payments for Joe.

Now the bank may not like this. What is happening is Joe will sign over the deed to the house to us, and in exchange we will make payments on his mortgage for him. If needed, we will give Joe a premium, which ideally will be used to bring the mortgage current. This sudden influx of money into Joe's credit, as well as consistent payments on Joe's mortgage will undoubtedly help Joe's credit. Joe was already going to lose his house from the start; all we did was simply help Joe's credit.

So Joe is happy.

And we are happy, because we just acquired a house with having to deal with applying for new mortgage. If we negotiated the purchase price higher than the mortgage amount, we could simply send a second check every month to Joe to pay off this separate amount.

I mentioned above, you do not want to tell the bank about this. The bank may be a little bit upset that the person on file for that mortgage just signed over their house to a complete stranger. Sometimes there is a clause in loan documents that states the bank may call a loan due within 30 days if they discover this has happened. But think about this for a second: if a bank is getting its money every single month without interruption, do you really think they're going to say anything? After all a bank really makes its money off the interests of that mortgage. So why would they want to screw up a good thing? So my point here is this: what the bank doesn't know won't hurt them, just make sure you make every single payment on time.

So overall, I hope you can see the power of the strategy. Again please consult the advice of a professional first before you embark on such an endeavor.

Until next time,
John

Protecting Your Money in the Market

I would like to take some time out today to talk to everybody about investing. Not so much about how to make money, but instead on how to protect money. When I talk about protecting money, there is one man that comes to mind in particular. During last fall, when the markets began to really crash, he came up to me and told me about the great losses he's had in his retirement account. I asked them one simple question, and instead of giving me a verbal answer he just lowered his head in shame. Now I did not ask this question to embarrass him, but instead to educate him.

Ever since then I have always kept my eye out for people who do not protect their money. And let me tell you every day I run into more and more people who do not take measures to protect their own money. Today I'm going to talk about two strategies you can use in the stock market to protect your money. These are not new strategies, they have been around for very long time. However, people still look past them as if they actually know what they're doing.

The first one I'm willing to talk about is called a stop limit order or just a stop order. First and foremost let me say this and let me be clear, I'm not giving you investment advice. I am simply pointing out what already exists and what you may want to educate yourself about. I'm not telling you what to do, I'm just pointing out what you may want to look into. I know what I'm saying is confusing, so let me just put it simple: if you lose money it's not my fault.

Now then let me get to the meat and potatoes of the subject. The first thing you need to do in executing a stop order is to make sure your brokerage will support. I've worked with brokers before that don't do things like advance orders and this is something you probably should steer away from. Not that these brokers are bad or I'm trying to say that they're bad, but there's just some things your broker should be doing for you automatically like advance orders. So first before you try to do anything check with your broker and make sure you're able to do advanced orders.

So by now you should already have check with your broker and made sure everything is good to go. A stop order is so easy you're probably going to laugh if you've never heard of it before but yet people don't utilize it and end up losing more money than they have to. So let's paint a picture here. Let's say you just put an order in and you thought it was going to go in one direction and for example say you bought XYZ stock at $50 share. So the market opened, you put your trade in, and you went off to work. So you're having a great day at work when you glanced over at the television. It just so happened be one of those fine finance channels that we have all across the television network. And you notice that they just flashed XYZ stock. Well guess what, it drop down significantly to the $35 a share. And as a seat of your pants fills up with a foul-smelling material, you soon realize that you have absolutely no access to a computer at work. And as you sit there in your own fecal matter, you begin to feel so bad for yourself as you see XYZ dropped from 35 to 30.

Now if you're active trader asked yourself how many times have you been in a situation. I think I've made my point why you'd want to utilize the stop order. A stop order is simply an order that you place with your broker which is good till canceled, where you tell your broker to sell a certain stock when it is at or below a certain price. So in this situation that we just described, right after you bought XYZ at $50 share, you could have immediately told your broker to sell XYZ if it drop below $30 or $35 a share. With this would have done is instead of you crapping your pants at work, you would still crap your pants but know that you had some sort of protection from losing all your money.

Some people would say you should always use a stop order no matter what. But there are certain situations which a stop work actually hurt you and not help you. Let's say instead of buying XYZ $50 share that morning, you place the order the day before. And when the market opened up the next day, the stock gaps from $50 share down to $20. If you had a stop order you would have been pulled out of the position right when the market opened. Obviously this would not be a good situation especially if the stock shot right back up to $50 within the first hour. But never fear there's another trick we could use.

This next trick I'm talking about involves using options. Specifically we will be talking about using a protective put option. Now if you're unfamiliar with options I recommend you to become familiar very fast, because they're a very powerful thing you could use in the stockmarket. So real quick were going to go over options and then talk specifically about the protective put option. The basic definition of an option is this: An option is a contract between the buyer and seller which gives the buyer the right, not the obligation, to either buy or sell a tangible item at a specific price, within a specific timeframe".

So in the stock market, if you wanted to buy a call option on XYZ stock, and we are in January, you could buy an option to buy XYZ stock at $50 a share that would last you until May. What this basically says is that you have the right to buy the stock at $50 a share between now and May no matter what the stock price does. If the stock goes up to $1 million a share, you still get the buy it for $50. The only time where this does not apply is if you let the option expire past May. This is called a call option. A put option is exactly the opposite, in which it gives you the right to sell at a specific price. For instance, let's say you owned 100 shares of XYZ stock, and you bought it at $50 a share, you can buy a put option that gives you the right to sell XYZ stock at $50 a share. When you do this, you give yourself the right to sell your stock if it ever goes below $50 a share. If the stock goes all the way down to zero, you can still sell at $50. Utilizing a put option like this is called a protective put, and I hope you can see how powerful this could be.

So one more time, a stop order is a good till canceled order with your broker which instructs them to sell a stock when it is at or below a set price that you indicate. A protective put is a strategy you use where you purchase put options on the stock you already own. This acts like an insurance policy on your stock, where no matter what happens to your stock, if it gaps or just falls all the way down to zero in one day a protective put strategy will still protect your money. Using protective puts have two problems: one, it costs money and two, options expire so you would have to renew this every time the protective put option expired.

No matter what the downfalls are of using these protective strategies, I will say that there are far more worth having in my trading arsenal then ignoring him and losing all my money. Now I may not be the best person in picking stocks, but I can tell you right now I have saved more money than I could imagine by using these two things. If you have any questions about using these two strategies I suggest you call your broker and ask them; they should be the best people to tell you. Above all keep educating yourself, and I will talk to you later.

Until next time,
John

It's Been a While

Hey people. I know it has been a while since we last spoke. I have gone through a lot of changes. No longer am I an active Realtor, however investing in real estate still fascinates me. Don't worry, I have a few more tricks up my sleeve. For instance, investing in the stock market. It is funny to see people's reactions when I tell them that is one of the avenues that I use for income.

What is even funnier is when I tell them that I have made more money now than ever before in the market!

It is all about a matter of knowledge and how you apply it. Let loose of your fears and learn how to harness the power of money! I will give more information soon, but the journey starts with you!

Sky is NOT FALLING

Ladies and Gentlemen,
The sky isn't falling. That's a fact.
The economy may be in a recession, but the sky is not falling.
The auto industry my be on the brink of bankruptcy, but still the sky is not falling.
The real estate markets may be crashing, the bank systems may be flopping, however THE SKY IS NOT FALLING!

How do I know this? Could it be because sweet deals are being made as I type this blog? I don't know.

I have read somewhere, that if you think with a success geared mind, you will be successful.
If you think with a mind of failure, you will be a failure. When this dawned on me, I was struck. This empowering shock took over. I cannot describe how I felt, but I felt it. I had never felt that feeling ever.

If you think the sky is falling, then you'd better buy a damn good umbrella.

The Monopoly Challange

Hello all,

The surprise today is how much people don't care about there financial education. I know this is a rant, however the number of people destroying their financial lives due to lack of financial literacy is STAGGERING.

Wondering how you are doing? Take the challenge.

1. Get out the old MONOPOLY game collecting dust.

2. Get some friends interested in playing a unique game of MONOPOLY.

3. Play by the NORMAL RULES (i.e. no money on FREE PARKING, auction properties not normally bought). You may need to consult the Internet if it has been a while.

4. Here is the challenge. Everyone starts with $500, and you collect NO MONEY when you pass go.

5. No matter how tempting, NO CHEATING. If you cheat here that should tell you how honest you are with yourself in real life.

If you think this is impossible, you are wrong. It's possible, but it's not easy. Get creative, hopefully you will be enlightened (financially speaking).

Recommended Reads!

Expanding your knowledge and implementing it is a cornerstone of life. Obvious? Why is it then people don't exercise this with their investments? I've had the chance to read some great books, and would like to share my thoughts.

Rich Dad, Poor Dad by Robert T. Kiyosaki
If you haven't read it, READ IT. This should be required reading in high schools across the country! Mr. Kiyosake has written many books on investing and his company provides outstanding financial learning tools. This is a must read.

Trump Strategies for Real Estate; Billionaire Lessons for the Small Investor by George H. Ross
If your like me, then you must appreciate Donald Trump and his style of business. This book takes some of the best deals Trump has made, and relates them to how a small investor can use those same tactics. Obviously not the first book you would pull off the shelf and read if you are new to investing, but is by far a very good book.

Trump The Art of the Deal by Donald J. Trump
Not so much about sharing strategies, this book accounts for the early deals Trump did, and goes on to explain his thinking. The reason I like it is because it gives you a bit of a chip on your shoulder when you read it. The negotiation techniques he discusses with his deals are admirable, and can give you a grin while reading it. Overall, great read.

Investing in Real Estate with Lease Options and "Subject-To" Deals by Wendy Patton
A very informative book, specializing in a special niche of investing. This is almost an instruction manual on how to do these deals, and comes with a flurry of information, including the upsides and downsides. Although this is something that I would not recommend a new investor to try first, reading this book does allow you to open your mind more concerning different ways to invest.

I Am America (And So Can You!) by Stephen Colbert
This has absolutely nothing to do with investing. However, I just finished reading it, and it is a very hilarious book.

I hope you take up my suggestions.