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Text Box: on margins, or buying lower grade bonds delivering higher rates of returns). Markets alone do not determine the best choice of investment. The evaluation of the profitability of each investment vs. the risk must always stand on its own criteria. (e.g. borrowing money to buy a property with a negative cash flow with hopes that the property will increase in value quickly because of market trends adds significant risk). Investors will often get caught up with current market trends (both with securities and real properties)

Text Box: A Macro Look at the Housing Crisis

Text Box: At any of our get togethers these days at some point the talk usually turns to the “housing market”, and not surprisingly given the current crisis. The typical questions are asked: “How bad will it get? How long will it last? If I buy a house now will the price drop next year? With all this turmoil where should I invest?” Not to minimize these important questions and not pretending to have all the answers I see two basic views: The optimistic answer: The housing market will get somewhat worse because of the sub-prime mortgage market meltdown, the general fear, and that is all. The pessimistic answer: Unless the nation takes immediate steps to get its fiscal house in order (e.g. balance the budget, control inflation, etc.) the housing market meltdown and ensuing financial market turmoil are just the fuel needed to begin an ever widening spiral into a recession. Both views have been presented, but let us look to the context of historical

Text Box: events, and our current economic condition to make our evaluations. First, a few basics regarding investing: The purpose of investing is to attempt to improve one’s financial position. This goal is usually achieved in two ways: 1) by investing to create income at an equivalent rate of return that is justified by the risk taken, or, 2) by investing because the value of the investment is anticipated to increase over time and can be sold for a gain commensurate with the risk. By calculating either (or both) of these investment methods one then chooses investment types: stocks, bonds, mutual funds, commodities, land, commercial properties, rentals, or sometimes the lending of money. One can invest with one’s own cash, or borrow. A benefit of borrowing is the “leverage” of using less of your own money; however it also introduces more risk. Also, when seeking excessive leverage the investor will enter into the “high risk situations” (e.g. high loan to value financing, buying

Text Box: foreclosure sale. Great opportunities exist at 10% to 40% below market value, but buyers must heed two critical caveats: First, the pre-foreclosure stage is strictly governed by California law, which makes it a crime to buy property from a home owner in foreclosure unless: 1) The proper equity and notice of default purchase agreements are used, 2) The buyer does not sign any deed

Text Box: Today’s rising foreclosure rates present great buying opportunities for investors, first time home buyers and others interested in purchasing real estate at a discount. Buyers can make a purchase at any of three stages of the foreclosure process. First, they can buy directly from the homeowner in the “before stage” (called the pre-foreclosure process). The second opportunity comes at the foreclosure stage or auction.

Text Box: Finally, one can purchase a foreclosed property after the foreclosure sale as an REO, or real estate owned property. In this case the seller is the bank or lender that took the property back after foreclosing on the home owner. -A Deeper Look at the Stages- Pre-foreclosure stage: The pre-foreclosure stage is the period between the filing of notice of default by the lender and the