HECS Assets: The Ultimate Real Estate Investment
Experience the benefits of investing in owner-occupied residential real estate without becoming a landlord or a lender. HECS (Home Equity Conversion Sales) replace reverse mortgage HECMs (Home Equity Conversion Mortgages) for investors looking for exceptional risk-adjusted returns.
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Saturday, September 11, 2010
Tuesday, August 24, 2010
Why Would Anyone in Their Right Mind Become a Landlord?
So, again, “Why would anyone in their right mind become a landlord, either commercial or residential?”
In the past there was no readily available alternative; today there is: HECS investing. No renters, no taxes or insurance, no risk of vacancy or vandalism and no maintenance expenses to eat away at your profits. And no 24/7/365 responsibilities for your renter’s happiness: i.e. no midnight phone calls, 2 am trips to the rental to fix the toilet or letters from a tenant’s attorney threatening to sue you.
So, one more time, “Why would anyone in their right mind invest in rental property?” when they can purchase fractional interests in owner-occupied residential real estate, deposit it in their portfolio and let it do its magic. Not all HECS products are the same, of course. Shop carefully.
HECS equity investments in real estate: the safety of real estate investing with the blend of flexibility, liquidity and returns that exceed bonds, stock and even T Bills.
Saturday, August 21, 2010
Target Date Mutual Funds - Right Idea, Wrong Assets
I’m underwhelmed by Vanguard’s effort but heartened by what appears to be public recognition that a long term personal commitment to financial responsibility is actually a good idea. Never mind that it is primarily a long term investment in a short term product mix of stocks and bonds providing regular work for fund managers for a very long time (45 years) and that it is designed for investors who want to have little involvement in the investments and will need to settle for minimal returns. It’s good for Vanguard and, other than the high cost of lost opportunity, won’t hurt the investors a lot. In reality, the mutual funds offering these are simply competing with your local bank’s savings accounts: money put away is money not spent…
The question becomes: why adopt a long-term investment strategy that relies on the performance of short term investment products that ultimately become an annuity income for fund managers? I would contend that assets that appreciate and are managed by co-owners with a vested interest in maintaining the value of the asset is a much better choice. The only such investment class to provide those features is real estate and the only subclass to protect the investor from the vagaries of relying on continued employment (of borrowers) to minimize risk is the HECS.
Target retirement funds are a great idea. Find one filled with Home Equity Conversion Sales that have an average appreciation rate for a tenure forecast of 30 years and that reinvests those assets that don’t make it that long and you will find a fund that can be counted on for unrivaled stability and risk-adjusted return that will multiply by 20 your retirement savings. Had such a fund been acquired in 1979, appreciated at the Case/Shiller US average appreciation rates thru last December and had reinvested its cash in-flows from early liquidations, the fund would have converted a 4.38% appreciation rate into an annual return of 9.63%, far better than the US stock market’s anemic 1.1%.
Wednesday, August 11, 2010
Ed Lotterman Got It Right, as Usual...
The performance of our economy is much more dynamic and unpredictable than we'd like; in fact, economics is much more akin to the science of fluid dynamics and the Heisenberg Principle (think weather prediction) than integral calculus. And when you think in terms of weather prediction, try to imagine that each molecule that makes up the atmosphere has 'free will' and can make seemingly irrational (and hence unpredictable) decisions. That is why the science of economics (literally 'house law') is a backward looking view of the world thru a misshapen lens.
So what? Your economic well-being is best served by shrewd simplicity and patience. And these are best provided by HECS investing in real estate where the Sharpe Ratio and the Sortino Ratio give you the optimal fighting chance of achieving your long-term economic goals.
Tuesday, August 10, 2010
A Welcome Word of Encouragement
"Hi, John. Nice to hear from you. Please know that I continue to be very impressed with you and with the amount of thought and work you have put into ROOF®s. I believe you have a unique product that's positioned to hit the market at just the right time. Your instincts and hard work should bring you great success.
It was indeed a pleasure to meet you and to learn a little about your background and your wonderful family. I wish you all the best and will be watching for ROOF®s in my neighborhood!
Joanne"
Joanne's note concerning timing is insightful as residential real estate values are severely market-discounted and are likely to remain so for the next 4 years in most markets according to Reinhart & Rogoff. Reverse mortgages will continue to flail about, struggling against their inherent flaws and only desperate and naive seniors will buy one.
This is an ideal time to invest in HECS, purchasing fractional interests in lien-free senior homes before appreciation returns to historic performance.
Monday, August 9, 2010
"Buy a (Fractional Interest in a) House to Protect Yourself from Inflation"
But what if you already own a home? The cost of selling your home and buying a new one would exceed the savings from inflation. Buy a rental? Then you have the risks and responsibilities of becoming a landlord with the attendant 'terrible 'T's': tenants, teenagers, trash, taxes & toilets (The real list is much, much longer. I really don't know why anyone would voluntarily become a landlord...)
But what if you could buy a fractional interest in residential real estate and the majority owner that occupies the home takes care of ALL of the ownership responsibilities and expenses for you? It would even make sense to consider borrowing the money (like a mortgage) in order to 'buy a house' today using tomorrow's less valuable dollars!
And, as a bonus, if your fractional purchase is in an appreciating MSA, you would enjoy your share of the appreciation of the property.
Wednesday, August 4, 2010
Now is the Time for HECS Investing
Reinhart and Rogoff in their fascinating book This Time is Different explore, for probably the first time ever, the relationship between real estate and large-scale financial crises, particularly bank failures. Among other fascinating insights, their research uncovers the pattern of the 4 to 6 year period of languishing home values following a serious economic downturn. This is hardly surprising since the last 30 years has seen the relationship between banking profitability and mortgage lending focused-on by 'supply-side' proponents, fanned with 'ATM' ease of access to home-equity cash, and ridden like crazy into our current 'Great Recession.'
This leads me to three immediate insights:
First, the government's fanning of the 'American Dream' of universal home ownership, which is both unsustainable and of questionable value, is suspiciously aligned with the banking lobby's interest in short-term profitability. It is a relatively easy case to make that the banking/mortgage industry's crisis is self-made as it attempts to make equity available to its owners solely by means of debt-loading to the point of collapse. The Military/Industrial Complex railed against during Vietnam and the Cold War can be said to have been replaced by the HUD/Banking Complex as the political and economic interests of both conservative and liberal politicians align with the banking and mortgage industries. New homeowners (with new mortgages) make loyal voters.
Second, the next 4 years will be the ideal time to invest in residential real estate as values, driven back to earth by the banking industry's liquidity retreat and the federal government's staggering debt load, are prevented from appreciating.
Third, the risky nature of investing in residential real estate using traditional employment-based debt instruments will be illustrated in high-relief as employment continues to languish and foreclosures and short-sales hammer investor returns and the government's balance sheet.
Digesting the huge 'debt' meal we have gorged ourselves on will take time; time during which investing in lien-free residential real estate will reward investors, rescue Senior homeowners and significantly contribute to our economy's recovery.