The HECS product that my company, Fractional Equities, LLC, has developed is called a ROOF®; it is an acronym for "Residential Owner Occupied Fractional." Chartered Financial Analysists, Licensed Investment Advisors, Broker-Dealers, CPAs, attorneys and regulators have been thoroughly examining it and its performance for the last two years. Joanne Bachmann, president and principal at Doherty, Bachmann & Sons, an investment banking firm, sent us the following appraisal:
"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.
Tuesday, August 10, 2010
Monday, August 9, 2010
"Buy a (Fractional Interest in a) House to Protect Yourself from Inflation"
In his Bargaineering.com site's 'Personal Finance' article, "How to Protect Yourself from Inflation", Jim Wong strongly recommends buying a house! His arguement is that as inflation erodes the value of your dollars, you would use future dollars of less value to pay off a mortgage established in today's dollars.
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.
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.
Sunday, July 18, 2010
This Time is Different, Reflections 7/18/2010
The concluding observation to chapter 2, "Debt Intolerance: The Genesis of Serial Default" is that, "Going forward, after the global financial crisis of the late
2000s subsides, a challenge will be to find ways to channel capital to debt-intolerant countries in nondebt form to prevent the cycle from repeating itself for another century to come." Reinhart & Rogoff's observations are spot-on for sovereign debt but, it needs to be noted, is equally applicable on a micro-economic scale.
There is no question that a prime mover of the 'global financial crisis of the 2000s' is the massive amount of unsustainable debt incurred by 'debt-intolerant' home buyers using insufficient income to purchase homes beyond their means and beyond the security of their employment.
How much more true is this of the fixed income homeowner in need of 'capital' today? The very same challenge of 'finding ways to channel capital to debt-intolerant homeowners in non-debt forms' is critical. Simply replace 'capital' with 'cash', 'debt-intolerant countries' with 'fixed income homeowners' and the use of HECS to convert existing home equity into cash becomes an obvious strategy for 'preventing the cycle from repeating itself...' Using HECS to provide cash to fixed-income homeowners relocates the 'risk equation' from continued employment to asset appreciation and in doing so, moves inflation from the 'risk enhancement' relationship it has with debt to the risk diminishment relationship of asset appreciation.
2000s subsides, a challenge will be to find ways to channel capital to debt-intolerant countries in nondebt form to prevent the cycle from repeating itself for another century to come." Reinhart & Rogoff's observations are spot-on for sovereign debt but, it needs to be noted, is equally applicable on a micro-economic scale.
There is no question that a prime mover of the 'global financial crisis of the 2000s' is the massive amount of unsustainable debt incurred by 'debt-intolerant' home buyers using insufficient income to purchase homes beyond their means and beyond the security of their employment.
How much more true is this of the fixed income homeowner in need of 'capital' today? The very same challenge of 'finding ways to channel capital to debt-intolerant homeowners in non-debt forms' is critical. Simply replace 'capital' with 'cash', 'debt-intolerant countries' with 'fixed income homeowners' and the use of HECS to convert existing home equity into cash becomes an obvious strategy for 'preventing the cycle from repeating itself...' Using HECS to provide cash to fixed-income homeowners relocates the 'risk equation' from continued employment to asset appreciation and in doing so, moves inflation from the 'risk enhancement' relationship it has with debt to the risk diminishment relationship of asset appreciation.
Wednesday, July 14, 2010
Restoring Liquidity to the US Economy
Rehydration of the US Economy
We are experiencing a period of financial dehydration caused by dangerously leveraged overuse of the existing aquifers (accumulated equity) and watersheds (profitability) of liquidity; the supply is running perilously low and the economy is seriously wilted with little hope of a timely recovery.
However, there exists a tremendous untapped aquifer of liquidity heretofore unavailable to either its owners or the general economy, even if credit was more accessible; house-rich but cash poor homeowners can’t make monthly loan payments. Owned by the Great Generation and their children, the Boomers, that aquifer is stunningly large: $4.5 trillion and can now be tapped with a HECS.
By providing access to that immense pool of home-equity existing beyond the wells drilled by mortgage companies, HECS can be used to inject $751.3 billion back into the US economy by putting it into the checking accounts of Senior homeowners without mortgages. Another $317.5 billion is accessible to senior homeowners with mortgages, relieving them of the current strain of mortgage payments made from a fixed income. In addition, pre-seniors, aged 50 to 64, with a qualifying mortgage expand the ‘aquifer’ adding approximately $ 1.4 trillion more for a total of $2.5 trillion liquidity available to be injected back into the economy, one household at a time.
A careful and deliberate tapping into that aquifer with HECS wells will rehydrate the American economy as it allows the trillions of dollars of unliened home equity and redirected former mortgage payments to be liquefied and reinjected into the economy as cash without the risk and overhead expenses of further debt.
That economy-refreshing liquidity is moved from the immense pool of investor cash looking for a safe and secure investment opportunity to the homeowner providing for their unbudgeted expenses. In doing so it also provides relief to the Senior 'safety-net' provided by the government. Eventually it moves to the main street economy providing jobs and the flow of cash that follows employment.
HECS allows the swelling ranks of seniors and pre-seniors, currently seen as a burden to the American economy, to become a source of relief, a source of job creation and a re-hydration of the economy.
American retired homeowners have been filling this vast reservoir with value for more than 30 years. They have paid an even greater amount of interest on the mortgages used to put this value away; they are no longer required to borrow it a second time in order to access it!
We are experiencing a period of financial dehydration caused by dangerously leveraged overuse of the existing aquifers (accumulated equity) and watersheds (profitability) of liquidity; the supply is running perilously low and the economy is seriously wilted with little hope of a timely recovery.
However, there exists a tremendous untapped aquifer of liquidity heretofore unavailable to either its owners or the general economy, even if credit was more accessible; house-rich but cash poor homeowners can’t make monthly loan payments. Owned by the Great Generation and their children, the Boomers, that aquifer is stunningly large: $4.5 trillion and can now be tapped with a HECS.
By providing access to that immense pool of home-equity existing beyond the wells drilled by mortgage companies, HECS can be used to inject $751.3 billion back into the US economy by putting it into the checking accounts of Senior homeowners without mortgages. Another $317.5 billion is accessible to senior homeowners with mortgages, relieving them of the current strain of mortgage payments made from a fixed income. In addition, pre-seniors, aged 50 to 64, with a qualifying mortgage expand the ‘aquifer’ adding approximately $ 1.4 trillion more for a total of $2.5 trillion liquidity available to be injected back into the economy, one household at a time.
A careful and deliberate tapping into that aquifer with HECS wells will rehydrate the American economy as it allows the trillions of dollars of unliened home equity and redirected former mortgage payments to be liquefied and reinjected into the economy as cash without the risk and overhead expenses of further debt.
That economy-refreshing liquidity is moved from the immense pool of investor cash looking for a safe and secure investment opportunity to the homeowner providing for their unbudgeted expenses. In doing so it also provides relief to the Senior 'safety-net' provided by the government. Eventually it moves to the main street economy providing jobs and the flow of cash that follows employment.
HECS allows the swelling ranks of seniors and pre-seniors, currently seen as a burden to the American economy, to become a source of relief, a source of job creation and a re-hydration of the economy.
American retired homeowners have been filling this vast reservoir with value for more than 30 years. They have paid an even greater amount of interest on the mortgages used to put this value away; they are no longer required to borrow it a second time in order to access it!
Friday, July 9, 2010
HECS Definition Added
HECS investing in real estate is both a unique investment strategy and a new class of asset investment. The White Paper Library now has a definition of "HECS" for your questions and/or comments.
Thursday, July 8, 2010
Chapter 3 Added
Chapter 3 of "Financial Pressure on Boomers": 'Fractional Equities Brings Hope to Seniors and a Unique Opportunity to Real Estate Investors!' now added!
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