Financeheaven.net blog

Time as a Financial Resource

Time is one of the most valuable resources during a workout. Many restructurings fail simply because the company runs out of time before the relevant information has been evaluated and negotiations are completed. The time available to the company before it runs out of cash, or the confidence of its customers and suppliers evaporates, needs to be assessed early in the restructuring and every attempt should be made to deliver a solution within that period. As soon as it becomes apparent this may not be achievable, banks need to explore ways of extending the time available.

Corporate distress situations are characterised by uncertainty and instability. The key contributor to the crisis tends to be a ‘liquidity crunch’, whereby the company experiences severe cash shortages. This constrains the company’s ability to carry on operating normally. An assessment of the company’s short-term liquidity position, and meeting the cash needs identified, is necessary if stability is to be attained, so that the loan workout can be transacted effectively.

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Getting Back to Commercial Real Estate Investing

While our forays into landscaping, tree growing, and general contracting were educational and largely fun, we are no longer involved in those activities. For instance, despite all the advantages of our own group of companies having an in-house landscaping company, the forward planning and logistics required to keep 18
men and a fleet of machinery efficiently deployed on a wide range of projects is enormous. Randy would be on-site at 5 A.M. and not get home until late. His focus on keeping that team usefully deployed prevented him from doing more interesting—and ultimately more lucrative—things elsewhere.

In a wise move, like so many people from all walks of life before us, we decided to divest ourselves of all noncore activities, and focus again on what we know best: smart real estate deals where we have identified a twist that we can capitalize on to vastly increase value. Best Choice Properties continues to work with equity partners from all over the world to create value with real estate transactions that are, in general, a lot of fun.

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How to Avoid Financial Crisis? Invest in Gold!

First and foremost, you should remember to focus on investing in “non-correlated” investments, such as gold, oil and commodities. It is crucial to always invest in non-traditional “alternative” investments as a hedge. The Fed is making a number of serious errors, mainly reducing interest rates too far below the “natural rate” of interest, and therefore weakening the dollar even further and as a result causing the oil and gold prices to rise even more. That is the reason for emphasizing a 15% position in natural resources recently – funds and stocks that invest in mining and energy companies, as well as the outright purchasing of silver and gold coins.

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Don’t Get Ripped Off By the Payday Loan Companies!

The payday loan business is typically a very legitimate one. Similarly to any type of industry, there are some companies on the market that are aiming to take advantage of people and make some easy profit. As a consumer, you should consider it your priority to protect yourself against these potential dangers.
First of all, any company that requires a fee up front before sending any cash is a company that should immediately turn on a red light in your head. What is more, you should be careful about companies that provide deals that look too good to be true. When the high rates are floating around the market, people frequently want to search for the best deals they can get. If a payday loan corporation is giving you a significantly better offer than other companies, then it is very likely that they aren’t very reputable.
As a general rule, research and information constitute your best weapons against fraudulent companies. Online research, accompanied with other forms of research is fundamental to finding a company that won’t try to rip you off. Additionally, it is crucial to resort to at least a little bit of common sense. If at some point in your dealing with a payday loan company, you believe there is something fishy going on, then resign from the transaction. You may be asked for a good bit of information, but there are some things that every legitimate company needs. If you are not asked for your previous employment record or your current employment information, then it is quite probable that you may get scammed.

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How to find a crisis-resistant company to invest in?

In times of financial crisis a good investor will not only buy stocks at the right price, but will also invest his money in companies which will continue to prosper (that is make money for you) well into the future. It is true that no one can really see the future, but here are certain characteristics which you are advised to take into consideration when thinking about a stock investment. Below you can find some pointers to get you doing more research:

• Companies which dominate their market in certain way. Such dominance, also called ‘economic moat’, may be (for instance) a recognized brand, a wide network or high costs involved in switching to a different service provider. Because of these moats make competitors find it hard to get a foothold and, therefore, it more probable that the company will stay financially successful and stable.
• High return on equity. This is a good measure of how successfully a company makes use of invested money to render growth in earnings. A high ROE may indicate that a company has a moat.
• Consistent and rising dividend payments may indicate that a company is consistently making profit.
• Companies operating outside the US. Warren Buffet and other financial experts are convinced that the increasing US trade deficit will devalue the US dollar in the long term and, therefore it is prudent to have some exposure to companies which operate in markets different than US.

Obviously, such measures are just the tip of the iceberg. If you are seriously considering investing in stock, you have to do some more research on your own.

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Why buy a full homeowners insurance coverage?

Float your way to complete coverage. Although a typical homeowners insurance will cover the structure of a home and some of the owner’s personal belongings, it may not offer complete coverage for high-value possessions, such as coin collections and jewelry.

If you posses special items for which the value goes beyond your policy limits, you are advised want to add a “personal articles floater” to your coverage. Rates will vary depending on the state and the actual item insured, but you should be able to buy a personal articles floater for as little as $30 a year to insure your most valuable belonging for their current purchase price or recently appraised value. Such coverage is frequently used to fully insure engagement rings or electronics. “Floaters” have no deductible and typically cover a wider range of claims, such as theft or loss away from the home.

You might also want to consider the following tips when applying for insurance:
•    Read and understand your policy.
•    Keep a list of personal belongings, prepare photographic records, and put them in a safe-deposit box or other place away from home.
•    Be certain that your coverage keeps pace with improvements or rising value.
•    Review your policy every year.
•    Call your local fire department or other emergency agencies for information on improving the safety of your home.

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Finishing a foreclosed real estate research

The ultimate goal of all your real estate foreclosure investigation is to make a decision whether a given distressed property provides a good bargain-buying opportunity. To the outstanding unpaid loan balance you must add all the liens against the property and any estimated fixing costs and then subtract that total from the market value of the foreclosed house. If the difference is a strong positive number, you can contact the owner already prepared with all your evaluations and start negotiating a possible sale.

You will also have to collect financial information the lender will require and apply for pre-approval. Try to read as much as possible about the lending process and what steps will be needed to complete it. Check your credit and deal with any credit problems that may have arisen before the lender gets your credit report.

Finally, take a short list of properties you are interested in and hand it over to your agent. Many experienced buyers and investors prefer to purchase real estate foreclosures without the help of an agent, but if you have never done this before, it is a really good idea to trust the expertise of an agent who has both knowledge and experience in purchasing distressed property.

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Renting your second home? Save on insurance!

If you rent out your vacation home, you will probably have to pay 20% over the cost of typical second-home insurance. That’s caused by the fact you’ll be spending there even less time than most second-home owners and insurance companies see your house is at even higher risk. Moreover, they claim that it is the owner who best takes care of a property. However, if you plan to rent it out often, notify your insurer. Although it may sound contradictory, certain insurers will charge you less if it seems that there will be tenants around most of the time. An occupied house is less likely to be burglarized or burn to the ground. Usually, second-homeowners rent their houses furnished, but if you rent an empty house, let your insurer know that; you’ll get a break on contents coverage. And if your tenant brings his belongings into your house, he’s on his own. He can’t claim anything under your policy, and although 10% of the contents insurance from his primary residence follows him into a rental, it’s not likely to be enough should some disaster occur.

Posted in Buying a Home, Financial Advice, House Purchase, Insurance, Personal Finance, Save on insurance, Uncategorized | Comments Off

Why house purchase is a good investment

The Best Investment

• As a typically general rule, homes appreciate about 4 or 5 percent a year. Some years will be more, some less. The figure will differ depending on neighborhood and region.
• 5% may not seem like that much at first. Stocks might appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds.

But take a second look…

• Let’s assume that you bought a $200,000 house, you did not pay cash for the home. You got a mortgage as well. Suppose you put as much as 20% down – an investment of $40,000.
• At an appreciation rate of 5% per year, a $200,000 home would increase in value $10,000 during the first year. Therefore, you earned $10,000 with an investment of $40,000. Your yearly “return on investment” would be an amazing 25%.
• Obviously, you are making mortgage payments and paying property taxes, accompanied with several other costs. Nevertheless, because the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.

Income Tax Savings

• Due to income tax deductions, the government is subsidizing your purchase of a home. Each and every interest and property tax you pay in a given year can be deducted from your gross income to reduce your taxable income.
• For instance, imagine that your initial loan balance is $150,000 with an interest rate of 8%. During the first year you would pay $9969.27 in interest. When your first payment is January 1st, your taxable income would be as much as $10,000 less – because of the IRS interest rate deduction.
• Property taxes can be deducted, too. No matter what property taxes you pay in a given year may also be deducted from your gross income, decreasing your tax obligation.

Posted in Buying a Home, Financial Advice, Financial System, House Purchase, Money Problems, Personal Finance, Real Debt, Real Estate, Uncategorized | Comments Off

When is Debt Real Debt

Let’s assume that you have a sizeable savings account and have gathered $2,000 of your savings for a new TV. You go to the store and discover that the TV you want to buy and the total comes to right at $2,000. You are about to pay cash when you see that the store provides 0% financing for the period of 18 months. If you decide to benefit from the 0% offer (assuming there’s not a deal for paying cash), are you taking on debt although you have enough cash to pay it off at any moment?

I’m aware of the fact that there are all kinds of “what if…” scenarios that could go along with the presented situation. Nevertheless, let’s just assume that you are disciplined enough and would not charge the TV and then go buy something else for your $2,000. What is more, bear in mind that you are not spending money you do not have because we have assumed that you saved up for the TV. To put it simply, you are not purchasing now and paying later.
In my personal opinion, although you are taking on debt, I see nothing wrong with taking advantage of the 0% offer. I think that it really is not a debt if you posses the money to pay it off any time you want but you have decided not to do so. I perceive it as a method for smart people to use debt for their own benefit even though the benefit is relatively small (approximately $91 if you get a 3% interest rate on your savings for a period of 18 months and less if you have to make monthly payments since you will be drawing down your $2,000 over the 18 month period).

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