USA Social Security Retirement Manual
Stocks and Shares Retirement Rescue
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Like life insurance companies, pension and retirement funds use mortgages and mortgage-backed securities as a vehicle for investing their reserves. Pension and retirement funds has become potentially the largest sources of real estate financing. There are hundreds of thousands of private pension funds and state, local, and federal pension funds nationwide, representing over 1 trillion in assets. The Mortgage Bankers Association of America projects the growth of these funds will create an enormous amount of potential mortgage funds that could become available to prop up housing and other real estate markets.
As private pension programs became more popular with liberalized tax-deferred contributions for Individual Retirement Accounts for employees, and allowances under the Keogh Plan for self-employed persons, substantially more of these dollars are entering the capital markets. These funds are an important source of real estate financing on all levels. New money is being brought into the capital market from employers, employees, and the self-employed in what might be viewed as a captive market, since the steady inflow of such funds is often more stable and dependable than savings inflow into thrift institutions. (Pension funds accumulate until each member reaches retirement age, whereas savings strictly as time deposits are more volatile.) Until recently, most pension funds had been invested in government securities and in corporate stocks and bonds. However, the rapid increase in the assets of pension funds and the desire to diversify these investments are causing some fund managers to...
When you're building a referral business, I want you to think about your retirement. Here's what I mean. In the insurance industry, they have a great setup. Every time a salesperson sells you an insurance policy, that salesperson keeps getting a little residual as long as you're making your premium payments. It's not a lot, but it keeps coming. In the first year, the agents make the bulk of their commission, then after that they just get a little residual. But you keep multiplying those residuals by hundreds of clients. There are some insurance people making a ton of money every year and they're not even actively working insurance anymore. I want you to consider this concept of residuals in your real estate career.
Between now and 2025, the number of persons over age 60 will double. It's the largest age shift in U.S history. Just as important, millions of these emerging seniors rank among our country's wealthiest households. In contrast, many other age wavers are still seeking to build up their wealth and incomes through property investment. Thus, demand for retirement second home property will remain strong from both retirees and older investors. Combine these numbers with increasing longevity and you can see a continuing boom in prices for properties located in areas that become favored vacation retirement spots. If you wish to invest for high appreci
A common question for experienced agents and brokers is, How can I retire The retirement model has been created to answer that question. Over the years, an agent builds a book of business in the form of hundreds of past clients. In the retirement model, a system is provided so an agent or broker can pass on this book of business to a successor and collect fees on all future business generated from the client base that has been passed on. As in the recruitment model, it is not uncommon that a retirement model franchise may also include some reward for recruiting agents. One of the more popular retirement model franchises available today is Exit Realty.
Pension funds are not taxed on earnings so theoretically they should be able to make investments with lesser yields. In practice, pension funds are being pushed to perform well. Pension funds have discovered real property secured loans as an acceptable balance between risk and yield. Both private individuals and private pension funds can avoid the usury limitations and receive higher rates of interest by using brokers as arrangers of their loans. (If they made the loans direct, the usury law would apply.) Public pension plans are exempt from usury limitations as are other licensed lenders. Disclosures need not be given to trustees of pension, profit sharing or welfare funds having assets of 15 million or more. Pension funds with less than 15 million in assets are treated as other non-institutional lenders. These pension funds receive the Protection of required disclosures.
The final group for whom I wrote this book includes those who are in some other occupation and are now considering real estate as a career change or as a second career after retirement. Real estate was a second career for me, so I have a good understanding of the attraction it holds for people looking for a new field to enter.
Six to eight percent That's hardly the kind of return that will build wealth and help you achieve financial freedom. That's hardly the size of return necessary to fund a comfortable retirement (assuming that you want to retire prior to age 75 to 80). The fact is that in recent years, investors have pushed up property prices thus lowering relative cash flows because they are learning this undebatable truth Historically, real estate investors have dramatically out-earned their fellow investors who have tried to accumulate wealth, income, and financial security via stocks. (As Here's my reasoning Nearly everyone now realizes that the United States, Japan, the UK and Continental Europe face an emerging age wave of seniors. Increasingly, these forthcoming seniors understand that neither government social security programs nor corporate pensions can possibly provide them the income (and money for medical care) that they will need to enjoy a prosperous (or even a comfortable) retirement. Why...
Think about this You buy your home, pay off the mortgage after 20 or 30 years, and you then have an asset that is likely worth substantially more than you paid for it. If you did that with just two or three more houses that you bought, rented out (which means you will pay your mortgage with the money your tenants pay you), what would you have You'd have enough to make a major difference in your retirement lifestyle, or enough to send your kids to college, or enough to do all those other things you've dreamed about but thought you couldn't afford.
The gaping yield spread between stocks and property indicates that investors with retirement in their sights will continue to rebalance their portfolios toward property, thus pushing up property prices. In terms of both expected income and appreciation, property stands as your best route to wealth and financial security. I disagreed strongly and put forth the opposite view In my 1993 book Stop Renting Now I told Americans to get off the sidelines. Get into the game now Housing prices would soon climb to startling new heights. For the reasons stated in this chapter, I make the same forecast today. By the year 2020, you will see prices and rents shoot up as much as (or more than) they did between 1990 and 2005. I also predict that cap rates for rental properties will continue to fall. The baby boomers will be scrambling for their retirement incomes.
The best professionals provide ongoing services to clients who wouldn't think of taking their business elsewhere. These professionals develop reputations and client loyalty that reside in their company names, even after the founding professionals move on to other ventures or into retirement. Doing more than just earning an income and building a clientele, these professionals build an asset that they can sell, which allows them to receive compensation from the value of the successful businesses they've built.
Individual Secondary Mortgage Lending Individuals can assume debt positions (lending money) as well as equity (owning property). These positions can involve significant risk as well. Granting individual second mortgages to property owners creates an income stream and higher than average interest rates. However, if and when such second mortgages are defaulted, the lender is entitled to get their principal returned only after the first mortgage has been paid. In cases where owners overborrow, second mortgage investors could be left with losses. The way to reduce risk is through careful screening and selection of borrowers with plenty of equity in their homes. Some companies specialize in placing money in second mortgages, notably through self-directed retirement plans or financial planning programs.
One of the fastest-growing regions in the United States is the central Arizona Phoenix metro area. Much of the development is aimed at retirement or semiretirement age groups one exception is the Anthem project, which began selling in 1999 and is planned for completion in 2007. Developer Del Webb is well-known in the Southwest for its lifestyle communities often gated, guarded neighborhoods. The Del Webb Corporation has built more than 100,000 homes since 1928 and is best known for its Sun City retirement communities. Anthem is the company's first nonage-restricted housing development and is described on its promotional web site www.anthemarizona.com as containing two sections. Anthem Country Club consists of gate-guarded, resortstyle living with two . 18-hole championship golf courses. The target resident market is described as professionals aged 40 to 60, preretirees and empty nesters. Anthem Parkside offers real neighborhood living with activities and amenities tailored to fit the...
There are several major types of institutions which participate in mortgage finance commercial banks, mutual savings banks, savings and loan associations, life insurance companies, private pension funds, public pension funds, mortgage companies (mortgage bankers or brokers), real estate investment trusts, federal credit agencies, and mortgage pools. These institutions may be private, governmental, or quasi-governmental. Private individuals become important as (non-institutional) lenders when interest rates are high and alternative or junior financing is necessary to secure property transfers.
Unlike banks, savings institutions, life insurance companies, pension funds and credit unions, which are directly responsible to their depositors and premium payers, the semifiduciaries are removed from a first-person relationship. Although the quality of a fiduciary relationship is somewhat implicit in their actions, the semifiduciaries' responsibilities are directed either internally, to their owner-partners, or externally, to the primary fiduciaries that they represent, but never directly to any depositors or premium payers. Although a semifiduciary is expected to invest entrusted funds with sound
The problem is that they haven't fully understood and used the leverage of time that is also available for real estate investors. The easiest way to think about this form of leverage is to picture a simple lever. It's nothing more than a long board resting on a fulcrum. On one side of the lever, picture all the things you want from real estate. A sample of those benefits might be choice, time, money, passive income, wealth, and retirement. The fulcrum that moves those things is your real estate investments (Figure 4.2). The five forces that move that lever are
Well, about fifteen years ago I was living in the Seattle area where Boeing had its headquarters. It was a bad time for Boeing, and they were laying off people right and left. One day, someone offered to sell me their house. 'Just take over my payments,' they said. It seemed like a good deal. I'd just come out of a bad marriage that had resulted in a bankruptcy. So I bought it and rented it out. Since that one went well, I picked up another one for my retirement. And then one for each of my four kids. Pretty soon I had five houses. I was very lucky then. I ended up picking up twenty-one houses this way. And then my luck ran out. I made the mistake of marrying again. She laughed nervously. It was the worst mistake of my entire life Sometimes we don't use our heads, you know
With retirement plans and insurance benefits, by far the easiest, most cost-effective way to provide these forms of compensation is to outsource them through a professional employer organization (PEO), which can offer excellent standardized retirement benefits. A PEO virtually employs thousands of employees and has the ability to negotiate high-quality investment, insurance, and retirement plans, which are almost always better than you can offer for a similar cost. They also provide a broad range of payroll and human resource administration while limiting your liabilities as an employer.
I brought him a pension fund that put in all of the equity and had a very long-term investment strategy. My client was very happy to get his first Phoenix project started with minimal equity requirement from him. This client could have easily done the project all on his own but decided to reduce some risk. This is probably why he has been in business forty years
The suburban model tends to concentrate on residential land uses first, with other land use features designed to serve the needs of residents. For example, The Villages in Florida is primarily a series of gated communities. But the numerous golf courses are what developers promote, clearly aimed at the leisure retirement market. Additionally, a highly structured down-
Many people look forward to retirement with eager anticipation and make a satisfactory adjustment to it. A significant number, on the other hand, become bored. They may never admit it, but they actually miss working Still others find that the Golden Years require slightly more gold than they have stored up, and they need to do something to earn extra cash.
Equity in other properties. Pension funds. Relatives. 1. List three reasons why you want to make more money in real estate. Get down to the real core reason of why you picked up this book. Some examples of great reasons would be to create a secure retirement, to build wealth for my family, to contribute more to my favorite charities and causes and the like. Why are you reading this book What is it you really want 4. List five sources of cash you have available to you today (Aunt Tillie, the mattress, someone you know, pension fund).
I Your clients' home purchase may have sparked their interest in building wealth through real estate investments. They may be thinking about how to secure their retirement or how to create a nest egg for their children's college educations. If your clients view real estate as a piece in their build-the-wealth puzzle, they may seek your advice about how to acquire and retain properties as a key step toward wealth creation.
When a lender makes a loan directly to a borrower, that action takes place in the primary mortgage market. Later, that loan may be sold to a bank, pension fund, or some other investor. The sale of that loan takes place in the secondary market. For example, if a savings bank makes a loan directly to a borrower, it is involved in the primary market. If the loan is subsequently sold to the Federal Home loan Mortgage Corporation, that sale takes place in the secondary market.
On a nationwide basis, deposits in institutions are not sufficient to meet the demand for mortgages. Therefore, to obtain additional funds for mortgages, lenders have had to revert to the capital market. The capital market is the market for long-term investments, which include government and corporate bonds as well as mortgage loans. Some of the investors in the capital market buying long-term investments are insurance companies, trusts, pension funds, and individuals.
Whereas construction of commercial property may be financed without difficulties from own funds of customer or commercial loans, construction of residential property through third party financing is permitted only through special Construction Financing Funds and Real Estate Operations Funds, institutes of joint investment, non-state pension funds and by way of issuance of corporate bonds.
High-density model, 63-64 questions to ask, 59 recruiting model, 61-63 retirement model, 63 traditional commission model, 60-61 what to look for, 59-60 Franchise fee, 57-58 expansion or contraction, 194 personal exercises, 194, 196, 200 retention ideas, 196-200 value proposition, 192-194 what agents want, 192 Retirement model, 63 Review the files, 115-116 Risk management, 249-258
This central Florida development takes up 5.2 square miles. While the latest reported population was 11,828 (2000 Census), approximately 45,000 people live in the immediate area in owner-occupied or rented housing and multi-unit retirement and senior accommodations. This development combines gated communities with recreational facilities, notably a series of golf courses. However, with additional development near the villages, traffic congestion and travel distance to the courses are becoming a problem. The popularity of the closest golf
I mentioned working with retirees briefly in Chapter 8, but the topic deserves elaboration. Americans are living longer, and living more vigorously. Retirement has taken on an entirely different meaning for a large segment of the senior population. Statistics also show that roughly 80 percent own their own homes. So we've got a booming population with somewhat similar attitudes, goals, and values who overwhelmingly value home ownership.
He actually enjoys reading the tax code, and because he is such a student of it, he understands this lengthy document better than anyone I know. Most CPAs focus on a very small part of the tax code. They focus on the part that lets you and most Americans defer taxes until retirement the code relating to IRAs, 401(k)s, and other so-called retirement plans. Tom also pays close attention to the other, much lengthier part of the code that shows you how to reduce or eliminate your taxes permanently. The difference between Tom and other CPAs is that Tom understands the purpose of the tax code. It's not just a set of rules. It's a document that when followed is designed to reward certain behaviors through lowering or eliminating taxes. Does your CPA see the tax code this way
When it comes to investing, facts eventually expose illusions. Eventually reason trumps faith. Nearly all adult Americans need to invest successfully. Relatively few of us can count on a lifetime job, a large pension, or social security to guarantee our financial prosperity or survival. Yet most investing Americans still believe they can find salvation in stocks. They keep plugging money into their 401(k)s, 403(b)s, IRAs, Keoghs, and 529s. Financial advisors keep chanting, Stocks for the long run. And most Americans continue to believe them.
Most people don't know how to successfully maximize their investment dollars and others are not able to accumulate those additional dollars to invest. It becomes a revolving turnstile few of us are able to change. Additionally, it is well known that two thirds of America's population lives from paycheck to paycheck and less than three percent of us are considered financially secure at retirement. To give you an example of the safety of trust deeds and mortgages we would like to highlight the fact that insurance companies and most pension funds invest more than fifty (50 ) of their assets in real estate notes.
The downside of a recruiting model franchise is that it often attracts agents that may be more interested in recruiting and creating a down line revenue stream than they are in listing and selling real estate. A broker may want to think carefully about hiring an agent who wants to join the company simply because of the recruiting incentive this may be a clue that the agent may not be a very solid sales producer. If an office becomes filled with agents who are mediocre producers, trying to recruit better agents will be difficult. Depending upon the franchisor, the recruiting model franchise may in fact become a retirement model for an agent or broker.
Pensions Extend your thanks verbally and put it into hand-written notes. Find simple and creative ways to express your appreciation to the people that put food on your table, gas in your car, dollars in your retirement account, and tuition dollars into your children's college education accounts. Your thanks will be rewarded with referrals.
In this chapter you will study noninstitutional lenders - real estate lenders whose activities are not as strictly regulated as Institutional lenders. Noninstitutional lenders, also called nonfiduciary financing include private parties, mortgage companies, syndicates, real estate investment trusts, pension and trust funds, and credit unions.
Mortgage bankers, mortgage brokers, or mortgage companies are primarily representatives of the ultimate sources of money, such as life insurance companies, savings banks, trust or pension funds, or private parties. They are essentially money brokers who may or may not service the loans they originate.
With the certificate in hand, the lender is able to sell the mortgages to an investor. When the investor buys the mortgages, it receives the certificate. Typically, the securities are purchased by securities dealers who trade in Ginnie Mae securities. They in turn sell the securities to other investors such as insurance companies, pension funds, other lenders who need mortgages, and individuals. The securities can be broken down into smaller denominations to satisfy the demands of the various investors (the smallest denomination is 25,000). The securities are traded on Wall Street just like stocks and bonds. There is an active market for the securities, which makes them a liquid investment.
As with retirement plans, we recommend exploring a PEO or other outsourced group to handle this aspect of compensation. PEOs can negotiate from a position of strength since they represent thousands of virtual employees. Most, but not all, will also have options for handling payroll, since deducting from salary is the preferred method of covering the discounted costs of these benefits.
First, let's review the fundamental facts of life as a real estate agent. You are almost certainly going to be solely responsible for providing for your personal financial welfare. You will likely not be provided any company-paid medical, insurance, disability, or retirement benefits, although the brokerage may have plans in which you may enroll at your expense. These realities, plus the emotional pressures associated with any selling job, make it essential that you have a plan to keep your financial, physical, and mental health stable.
From that, allocate roughly 15 percent as your cost of doing business. Automobile expenses, telephone calls, license fees, multiple listing fees, dues for professional affiliations, client relations expenses, clothing, business cards, postage, and office supplies all add up. Now consider federal, state and local income tax, and Social Security. You should also plan to allocate a portion of your income to retirement plans. Most of these things will not be deducted from your check you will have to budget for them.
Do you have a pension with money in it If your plan is under ERISA guidelines, you will not be able to use the money to invest in real estate. ERISA plans include 401(k) plans. But, if your retirement funds are in plans such as SEP-IRAs, you can move the money into a self-directed plan. And, you can then direct that self-directed plan to buy real estate. Not everyone knows about this possible source of funding. Be prepared to shop around a little to find a pension company that will help you set up your self-directed plan to handle real estate. Go to www.DolfAndDiane.com for a list of resources that can help you get your money.
The debt markets provide over 250 billion in new financing each year, but another 50-plus billion of equity capital is also required for new real estate investments. As noted above, large pools of capital, such as pension funds, have been attracted to real estate for its inflation-hedging characteristics. Large pools of foreign capital also participate in hopes of preserving asset values. Despite the great attention these investor groups receive, they actually contribute only about 5-10 billion per year.
It was a full year before a permanent oan could be secured. In June 1981, a commitment was made by a pension fund o provide an 18.4 million permanent .lortgage, with a 35-year term, and inter-st rate of 13.5 , plus 30 of any cash ow in excess of the base projections (see exhibit 4). Joey was very pleased with the rms Based on what is available, it is an Jxtremely favorable loan. It means that nnually, the first 275,000 to 300,000 in ish flow is ours. Then, above that, we get 0 , while they get 30 . When asked if he lender had perhaps been too generous, foey responded No, they got an ex- emely strong location and they're going 'j get their required internal rate of re-urn.
You can identify soon-to-be vacation retirement meccas in the same way that you can identify emerging creative class locations. Talk with future retirees. What newfound areas are achieving attention and increasing popularity Personalize, then generalize. What locations seem attractive to you your family, your friends, your co-workers
Many people who buy vacation retirement properties plan to rent them out part of the year and personally enjoy the property at other times. Although this strategy can work well, watch out for exaggerated estimates of rental revenues. Demand for seasonal rentals varies according to weather (too much rain, too much snow), traffic and transportation issues (road construction, cost and availability of flights, etc.), and recent publicity (the SARS scare slashed travel to Toronto and Hong Kong). In addition, firms typically charge high fees to manage vacation and seasonal rentals. It's not unusual for vacation management companies to charge 20 to 40 percent of gross rental receipts. (For a full discussion of issues relevant to this investing strategy, see my book, The Complete Guide to Second Homes for Vacations, Retirement, and Investment, Wiley, 2000.)
Other includes pension funds, REIT's, mortgage companies and private individuals Source Federal Reserve Bank Other includes pension funds, REIT's, mortgage companies and private individuals Source Federal Reserve Bank Pension Funds and Insurance Companies. Pension funds and insurance companies together represent the second group to have increased holdings of mortgages. Within the Other category, pension funds have increased their share of the dollar volume of mortgages. A portion of this represents purchased loan portfolios and mortgage-backed securities, although both pension funds, through advisory firms, and insurance companies are also originators of mortgages. Fueled by the 1979 Employment Retirement Income Security Act (ERISA), pension funds have grown dramatically in size during this period. Their participation as lenders is small, but growing, and they are also investing in volume directly as equity owners of properties. This group is active in commercial real estate and...