What can the average joe do to take advantage of the credit crunch?

[Randall]

MSNBC is now saying 17 mortgage lenders are being investigated by the FBI. No link but ti should be everywhere soon.

[Atlanta Cracker]

I have no idea if this is good advice or not but I keep hearing people say buy gold

 

 

Total Real Return Indexes for Stocks, Bonds, Bills, Gold, and The Dollar, 1802-1997, 1 Dollar Invested in 1802*

 

 

Stocks: $558,945

Bonds: $803

Bills: $275

Gold: $0.84

The Dollar:$0.07

[TheShiznit]

I have no idea if this is good advice or not but I keep hearing people say buy gold

 

Still not a bad idea....especially with a sharply declining dollar. I have owned gold for 6 years now...and made a killing. Wish I had more loose change...but I don't.

[Randall]

Total Real Return Indexes for Stocks, Bonds, Bills, Gold, and The Dollar, 1802-1997, 1 Dollar Invested in 1802*

Stocks: $558,945

Bonds: $803

Bills: $275

Gold: $0.84

The Dollar:$0.07

 

 

That was until the Clinton adminstration. It had to end sometime. Put a moran in charge and everything changes,

[yo mama]

I have no idea if this is good advice or not but I keep hearing people say buy gold

Gold and oil have done very well over the last 5 years. They'll probably still continue going up, but the best time to buy was pre 9/11.

[Furd]

Buying a house and renting it out seems like a good idea, but just about everyone I know that has done it has regretted it. You have responsibilities as landlord that many don't realize. Deadbeat tenants are common. You get professional tenants who prey on amateur landlords, who typically are more lenient than those of the professional variety. They'll skip out on you, maybe leaving the house trashed, knowing that its probably not worth your while to chase them down to try to get a judgment and then try to collect on the judgment. Then they'll find another guy who is renting out a house to start the process all over again.

 

I'd rather try to flip the thing.

[Ursa Majoris]

Buying a house and renting it out seems like a good idea, but just about everyone I know that has done it has regretted it. You have responsibilities as landlord that many don't realize. Deadbeat tenants are common. You get professional tenants who prey on amateur landlords, who typically are more lenient than those of the professional variety. They'll skip out on you, maybe leaving the house trashed, knowing that its probably not worth your while to chase them down to try to get a judgment and then try to collect on the judgment. Then they'll find another guy who is renting out a house to start the process all over again.

 

I'd rather try to flip the thing.

From experience I can confirm that being an absentee landlord is not the road to riches. Very far from it.

[yo mama]

From experience I can confirm that being an absentee landlord is not the road to riches. Very far from it.

It's generally best when the property is something near where you live. It also helps if you're a contractor, attorney, or have other skills that are helpful in being a landlord.

[Ursa Majoris]

It's generally best when the property is something near where you live. It also helps if you're a contractor, attorney, or have other skills that are helpful in being a landlord.

I used a management company - they sucked balls.

[yo mama]

I used a management company - they sucked balls.

Don't they take like 25% of your net?

[Ursa Majoris]

Don't they take like 25% of your net?

10% of gross but they did nothing for me at all. Seemed like the tenants were employing them rather than me. I evicted the tenants, fired the management company and sold the house.

Edited March 18, 2008 by Ursa Majoris

[geeteebee]

I evicted the tenants, fired the management company and sold the house.

 

Ooh, the dreaded 'triple crown' of landlordism.

[Ursa Majoris]

Ooh, the dreaded 'triple crown' of landlordism.

It was the least I could do for the bastages.

[polksalet]

Pay down your debts.

[i_am_the_swammi]

Pay down your debts.

 

Solid advice in theory, especially if it is high-rated debt.

 

But if you can convert it to a low-rate interest-only loan (which is easy to do), and invest the cash-on-hand today at a higher rate-of-return, you'll net better in the long run. Then use the proceeds from your investment to pay off the low-rated debt, and pocket the difference.

 

Basic example: Suppose you have a tax deductible home equity loan at 4.5%. Due to the tax advantages, the "real" cost of this money is closer to 4%. If you can invest excess cash in a muni, CD, etc.at 5% or better, you keep the spread as profit. So basically, you're borrowing money for free, earning a profit on it, and using those proceeds to pay down the debt.

[dmarc117]

The Federal Reserve cut interest rates by three-quarters of a percentage point Tuesday, but don't expect mortgage rates to go down too. In fact, home loans could be heading higher.

 

Inflation drives long-term fixed rates. When the Fed cuts short-term rates, the intent is to lower borrowing costs for corporations so that they'll invest and hire. But this economic growth can lead to inflation.

 

That in turn leads bond traders to demand higher rates on their long-term bonds - and that drives up mortgage rates too.

 

"Mortgage rates are determined by how fearful the market is of inflation," said Gumbinger.

 

http://biz.yahoo.com/cnnm/080318/031408_ra..._mortgages.html

[Big Country]

Solid advice in theory, especially if it is high-rated debt.

 

But if you can convert it to a low-rate interest-only loan (which is easy to do), and invest the cash-on-hand today at a higher rate-of-return, you'll net better in the long run. Then use the proceeds from your investment to pay off the low-rated debt, and pocket the difference.

 

Basic example: Suppose you have a tax deductible home equity loan at 4.5%. Due to the tax advantages, the "real" cost of this money is closer to 4%. If you can invest excess cash in a muni, CD, etc.at 5% or better, you keep the spread as profit. So basically, you're borrowing money for free, earning a profit on it, and using those proceeds to pay down the debt.

 

Don't forget to deduct taxes from the 5% return. Walking a very thin line of truly being profitable with that thin of a spread. Very close to the point of too much risk for too little gain.