Archive for the ‘Investing in Atlanta Real Estate’ Category

Are You a Short-Term Trader or a Long-Term Investor?

Think about it for a minute – and be honest with yourself… Are you a short-term trader or a long-term investor?

You might be surprised to hear me say that there’s not a right or a wrong answer to this question. Sure, there are advantages and disadvantages with each approach, but BOTH short-term traders and long-term investors have the potential to make great returns over time.

If you’ve had a discussion with your traditional money manager this month, chances are good that you have sat through the tried and true “in it for the long haul” speech. And for true long-term investors, this is an important concept to keep in mind.

Long-term investors can’t get worried about volatile swings in the market. After all, they’re in it for the long haul. When prices trade lower, it doesn’t matter. They weren’t planning on selling any time soon and in time they expect their positions to rebound.

The luxury of being a long-term investor is that you don’t have to worry about the day-to-day gyrations in the market. You simply have to wait patiently and allow for long-term growth trends to send the value of your investments higher. Of course the downside of being a long-term investor is that you don’t get to take advantage of the “buy-low, sell-high” opportunities in a volatile market.

Short-term traders can either love or hate markets like this. When things are moving rapidly (and in every different direction) there are plenty of chances for short-term traders to make a lot of money. But at the same time there are plenty of opportunities to rack up losses too.

If you’re a short-term trader, you know that the day-to-day action can be a grind. Short-term traders don’t have the luxury of sitting back and patiently watching. But of course a talented trader can make a much higher return buying cheap and selling dear.

The Key is Discipline

As with most business ventures, the key to success (whether investing for the long-term, or actively trading) is developing a disciplined approach. Long-term investors MUST have a rigorous process for identifying strong, valuable investments that they can stick with for years.

Without this detailed analysis, the long-term investor will undoubtedly pick sub-par investments and will ultimately earn a less-than competitive return. But with a rigorous process for identifying quality investments, and the patience to hold on to these investments through the long-term, a disciplined investor can expect to beat the market over time.

Discipline is just as important for short-term traders. Using risk management techniques, stop losses, proper position sizing, and reasonable profit targets ensures that a trader will keep his capital base intact and grind out profits quarter after quarter.

Once again, the key to success is building a disciplined approach – and then sticking with the rules throughout the turbulence.

Ashford Offers the Best of Both Approaches

At Ashford Capital, we incorporate some of the strengths from both long-term investors as well as short-term traders. Our goal is to buy residential real estate at the lowest possible price, and sell to developers at a significant profit.

From a short-term perspective, we’re acutely aware of the day-to-day market dynamics and how they affect real estate prices. When banks are in dire need of capital, we’re able to negotiate tremendous deals – buying distressed properties at fire sale prices. When the FDIC is saddled with a portfolio of illiquid properties, we’re willing to buy – but only at a significant discount.

Looking farther down the road, Ashford can afford to be patient, waiting for the very best opportunity to sell these properties to developers. Since we buy quality locations that will rebound in value quickly, we can be confident in the ultimate value of our locations and ride out a turbulent environment without hitting the panic button and selling.

Does your investment process have the discipline to ride through both good environments as well as rough periods? If not, why not?? In times like this, you owe it to yourself to have a carefully crafted plan and to manage your investments with the utmost care and diligence.

I would love to chat with you one-on-one and see if Ashford Capital can help you work to build a disciplined investment approach. Today’s environment offers tremendous opportunity – but you have to understand how to manage your risk and develop a long-term plan. Let’s have a conversation this week!

Wishing you every success,
Matt

Matthew J. Riedemann
Founder, President, & Managing Director
Ashford Capital Partners

678-231-4579
[email protected]

Is Your Net Worth Bouncing Like a Yo-Yo?

Investors and Colleagues,

August has been a tremendously volatile month for most investors.

Two weeks ago, four of the five trading sessions for the Dow featured a 500 point range. (Remember when a 100 point move seemed like a big deal?). Last week, the stock market initially tried to rebound, but then finished the week on a sour note – with the Dow closing back below the key 11,000 mark.

Several of the financial advisors that I speak with are expecting the volatility to continue. Many investors will wait to make any adjustments to their portfolios until after they receive their August account statements.

Based on the action so far, the average retirement account is likely to see a double-digit percentage loss just for the month of August. Losses like this can have a tendency to be a self-fulfilling prophecy, as lower prices lead to panicked investment decisions – resulting in more selling and more price declines.

My point here is not to add insult to injury. Obviously no one likes to see their neighbors sustaining losses and struggling to protect their nest eggs. My purpose with today’s message is to help you develop a plan for this turbulent environment.

Stability Trumps Excitement…

As you probably know, my company (Ashford Capital Partners Inc.) invests in residential real estate developments that can be bought at a substantial discount and eventually sold to homebuilders and residential developers.

Our goal is to create stable investments for our clients. Investments that pay a preferred rate of return, which is agreed upon when we initially sign a contract. So it doesn’t matter whether the market is up, down, or sideways… that preferred rate of return is stable.

In addition to the preferred rate, our investors also participate in the profit when we sell a property. So there are essentially two ways our investors make money. Part of the return is stable and predictable. The other portion is based on the difference between our purchase price and what we can sell the property for.

The beauty of this arrangement is that our investments have both the stability of a “fixed return” investment, along with the profit potential of a more aggressive growth opportunity. For our investors, the stability of our investment approach is particularly comforting when the overall economy and the stock market is anything but stable.

Losses Are Hard To Recover

Albert Einstein called the concept of compound interest the “eighth wonder of the world.” An investment that continues to generate positive returns can grow exponentially as profits are reinvested and grow alongside the initial investment capital.

But while the compound effects of gains can be tremendous, the compound effects of investment losses are very sobering.

If your investment account loses 20% of its value, it actually takes a 25% return to get back to its original value. If your account loses 33%, it takes a full 50% increase to get back to even. A 50% loss requires a 100% return, and if you lose 66% of your account, you need a 200% return to recover your losses.

Based on these numbers, it’s extremely important for investors to protect against losses – so that they can actually participate in the eighth wonder of the world.

Considering the importance of protecting your account, don’t you owe it to yourself to put at least some of your assets into a more stable (and growing) investment program? Instead of watching your net worth bounce on the string of a yo-yo, why not create some stability into your investment process?

I would love to have a conversation with you this week about how we can help you protect your assets. Don’t wait until the Dow crosses below 10,000 – or 9,000 – or worse. Take action today and let’s create value and stability for your investments.

Wishing you every success,
Matt

Matthew J. Riedemann
Founder, President, & Managing Director
Ashford Capital Partners

678-231-4579
[email protected]

The S&P Downgrades US Debt – What It Means to You …

Investors and Colleagues,

It’s been an interesting week for the US economy…

Last weekend, US Lawmakers and the president reached a compromise with the debt ceiling. An 11th hour agreement kept the government from defaulting on debt or shutting down key operations, and a corresponding spending plan lopped a couple trillion off the deficit over the next 10 years.

Equity markets initially responded positively, but an hour after the open, stocks were trading lower – setting the tone for the week. You see, once the debt issue was out of the way, traders began to look at the other economic challenges on the horizon – and the realization of these risks sent prices spiraling. On Thursday, the Dow dropped more than 500 points – the largest single day decline in years.

But that wasn’t the big event for the week. The most significant piece of news last week occurred after the market closed on Friday. As you probably heard, Standard & Poor’s downgraded the rating on US treasuries from AAA to AA+

What Does the Downgrade Mean for Us?

As consumers with families and businesses – and as real estate investors, it’s important to take a step back and determine exactly how this downgrade will affect our lives and our finances.

On one hand, the downgrade was not a total surprise. For years, we have seen deficit spending increase, we have seen the US struggle with debt, and we have seen the economic recovery run into resistance. The S&P downgrade simply formalizes what we have understood for some time. So conceptually, the downgrade really doesn’t change anything.

But on a practical level, the downgrade can have much more profound ramifications. The downgrade has a particularly sobering effect on the financial industry – because of the widespread ownership of treasury securities.

For a number of money market funds and bank reserves, there are specific rules in place as to what kind of assets can be held. These accounts may be required to hold all of their assets in AAA rated securities, or in some cases a particular percentage of their assets must be top rated holdings.

Now that certain treasuries are downgraded to AA+, these funds or bank holdings will be forced to liquidate their positions – and all of the selling will likely drive treasury prices lower.

As banks see the value of their reserves (typically held in US treasuries) decline, they will be under even more pressure to liquidate assets to reduce their risk. This means selling a major portion of their foreclosed real estate inventory – creating opportunity for buyers with available capital.

Buy When There’s Blood in the Streets

There’s an old trading axiom that says it is wise (and profitable) to buy when there’s blood in the streets. The concept is simple: When things look like they are as bad as they can get – and everyone around you is panicking – that’s precisely the right time to be buying.

Not only do you get a tremendous discount in price (panicked sellers are usually much more worried about getting RID of assets than about what price they can demand), but you also have the best days of recovery ahead of you.

So as we enter a very uncertain week for our markets, for our economy, for our nation; I want to encourage you to keep your wits about you, to look for opportunity, and to realize that significant challenges translate to significant opportunity.

Since Ashford Capital has been in constant communication with our contacts at regional and national banks, along with the FDIC, we’re going to be in a great place to negotiate this week. These institutions don’t have to take time to establish a relationship with us, because we have already inked deals with them in the past. Instead, we’re free to immediately begin talking business.

I hope that our success in this market will translate to your success as well. If you’ve been receiving my updates along the way but haven’t participated in a transaction yet, there is no better time than right now. If you’ve been involved in a deal already but have an interest in putting more capital to work, this could be a great time to add to your investment.

Could you give me a call this week? I look forward to working with you to grow your assets, improve your investment outlook, and add stability to your financial outlook.

Wishing you every success,
Matt

Bank Failures and Real Estate Supply

Investors and Colleagues,

Last Friday, another three banks kicked the bucket…

At the end of last week, the FDIC announced that Integra Bank, Virginia Business Bank of Richmond, and Bank Meridian were officially insolvent and would be merged or taken over by the government.

Bank Meridian hit closest to home as the South Carolina bank was forced into a merger with SCBT Financial – another South Carolina bank. All together, these three banks represented about $2.5 billion in assets, and the total number of failed banks this year is now at 61.

A few generations ago, even one or two bank failures like this would have the potential to damage the entire financial system. If depositors lost their assets at one bank, consumers would be likely to pull their savings out of other financial institutions – igniting a run on the bank and sending the system into a state of chaos.

Today, of course, the FDIC protects depositors by ensuring the first $250,000 for each depositor. So as long as your savings account is below a quarter million, you can rest assured that a bank failure won’t result in you losing money.

Most people understand that the FDIC insures deposit accounts, but fail to realize what happens behind the scenes when a bank goes under.

The Proud New Owner of Real Estate
When a bank is taken over by the FDIC, depositors receive the full value of the assets in their accounts, and the FDIC actually takes over the assets of the bank. Sometimes the assets are able to be merged with another more healthy bank, but often these assets continue to sit on the FDIC’s balance sheet.

For banks who have made bad real estate loans, these assets actually represent property that has been foreclosed on.
Here’s an example… A southeastern developer might take out a $3 million dollar loan from Bank Meridian in South Carolina to purchase development property in Greenville, Nashville and Atlanta. Due to poor planning and a difficult economic environment, this developer goes out of business and the bank forecloses on the property.

Now a few quarters later, the bank is declared insolvent and is taken over by the FDIC. The FDIC pays the depositors cash and assumes ownership of the bank’s assets (including the developments in Greenville, Nashville and Atlanta).

The FDIC is now the proud owner of a few hundred acres of residential property. But of course this is not the position the government entity is supposed to be in. The FDIC’s assets are supposed to be held in cash so they have capital available to insure deposit accounts.

So what does the FDIC do with these developments? Well, the short answer is that they go looking for a buyer. Sometimes the assets are able to be merged with another bank, sometimes the real estate is sold to a private buyer, and sometimes the land is put up for sale by auction.

Today, the FDIC is sitting on a substantial amount of non-cash assets such as residential real estate developments. The number of bank failures over the past two years has been very high – and the longer it takes for our broad economy to recover, the more banks continue to fail.

Bank Failures Create Opportunity
Now no one wants to see banks continue to go under. But for us as investors, these bank failures actually translate to opportunity.

With the FDIC holding significant amounts of real estate (and needing more cash to cover deposit balances) there are some tremendous bargains available to opportunistic buyers.

At Ashford Capital, we are working directly with the FDIC to identify attractive properties and buy them at a significant discount. We only purchase properties in locations that we expect to rebound quickly – and this gives us a chance to sell the locations at a substantial profit for our investors.

Could we grab a few minutes to chat this week? I would love to give you details on some of the deals we are negotiating and help you grow your capital through one or two of these opportunities.

Wishing you every success,
Matt

Income Levels and Consumer Spending

Investors and Colleagues,

Are you confident about your prospects over the next six months? Do you expect your income to remain stable or even increase? Are you willing to splurge on a totally discretionary big-ticket purchase (like a vacation or a new vehicle?)

Chances are, your answer depends on your income bracket. Of course it makes sense that individuals with good jobs and a healthy income level are more willing to spend money. But one of the more interesting issues in today’s economy is the broad gap in confidence between different income levels.

Last week, the Wall Street Journal had an interesting article regarding the rebound in optimism by those earning more than $50,000 per year:

When massive job losses hit in early 2009, all income groups turned equally pessimistic about the economy, as shown by confidence indexes constructed from the Conference Board’s indexes divided by income groups, along with Census Bureau household income data.

Confidence among households earning less than $50,000 a year improved in 2009, but has stayed weak over the past two years, while consumers earning more than $50,000 have registered a large increase in confidence.

This confidence is showing up in numerous areas of the economy and is especially evident when looking at different retailers.

Retail companies catering to the “average consumer” – companies like Sears Holdings (SHLD), Target Corp. (TGT) and Kroger Co. (KR), have been struggling to recover. As consumers below the $50k income line pinch pennies, profit margins are difficult to maintain.

On the other hand, companies like Harley Davidson (HOG) and Polaris Industries (PII) – maker of ATV’s and snowmobiles – have been killing it (in a good way …) Demand has been robust and profits keep growing quarter after quarter.

The Real Estate Market Mirrors Retail
When looking at investments in residential real estate, the income gap applies just the same. Consumers with incomes over $50,000 are more likely to invest in a house.

This is not true just because of the price issues (there are plenty of cheap houses that are within reach of a 50k income). The real issue is one of confidence – whether buyers actually believe they will still have a job six or 12 months down the road.

As a general rule, buyers with incomes above $50k are generally in more stable positions, more willing to make a long-term financial commitment, and they are driving demand for higher-quality housing.

This means that when we are looking through developments for Ashford Capital to purchase, we are primarily focusing on lots that are high-end, will feature more expensive homes, and will be the first area to begin selling as builders begin rolling out new developments.

Speaking of builders, the housing start data out last week was very encouraging. For the month of June, US home starts were up 14.6% over the May period. As high-income buyers re-emerge, the demand for quality housing is increasing. This means more new homes are being built, and home builders are willing to engage in new projects to meet the demand.

At Ashford Capital, we are one step ahead of this surge. Over the past several years, we’ve been buying distressed properties from the banks and the FDIC at pennies on the dollar. Our investors now hold attractive properties that represent great opportunities for builders.

As the builders look for new real estate for their projects, we will be able to offer them attractive deals while still locking in a tremendous return for our investors. It’s a truly exciting time to be invested in Atlanta residential real estate.

Are you one of our current investors, looking for another property to allocate capital to? Are you a new investor, ready to make that first purchase? Or maybe you’re just interested in learning a bit more about how our real estate opportunities are structured.

Regardless of your situation, I would appreciate the opportunity to chat with you. Ashford Capital may or may not have the right investment for your situation. But it doesn’t hurt to explore the opportunities and decide for yourself. Please give me a call this week so that we can discuss your options.

Wishing you every success,
Matt

What Would Another Banking Crisis Look Like?

Investors and Colleagues,

As I write you this letter, Wall Street is under significant pressure. On Monday, US markets were hit by another round of selling – led lower to a large degree by financial stocks.

The newspapers and TV reporters had plenty of negative material to point to. The major US banks have been reporting relatively strong earnings, but when you look at the details, the picture is much less clear.

Banks are shifting capital around and “creating” income by cutting back on the amount of capital they have set aside as a risk buffer. This is financial engineering at its best… Positive earnings simply by moving numbers around on the balance sheet.

The charade isn’t fooling investors and traders, whose sell orders are now pushing the financial sector to its lowest level this year. And even as executives are wrapping up their conference calls, new risks are rising from overseas.

You see, the debt crisis in Europe affects our own financial system. European banks own large blocks of government debt that is becoming increasingly risky. US banks may not be very exposed to European government debt, but they certainly have plenty of interaction with the European banks.

If the trouble in Greece spreads to Portugal, Italy, Ireland or Spain, US banks could wish that they still had that risk capital set aside – and not moved into the “earnings” category.

Risk Overseas = Deals at Home
So how does a European debt crisis affect an Atlanta-based real estate company? The dots are more closely connected than you might think.

As the banking industry is forced to deal with their growing exposure to the European crisis, they need to unload risky assets to avoid a crisis like we saw in the fall of 2008. This means that we are still sitting down to the negotiating table, and able to command the very best prices for any properties that we purchase.

Negotiating from a place of strength is a very powerful advantage. When we begin discussions with a bank or even the FDIC, we always start by making one thing very clear:

We don’t need to complete this transaction.

We may want to buy the attractive development. We may even have a builder lined up to begin putting houses on the lots. We may have investors that are anxious to participate in the deal. But we always approach the negotiations from a detached perspective.

If the terms aren’t attractive, if the price isn’t low enough, if the stipulations are too constraining, we simply walk away – it’s that simple.

But the banks don’t have that luxury. For them, the clock is ticking and the risk is mounting. Every day that they are not able to move these underwater assets off their books, they lose capital. More importantly, they lose credibility. The banks are negotiating from a place of weakness which is why we have been able to ink so many attractive contracts over the last several years.

New Developments In Progress
While we’re constantly researching any number of different properties for a potential investment, there is a specific real estate development that I am particularly excited about.

I can’t give you the specific details because we haven’t yet signed the contract. I don’t want to risk this letter reaching a competitor and jeopardizing our negotiation. But I would love to speak with you personally about this opportunity.

The neighborhood in question is in a suburb outside of Atlanta and is one of the more desirable communities in the region. The amenities are beautiful. The surrounding neighborhood is pristine. The community is well established. A builder simply became overextended and was foreclosed on by the bank.

Now we have the opportunity to pick up a number of lots at a tremendous value – and should be able to quickly turn around and sell them to a builder for a tidy profit.

I’d love to discuss this opportunity with you – and determine how we can help you grow your investment capital. Would you call me this week to set up a time? I look forward to our conversation.

Wishing you every success,
Matt

Another Catalyst for the Banks

Investors and Colleagues,

If the banks and the FDIC weren’t scared before last week, they certainly are now.

On Friday, the non-farm payroll report for June was released, indicating that the economy added a mere 18,000 jobs during the last month. This was in comparison to expectations for an addition of 80,000 jobs.

As if this news wasn’t bad enough, the figures for last month were revised lower… a LOT lower. For the month of May, the economy added only 25,000 jobs, less than half of the previously reported gain of 54,000 jobs.

As it now stands, the unemployment rate is now 9.2% and rising. This is bad news for the majority of US banks with real estate exposure. If the employment picture is not recovering as quickly as expected, then the banks’ portfolios of foreclosed real estate likely holds more risk than they expected.

This means that major US banks are once again sitting down at the negotiating table, and willing to take almost ANY offer – just to reduce the amount of risk on their balance sheets.

This is a great development for us at Ashford Capital. Not only are we able to buy these properties at an extreme discount from the financial institutions, we’re also seeing an improving environment for builders who will be BUYING our properties in the next several months.

The Silver Lining for Housing
In addition to the non-farm payroll report, there was another news report that caught my attention last week…

The Wall Street Journal published an article noting that apartment rents were rising, while vacancy rates were ticking lower. The piece made a bullish case for owning the stocks of apartment companies – but it also has an interesting application for the residential housing market.

If rents are going up, consumers actually have a stronger incentive to own their own homes. Interest rates are still at historically low levels, and credit-worthy buyers can get a great deal when purchasing a new home.

The other benefit of higher rents is that existing homeowners who bought investment properties are more likely to be able to rent out these homes and be cash-flow positive. This also applies to new investors purchasing distressed houses and in-turn renting these houses out.

A Thawing Real Estate Market
As the economics for residential real estate improve, our investment opportunities become even more attractive. Expectations for the amount of time it will take for our developments to sell are declining, while the actual profit margins are remaining stable or even increasing in some cases.

Ashford Capital continues to close transactions at incredible valuations, which is a benefit to our investors. We continue to be in the sweet spot of this economic cycle (at a point where banks are selling cheap, but select areas of the market are still recovering nicely).

Considering the volatility on Wall Street and the uncertainty in the financial markets, it’s important to have a diversified and balanced approach to your investments.

At Ashford Capital, we have the flexibility to tailor a real estate investment directly to your needs. We offer plans that are compatible with your IRA, and we will work directly with you to make sure understand exactly what you are investing in.

Don’t you owe it to yourself to protect your capital and grow your investments (regardless of the market environment?)

Please give me a call today so that we can discuss the best plan for you and create a wealth-building strategy that fits your investment objectives. I look forward to the conversation.

Wishing you every success,
Matt

Home Sales and Bank Regulations

Investors and Colleagues,

The economic news just keeps getting better for opportunistic real estate buyers.

This week, the National Association of Realtors released their report on pending home sales for the month of May. The results showed that last month had the strongest improvement since last November!
The pending home sales index was 13.4% above its level from last year. And on top of the stellar May data, the Association also revised the April reading higher.

The NAR’s chief economist was quoted in the Wall Street Journal as saying:
“This solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace.”

The key point is that “many localities” (namely, attractive neighborhoods in communities with strong economic growth) are seeing price improvements.

The data is encouraging because obviously the overall housing situation is getting better. But as an investor, you still have to be very careful where you make your investments. Attractive housing areas are getting more attention and prices are moving up. But if you invest in the wrong neighborhood, your capital could still be tied up for years, waiting for the local market to improve.

At Ashford, we’re pretty pleased with the quality of real estate that we have been able to pick up – and we’re already beginning to see a dramatic turnaround in demand. For many of our properties, we now have to make the decision of whether to sell for good gains today – or wait for tremendous returns a few months down the road.

… not such a bad spot for our investors to be in…

Banking Regulations Still Lead to Opportunities
At the same time that housing statistics have been improving, large blue-chip banks have had to deal with some bad news.

Last week, the Bank for International Settlements (BIS) announced an agreement on capital requirements for large “Globally Systemically Important Banks.” These are the banks that are “too big to fail” and the BIS is an international regulatory agency that helps set the rules for the largest global banks.

The new agreement required huge banks to increase their capital ratios over the next few years. Considering the leverage that these banks currently have, the new regulations are a pretty big deal.

What this means for real estate investors, is that the large banks are going to have even more incentive to get rid of foreclosed developments sitting on their balance sheets. The new regulations require much more “Tier I” capital – and residential property doesn’t qualify. So once again, buyers like Ashford Capital have the upper hand when negotiating to purchase residential developments.

Isn’t it time you took a look at the opportunities we are pursuing at Ashford Capital? Regardless of whether you’re an institutional investor (with several million to allocate) or an individual with retirement assets to put to work, we can find a good investment for you.

The current economic season offers more opportunity than I have seen in years, and I am truly excited about the returns we are generating for our investors.

Ashford Capital typically structures each deal so that our investors are paid a preferred rate of return along with the ability to participate in the profit once we liquidate a particular holding. This setup aligns our interest with our investors, so that we make money when our clients are successful.

I would welcome the opportunity to show you exactly how we can help you generate excellent investment returns. Please call me so that we can set up a time to chat.

Wishing you every success,
Matt

Spectacular Bargains & Desperate Builders

Investors and Colleagues,

June has been an exciting month at Ashford Capital. The Atlanta real estate market is undergoing a dramatic shift and we are active on the front lines.

Not only are we finding some incredibly attractive opportunities for us to put new capital to work, we are also in discussions with a number of residential builders who are desperate to build their inventory of properties.

Considering the wide economic swings in the broad economy, I have become accustomed to seeing one side of our business – or the other – experiencing tremendous activity. When times are difficult and unemployment is high, we are able to buy properties at exceptional values. When the expectations turn toward recovery, we are able to sell these properties and book significant profits.

But today, we’re actually experiencing the best of both worlds. I’ve been fielding phone calls from bankers and the FDIC – desperate to get rid of real estate on their balance sheets… And then sitting down at the negotiating table with residential builders who need new attractive properties to build.

Let me give you a couple of details…

Pennies On the Dollar??
To show you the kind of deals are possible in this environment, consider a deal we have in the hopper right now.

A few weeks ago, we became aware of a small distressed development on the market. Typically, we would not be interested in this type of investment. The size of the development was smaller than the properties we usually purchase. Considering the due diligence process, the closing costs, and administrative burden, we have found that our best opportunities are with larger properties.

But the seller appeared desperate and we knew we could get a good deal. I must admit, however, that even I am surprised at the price tag we walked away with.

To give you a bit of background, the development covers 20 lots, each of which is expected to hold a $200,000 single family home. What would you be willing to pay for a lot? $40k? Maybe 20k?
I’m proud to say that Ashford Capital is under contract for $46,000. Oh, and I should mention that we are paying $46,000 for the entire development! So our effective price for each lot is only $2,300! What a steal…

Getting in at such a low price gives us a lot of options. We could hold this investment for a couple of years and wait for a developer to pay $40,000 per lot – giving us more than a 800% return… Or we could offer the property for $20,000 per lot and move our inventory more quickly. The point is, when you take advantage of deals and pay less than ten cents on the dollar, your options are wide open in terms of selling that property for an incredible profit.

Flexibility For Investors
In addition to the tremendous profit opportunity, tracking down deals like this smaller development give us more options when it comes to the amount of capital we can work with.

Maybe you have been hesitant to invest with Ashford Capital because you expected to have to put up a lot of capital at once. It’s true that most of our investors put a material amount of capital to work when they participate in an opportunity.

But at this point we are able to accept smaller commitments from individual investors. This is good news for you because you can start out small and then reinvest your profits along the way as the size of your capital base grows.

Believe me, Ashford Capital will have a number of deals for us to pursue over the next few years, but you are unlikely to see the kinds of opportunities we have in play this summer. It’s a unique market and we are focused on finding the very best deals possible for our investors.

Would you be interested in looking at some of our offerings? I would love to show you what we are working on.

Please give me a call this week and we can schedule a time to meet. I think you will be excited to see how Ashford Capital can be your partner in growing your wealth and giving your family (or your clients) financial stability.

Wishing you every success,
Matt

Mortgage Improvement Means Real Estate Opportunity

Investors and Colleagues,

This week we received an encouraging piece of economic information. According to the US Mortgage Bankers Association, the delinquency rate for US mortgages overdue fell sharply in the first quarter.
Essentially, the report stated that the number of mortgages seriously overdue has dropped to a rate of 8.1%. This is the fifth straight month the delinquency rate has dropped.

Two Ways to Interpret the Data
Mark Twain often claimed that there are three kinds of lies: “lies, damned lies, and statistics.”

He was basically pointing out that statistics can be presented in a multitude of different ways, and it is important to understand the context before jumping to any conclusions.

When looking at the mortgage delinquency data, I have one primary question: Did the delinquency rate drop because consumers are better able to pay their mortgages? Or did it drop because banks are moving mortgage contracts off the “delinquent” list and into the “foreclosure” category.

If the delinquency rate is higher because homeowners are catching up on payments, then this is a great sign for our overall economy. A stronger job market, fewer distressed mortgages, and more discretionary spending will lead to higher real estate prices. It would also translate into gains for our investors as we sell properties to developers and book profits along the way.

On the other hand, if the delinquency rate is higher because banks are writing off the loans, then it means the real estate market is not quite ready to recover. First the banks will need to unload the foreclosed properties and only then can they begin making new loans to consumers – feeding a new economic recovery.

If the second scenario is playing out, Ashford Capital will have plenty of opportunities to buy distressed developments, giving our investors attractive opportunities to put their capital to work.

So which is it?? Are consumers catching up on their mortgages, or are banks booking delinquencies into the foreclosure category? The answer might surprise you…

It’s All About Location
Once again, when it comes to real estate investing, location is the most important variable. In the case of mortgage delinquencies and foreclosures, the rates are different depending on what part of the country is measured.

Looking at the Atlanta market, even the metro area is fragmented. You have pockets where jobs are plentiful and the real estate market is vibrant, and there are pockets where builders were too aggressive and the supply of vacant homes is excessive.

On a national level, foreclosure starts have hit the lowest level since 2008. This suggests that the overall environment is improving, and banks are becoming healthier businesses.

For us at Ashford Capital, the improvement comes along with a sense of urgency. Of course we’re happy to experience improvement on the attractive properties we have already purchased. Our investors are pleased with the performance and we’re finding more opportunities to discuss exit strategies (aka realized gains) with home builders.

But since our best purchase opportunities come by negotiating with distressed banks and the FDIC, an improvement in the broad environment means that these exceptional opportunities may not be around much longer.

Of course we will continue to negotiate with sellers and there are plenty of attractive properties in the Atlanta area. But the current period of fire-sale prices and tremendous opportunity may be drawing to an end.

Please don’t miss out on this incredible investment period. You owe it to yourself, your family, or possibly your clients to make sure your capital is working hard for you.

Will you please call my office and set up an appointment to meet with me? As you can tell, I’m excited about the opportunities in Atlanta’s real estate market and I want to make sure you are able to participate before the opportunities pass. I look forward to our conversation.

Wishing you every success,
Matt

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