Archive for the ‘Real Estate and Unemployment’ Category

The Inventory Silver Lining

Investors and Colleagues,

There’s a question I get from colleagues and investors almost every day…

Matt, How is Ashford Capital able to invest so successfully even in this difficult economic environment?

It’s a fair question… The media headlines have been overly dramatic, and often don’t accurately portray what is going on in the economy (not to mention the local real estate market). To be quite honest, this is one of the most opportunistic periods I have seen in a number of years – and today I want to explain just how we are creating wealth for our investors…

Let’s take a quick example of the most recent housing statistics. This week the media jumped on a report that showed a lower “median” price for homes, and lower sales activity for the past month. Most investors failed to notice the good news behind the headlines.

Median Price – A Flawed Metric

To begin with, let’s look at the “price” component of the most recent report. Since the “median” price was lower, investors believe that home prices continue to drop.

There are certainly some areas that are seeing price drops – but at the same time there are key areas of our country (and key areas in Atlanta) where home values are actually rising!

When the statistics report a “median” price, it simply notes the middle price of houses that sold in the past month. If the middle price is lower, that could mean that the market for lower-priced houses is more robust – maybe because foreclosed properties are moving quickly.

It could mean that owners of higher-priced homes are making fewer transactions because they have the financial ability to wait until prices rise.

A fall in the “median price” of homes sold does NOT directly equate to the value of homes that were not engaged in a transaction over the past month. Because of the way that this metric is calculated, an increase in transactions from low-priced homes can actually skew the numbers and lead to the wrong interpretation.

Inventory – You Can’t Manipulate This Number

At Ashford Capital, we look much more closely at inventory statistics which tell us exactly how much real estate is on the market right now – giving us a better understanding of the supply and demand picture.

The good news from the most recent batch of statistics is that the number of new homes for sale has hit a record low. There simply aren’t enough units on the market to meet the growing demand.

Sure, there are a number of foreclosed homes being sold by banks, but have you seen the shape these homes are in? There is a certain subset of the market – home buyers who have good employment and a strong savings account – who aren’t interested in buying a “fixer-upper.”

And today, the number of new homes that they have to choose from is at its lowest level since Case-Shiller began keeping records. This is a tremendous opportunity for builders who cater to these new home buyers who want a unit that is “move-in” ready.

This is How We Do It…

Ok, apologies for the bad song reference…

But seriously, this is how we create value for our investors. We study the supply and demand dynamics in our specific market – the metro Atlanta area.

• We analyze the demand for new homes in specific neighborhoods.

• We study the assets held by troubled banks and the FDIC.

• We contact builders to determine who is ready to undertake new projects.

• We work with our investors to raise capital for attractive properties.

• And we profit when our developments are sold to builders who are fulfilling the demand for new homes.

It’s that simple! Despite this turbulent economic period, Ashford Capital is offering investors value, growth, and investment stability. We buy residential developments at dirt-cheap prices and then sell to builders as demand picks up.

Every time we complete a transaction, our investors win. We’re involved in a number of attractive properties right now that I would love to discuss with you.

If you’re tired of watching your net worth swing up and down on the whims of the market makers on Wall Street, then please give me a call. We can work on an investment program that meets your personal needs and set you on the path towards financial stability capital growth.

Wishing you every success,

Matt

Ivey Estates: A Defining Deal for Ashford Capital

Investors and Colleagues,

Every now and then, an opportunity emerges with the potential to define a company – or change the course of an investor’s account…

Today, I want to introduce you to one particular deal that perfectly represents the investment approach that Ashford Capital stands for.

This model investment will give you a better picture for exactly what we look for when buying property, and for a short time, we are still accepting investors who want to participate in the Ivey Estates property in beautiful Cobb County, Georgia.

When searching for real estate opportunities in the Atlanta market, there are two variables that are crucial in deciding whether to invest or not:

1: Location

Of course we all know that location is the most important variable for real estate investment, but at Ashford Capital, we have perfected our location analysis down to a science.

When we look at the location of a property we have a proprietary method for analyzing the supply and demand metrics for real estate in the area, the employment opportunities for potential residents, reasonable price expectations for selling the property to a developer, and a timeline for when the investment opportunity will be completed and investors paid.

It’s a rigorous process, but one that has helped us to be involved with only the most promising locations in the growing Atlanta real estate market.

In the Atlanta real estate market, builders typically invest in projects when there is less than six months worth of inventory currently on the market. This ensures that when they are ready to sell the homes that are being built, the market demand for these new locations will be strong.

For the Ivey Estates development, our research indicates that there is a 5-month supply in the $225k to $325k price range – perfect for attracting builders to the market.

While we have confidence in our proprietary location analysis, it is helpful to note that a number of national builders including Beazer Homes, Ashton Woods, and John Wieland Homes are actively building out properties in the same area as our Ivey Estates project. In fact, John Wieland is developing three different locations within a 2 mile radius of our property!

2: Price

Our goal is to generate the very best returns for our investors – and since our interests are aligned with our investors, Ashford Capital makes the best profit when our investors are paid well.

For this reason, we’re only interested in purchasing properties at an extreme discount to “fair value.” When we are able to pick up attractive properties at a distressed price, our transactions are completed more quickly, at a higher rate of return for us and for our investors.

We have negotiated a price of $495,000 for the Ivey Estates property – and this price represents the cost for 15 lots. These are premium developed lots which already have access to utilities and are builder-ready.

Our “all-in” cost for this location is $33k per lot – representing a 65% discount to the price a developer paid for the same location just a short time ago. Because of our deep relationships with regional banks and the FDIC, we are typically able to buy properties at a tremendous discount.

With such a steeply discounted purchase, we are able to sell these lots to a builder – at an attractive price – and still make a very healthy return. For the Ivey Estate location, our conservative estimate is a selling price of $75,000 per lot to a builder in 12 – 14 months. Of course our target price is higher, but we want to set your expectations conservatively and if you are surprised, we want it to be a good surprise.

Reserving Slots for First-Time Investors

Because of the special nature of this model investment, I wanted to make sure that the Ivey Estates project is accessible to all of our investors. I’m particularly interested in opening this deal to first-time participants in an Ashford Capital offering.

At Ashford Capital, we understand that traditional investors may not be experienced when it comes to buying residential real estate property. Sometimes participating in a new investment concept is challenging and investors want to start small before allocating a larger portion of their capital down the road.

For this reason, we’ve reserved a few slots in this offering for first-time investors, and for investors with a smaller amount of capital. My hope is that by offering smaller investment opportunities in this model transaction, you will become comfortable with our investment process, and be more willing to discuss additional opportunities once you have recognized an attractive return on this property.

I should mention that with the Ivey Estates offering, you can even use capital from your IRA to invest – which carries its own tax benefits for you.

If you’re interested in participating in this model deal, I would ask you to do two things:

First, go to http://www.youtube.com/watch?v=sTkVCJ0QOns and watch our short video on this property. You can see an aerial picture of the location along with some of the proprietary location metrics that I have mentioned.

Second, give me a call so that we can set up a time to discuss this opportunity. We can sit down and discuss the specifics, you can get a copy of the offering document which details our preferred rate of return and profit sharing arrangement, and best of all it will give us a chance to catch up and discuss your financial future.

Wishing you every success,

Matt

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

678-231-4579
[email protected]

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]

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

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

How the Employment Environment Affects Real Estate

Investors and Colleagues,

Late last week the Bureau of Labor Statistics (BLS) released the monthly payroll report for April. For the month, the US economy added roughly 244,000 new jobs which materially beat expectations.

On top of the April data, the BLS also revised previous month’s statistics higher – indicating a total increase of about 290,000.

While the raw numbers were good, the details were even better. The number of government jobs have actually been declining over the past month – so that means private payrolls have been increasing by an even stronger rate to offset government job losses.

Bottom line? The employment picture is steadily improving – and consumers are becoming more optimistic.

Consumers, Employment, and Real Estate …
The environment is improving each month. Nearly every economist now admits that the US economy is growing. While the terms describing the recovery often include “modest” or “moderate,” the pace of recovery is actually quite healthy.

I would much rather see a steady, sustainable recovery that can last for years, than the type of economic growth that creates risk, asset bubbles and eventually pain. Today’s economic expansion is the kind of environment that can encourage individuals to once again put their hard-earned capital back into play.

With the employment picture looking healthy, we should see a transformation in the residential real estate market. These two economic areas (employment and housing) go hand in hand.

Workers who land a new job are much more likely to purchase a home. And as demand for housing picks up, the residential real estate market will see inventories decline and asset values increase.

We’ve already talked about how important it is to be invested in the right areas of real estate. With this “moderate” recovery, not every real estate investment will benefit. But the prime locations with attractive housing, and a strong surrounding employment picture will yield tremendous investment returns.

Consumers Recover While Banks Tread Water
Here’s where it gets really exciting. Even though the employment picture is turning around and the broad economy is growing steadily, the financial industry is still under a lot of pressure.

Mega-banks who issued loans to everyone with a pulse (and sometimes not even requiring that) are still sitting on huge losses. The FDIC has stepped in and bailed out some of these institutions and the government has funneled taxpayer money to propping up the financial sector.

But significant risk is still being carried by these banks – and they have to sell foreclosed properties just to keep their capital ratios intact. Even the government sponsored Fannie Mae is still in trouble. On Friday, the company asked Washington for an additional $8.5 billion dollars in federal aid to help it deal with first quarter loan losses.

Do you see the opportunity here?

  • Banks and government financial institutions are desperate to get rid of assets and stem their losses.
  • Simultaneously, consumers are getting jobs and hundreds of thousands of workers are now becoming eligible to buy houses.

This situation has profit written all over it. At Ashford Capital, we are working with the banks and the FDIC to buy the most attractive properties at fire-sale prices. We then work with our network of builder and development contacts to sell these properties for a substantial gain.

Typically, our holding period ranges from several months to a couple of years. Our investment programs are designed so that our clients receive a fixed preferred rate of return, and then also participate in the profits of the entire transaction.

We work with individual investors, putting traditional or even IRA capital to work. We work with institutional investors helping to design opportunities for their clients. And we want to work with YOU to help you succeed in the real estate investment area.

Would you give me a call this week? I would love to give you some specific information about the properties we are currently holding or in negotiations to purchase. Whether we agree on an investment program that fits your needs, or you simply receive valuable information on the Atlanta real estate market, it would be my pleasure to chat with you.

Wishing you every success,
Matt

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