Norada Real Estate Investments

Has Wall Street Taken Over Washington?

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Are we all getting sucked in by the President Obama's charm as he tells us about the hard work and sacrifices that face Americans in the days ahead?

Should we also be disappointed in the President's dealings with the continuing mess on Wall Street?  I think it's time for the administration to take a hard line with companies like AIG, Goldman Sachs, Citigroup and others that have demonstrated gross irresponsibility.

We should probably include the automakers too!

Our country is in trouble when bankers can dictate policy. Isn't that what got us in this mess in the first place?  If so, then President Obama should be changing the situation for the better of the country and taxpayer, and without regard to the self-interests of the bankers.

There is a culture between Washington and Wall Street.  The government continues to spend massive sums of money under the guise of aid for Wall Street, only leading to tax increases for America.  Where's the measurable benefit?

Maybe it's time for a protest against Wall Street's lobbying and influence on the government.  Wall Street must stop robbing America, and Washington must stop helping Wall Street cover it up!  Bailouts and handouts for the sake of maintaining the status quo is only robbing the American taxpayer.

For example, taking over the troubled banks, terminating the executives, removing the board of directors, purging out the toxic assets and then selling the “clean” bank back to private investors.  Is this the only solution that Treasury Secretary Timothy Geithner can come up with?  I think the American people should be outraged!

I didn't take the Obama administration's campaign motto of “Change” to mean the continued placement of Wall Street interests over those of American's.  There is an unwillingness by those in power to do what's right.

Harvey Rosenfield, President of the Consumer Education Foundation, believes that since President Obama’s key appointments to the Treasury, the SEC and other agencies, like their predecessors, are veterans of the Money Industry that the Money Industry remains in charge of the federal agencies and keeps our elected officials in its deep pockets and, as such, nothing will change.

Rosenfield says, “If America is to recover from this economic debacle that we find ourselves in, its people must return to the principles that made it great — hard work, creativity, and innovation — and both government and business must serve that end. Washington must serve America, not Wall Street. Things will not change so long as Americans acquiesce to business as usual in Washington. It’s time for Americans to make their voices heard.”

There is a great article in this month's Atlantic that covers how Wall Street has in essence taken over Washington. It's highly recommended reading: Click here.

What are your thoughts?

Who Profits from Toxic Assets?

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Yesterday, I suggested that the idea of the "Stress Test" for banks was really just a marketing ploy by the Treasury to boost confidence that the United States financial system is stable. After all the back-bending, and billions in bailout funds to avoid bank failures, do we really think the Treasury is suddenly going to declare any banks insolvent?

Highly unlikely, in my opinion.

So if the Treasury is unwilling to nail any banks, what does that mean for the Public-Private Investment Program that's supposed to buy banks' toxic assets? What will be the motivation for selling if there are no consequences for keeping these assets and waiting for value to return?

Well, it would appear that the Treasury is playing the "opportunity cost" card. Offer the banks a premium for these assets now that might otherwise take years to achieve.

The banks win, as they free up their balance sheets and can theoretically increase lending. The "Toxic Investors" win, as they buy potentially valuable assets with very little of their own money while the Fed and Treasury subsidize the rest. And the taxpayer wins as Fed and Treasury loans are paid back.

I don't know about you, but that all sounds a little too perfect. Something's bound to go wrong with this neat little win-win-win scenario. And I know who isn't going to get shafted – the investors who partner with the Treasury to buy these assets.

That's because they simply won't be taking on much risk at all, and they potentially make a lot of money.

How to Maximize Your Tax Deductions on Investment Property

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Every real estate investor knows that investment property provides more tax benefits than almost any other investment.  Therefore, maximizing those tax deductions only makes good business sense.

Let's take a quick look at the most important tax deductions available as an owner of investment property:

1.  Mortgage Interest
Your largest deductible expense is likely to be interest.  There are two types of interest that you can deduct.  The first is mortgage interest from any mortgage loan on the property.  This includes Home Equity Lines of Credit (HELOC) and other loans secured by your property.  The interest deduction applies to any of these loans provided that they were used to acquire and/or improve your investment property.

Additionally, credit card interest can also be deducted for goods and services used in the operation of your rental property.  Closing costs and points paid by you to close on your mortgage loan is also deductible.

2.  Depreciation
Depreciation is simply the loss in value of your income property over time due to physical deterioration, age, and normal wear and tear.  Fortunately, the IRS allows you to depreciate income properties over their “useful” life.  This is defined as 27.5 years for any residential property (1 to 4 unit properties) and 39 years for commercial properties.  Depreciation can provide you a significant and welcomed deduction every tax year!

3.  Insurance
Premiums paid for insurance policies are tax deductible expenses too.  This includes, but is not limited to, fire, theft, flood, and landlord liability insurance.  Also, health and workers' compensation insurance for your employees (if any) can also be deducted. [Read more…]

Protecting Yourself From Mortgage Fraud

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With the large number of foreclosures to hit this country over the last few years, con artists have come out of the woodwork  to prey on those in trouble — including real estate investors.

The number of schemes, and those being caught and charged, can be found in the news and on many internet website like Mortgage Fraud Blog (www.mortgagefraudblog.com).

This short 2-minute video by Freddie Mac teaches you how to spot a foreclosure scam and find out how to avoid becoming victim to home foreclosure fraud.

Do you know someone who's been victimized?  Do you think this problem is getting worse?

Bailed-out Banks May Buy Toxic Assets

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There's a lot going on today. The unemployment rate "surprisingly" hit 8.5%. President Obama knocked 'em dead at the G-20 meetings.

But the headline that caught my eye was "Bailed-out banks may buy toxic assets."

Believe it or not, Citigroup, Goldman Sachs, Morgan Stanley and JP Morgan, are considering using the Public-Private Investment Program to buy toxic assets from other banks, according to the Financial Times.

The Public-Private Investment Program is designed to encourage private investors to put money to work buying toxic assets from distressed banks. The Treasury and the Fed have offered loans to make the purchases less risky for the buyer. In essence, all a buyer has to do is put up a token amount of cash and the government will fund the rest.

Yes, the plan reduces risk to the point that it's kind of like a free money giveaway – the taxpayer takes the risk, the subsidized investor makes the profit, assuming there is one.

Personally, I'm not happy about the plan. But something has to be done to get the market for these toxic assets moving. Right now, there's a huge spread between the banks asking price and investors' bid. And nobody's budging. Throw in some free money via the Public-Private Investment Program, and the bid can rise to be more in line with the ask price. It's a sweetheart deal.

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