Have you read about how the money gurus in Washington recently declared that we are in a national recession. In fact, we’ve been in a recession for more than a year.
It begs to be asked why it took them so long to figure this one out.I’m left wondering what part of the country these peopld come from and how they are so sheltered.
Regardless of how long it takes the official economic bean counters to verify the obvious truth of the situation, it has not taken the banks (both big and small) nearly as long recognize the facts for what they are and react accordingly.
While the stories of bank failures, FDIC takeovers, and the forced shotgun wedding of one bank to another clamor for domination of the newspaper and television headlines, a different and more subtle change in the banking community has taken place right under our noses.
Banks have been quickly and quietly lowering the yield on the old-fashioned Certificate of Deposit. Looking back on all that has happened in the last year and I guess you can’t expect much different.
A quick glance at Bankrate.com shows the local payouts for the 5 major banks in my state averaging 2.1% for a 1-year CD. Chase is offering only 1.00%. In fact they are offering 1% pretty much across the board, regardless of how much you commit to the CD or for how long.
We see this coming from one of the largest banks in the nation which supposedly has enough financial strength to be tapped on the shoulder to facilitate the Bear Stearns bailout. Yet the buck doesn’t stop there!Many in the ranks of the media feel that Chase is in the right on this one.
The word on the street is that even the higher rates advertised are inflated. They are simply trying to grab up deposits in an attempt to prop up their fourth-quarter figures before the year ends. Plan to see their rates to fall more in line with Chase after the kickoff of the New Year.
With the stock exchange and commodities markets in such a state of turmoil, an ungodly amount of money has been pulled out and directed towards CDs in an attempt to seek safety for whatever principal investors have left.The band news is that CD rates are probably going to dip lower than ever which means you have to wonder if these “safe investments” are really safe in any way.
If by “safe investment” you mean that CDs are guaranteed to have little to no increase in value over time, then you might be right. I suppose that just keeping your investment dollars from declining in value may be more favorable than throwing it in the stock market or mutual fund accounts, but if you’ve lost 10 years of growth you sure won’t be replacing it anytime soon with 1% rates.
Many investors when faced with the choice between the risks of the stock market and the sad returns of CDs are thinking outside of the box when it comes to searching for safe investments.A not-so-new option that is regaining popularity among savy investors is Private Mortgage Loans.
Private Mortgage Lending is a good example of how investors are lending to people they have a relationship wtih locally. Put simply, it’s you investing in someone you know and have a relationship with in the form of a mortgage secured against a piece of real property.
The rates paid to private mortgage investors tends to be high, averaging between 10-12%, yet are considered by most as safe investments because they involve relatively low amounts of risk.This safetly net is built-in becuase of the large amount of equity each asset has.
The fact that you get to invest locally in most cases is another benefit of Private Mortgage Investing.The benefit this brings you si that you can zip by a house anytime and inspect it to see how thing are going. You can “look under the hood” to see the in-flow and out-flow of cash that the property is subject to and get a good feel for whether your investment is working like a well oiled machine. This type of hands-on accountability is not possible with stock market investing where you are usually limited to reviewing charts, graphs, and profit and loss statements.
Even if you are investing out of state, you can request multiple photos and even YouTube style videos of the property before you commit to investing in the project.
Another benefit your receive as a Private Investor is the ability to see the on-the-ground benefit your money produces as it works to revitalize the local economy and enrich the community.
Many areas are filling up with vacant home because the big banks are refusing to lend to lend except on owner occupied properties. Many investors would gladly pay a high interest rate to buy these homes and rent them out for long-term growth (in essence taking all the property management responsibilities on their own shoulders) which means that both landlords and private mortgage investors who don’t have the time for tenant and property management stand to benefit from the relationship.
With banks imploding due to their own greed and mismanagement of their depositors’ money followed by the insulting returns they are willing to commit in the form of CDs now that the damage is done, it would appear that we are returning to a time where people feel more confident in loaning to people they know, have had lunch with, and can have a face to face chat about how well their investment dollars are doing. As a safe investment alternative, Private mortgage investing falls right in line with this trend emerging with the new economy we find ourselves in.
Do some more research on private mortgage investing and I’m sure you’ll agree that this strategy offers some of the greatest returns available as well as unparalleled safety at a time when many investors need it most.