1.       Sizing up the storm – situational awareness

a.       US Dollar – The U.S. dollar dropped to its lowest this year last Friday and was on track for its biggest weekly fall in two months.

b.      Jobs Loss – More cutbacks, lower paying jobs, fewer multi-income families.

c.       U.S. Housing Starts Down 77.6 Percent – Fewer new houses being built because there is a glut of inventory on the market that is being dumped or getting ready to be dumped.

d.      Looming commercial foreclosure wave – Loans nearing term, with values 45-55% they were previously appraised at with Federal regulators looking over local bank’s shoulders.

e.      Hyperinflation looming – with the sea of liquidity keeping things floating, experts are warning of double digit inflation.

2.       Where do you throw your anchor?

Real estate tactics are like unto water; Water shapes its course according to the nature of the ground over which it flows; the realtor works out his victory in relation to the market he is facing. Therefore, just as water retains no constant shape, so in real estate there are no constant conditions. He who can modify his tactics in relation to his opponent and thereby succeed in winning, may be called a heaven-born realtor.

- Sun Tzu

a.       Flight to quality / flight to safety

b.      On something you can control

c.       Secure Government funding

d.      Cashflow is king, but inflation adjustable cashflow is the king’s mistress.

3.       Consider investing in multi-family housing

a.       The market cave-in has created opportunities for cash buyers to acquire the same real assets as they could have with leverage 3 yrs ago.

b.      SBA and HUD loans that qualify for a fixed rate will beat inflation

c.       Well-managed real assets will ride the artificial value growth

d.      Demand for multi-family will continue to be strong

e.      There are and will be excellent opportunities for “turnaround” projects

4.       Conclusion:

a.       $500k – $5MM = the sweet spot for individual investors and small investment groups that can pay cash or keep low financing

b.      Look for mismanaged properties, negative cash flows, poor financing, deferred maintenance

c.       Talk to your local bankers to see if there are “pre-foreclosure” opportunities.