Debt Vs. Equity

As a hard money lender, I get calls daily from real estate investors wanting help funding their next project. Many of them are so focused on one way to do it, they sometimes miss opportunities to make money. It was a few months ago I spoke with an investor that wanted us to fund a deal in Denver. It was a fix and flip and the deal had merit. It would have likely produced a sizable profit. Unfortunately, we may never know. He lost the deal for lack of funding. What happened? He did not understand the different ways to fund real estate deals and was not willing to listen to advice. The fact is that sometimes an investor needs to get creative which could lead to less profit. But, in this case, a piece of something would have been a lot better than all of nothing.

Debt: Debt is the simplest to understand and the least creative. Debt is just a loan. There are multiple types of loans; bank loans, conventional loans, government loans, private money loans, hard money loans, and several others. Debt generally takes no ownership stake in your deal and you won’t need to give up control. In real estate, loans are typically secured by the project, but sometimes you can use other properties or assets as additional collateral. That is referred to as cross collateralization or blanket financing and is about as creative as it comes with debt. Lenders typically want a set rate of return, so when you borrower money you will likely pay fees and a set interest rate. You will also probably have a set amount of time to return the money. Debt is the cheaper of the two options, but is riskier for two reasons:

  • Debt holders get paid back first. If there is a problem with the project, the lender is the last one to ever take a loss. In fact, it is common in a loss situation that the owners take the loss and the lenders get paid back in full, including all interest and fees. This is why many savvy investors choose to lend money or work with companies that do.
  • Most lenders will also require monthly payments which creates pressure for a project.

Qualifying for debt is typically a bit more challenging than equity. Most banks and conventional lenders base their loan decision on cash flow. That creates a problem with fix and flips because fix and flips have no monthly cash flow. In fact, they have no positive cash flow until the project is done and sold. Other qualifying factors are important too, like credit, reserves, and the collateral. To some lenders, like commercial banks, your credibility is also a factor. Creditability is the lender’s belief you can handle the project, so they will look at experience and possibly want to interview you. Except for a fix and flip or new construction, no lender I know will make a loan on a property with negative cash …

Modern Money Mechanics – An Analysis of the Impact of Individual Debt

Modern money mechanics, as described in the banking handbook with this same name, is a system whereby money is created out of debt. This system is used in nearly every civilized country and as of late has been the largest contributor to the credit crisis. I will explain this system in detail in the following sections, but as a quick foreword, your financial problems are not your fault.

Money, that pretty green piece of paper with official looking seals all over it, does not exist. Money is created out of the need for more money. I'll give you an example. The government electronically sends the federal reserve a request for ten billion dollars. The federal reserve responses and then starts to print the money and these bills become federal reserve notes. The government in turn begins to print out some official looking pieces of paper called government bonds. A 10% reserve is held out of the ten billion and the nine billion is the excessive. Because that nine billion is consitered the excessive, new loans can be created based off of that amount.

Now lets say that a bank decides to borrow the newly created nine billion dollars. You would think that the money that was created earlier would be used in the new loan, but it isn't. The other ten billion was just used as a basis for this new loan and the newly available nine billion is created out of thin air just for this bank. In fact, the process continues up to nine times, down to 8.1 billion, 7.29 billion and so on. All of this money has been created simply out of a need for it, a debt. Therefore we can conclude that money equals debt. Inflation is actually a purposefull taxation on people in order to keep the population working longer (wage slavery at it's best).

Now that you know the internal structure of it, lets consider how it affects you. We all know how inflation is a constant in our modern world, but we don't know how to combat it as a society. The fact of the matter is, if there was no debt, there would be no money. If debt equals money, and inflation means that the value of our dollar is lowering constantly, then our only choice is to get out of debt as individuals. If we get out of debt, then the value of the dollar will raise, and our banking system will take a serious hit while we reap the benefit. Imagine your little $ 25,000 a year job becoming the equivalent of $ 200,000.

So now that you realise the reprocusions of what you've just read, I recommend reading another article of mine on how to get out of debt quickly and easily.

Source Article

Millions Avoid Bankruptcy With Debt Relief Grants

Those who are at the end of their financial rope and considering bankruptcy as a last resort can possibly make a swift and profitable turn around with personal debt relief grants. What used to be a little known advantage is rapidly becoming one of the most popular methods of debt relief among American citizens due to the overwhelming decrease in the American economy.

There are more people facing the astronomical obstacles associated with extreme personal debt than ever before. Taking into consideration the vast waves of layoffs adding to the already rising unemployment rate, millions of Americans have been resorting to desperate measures in hopes of merely staying afloat, even temporarily. Paying bills with credit cards, or even paying credit cards bills with other credit cards is also an unfavorable habit that thousands have picked up over the past couple of years, ultimately leading to horrendous credit ratings, thousands of dollars in interest that continue to incur, and sometimes so far as wage assignments.

Unfortunately, many have fallen hard to hit rock bottom and have filed for bankruptcy, losing everything that they had worked so hard to achieve. Had they turned to the government for financial assistance, they may have been eligible to qualify for free personal debt relief grants to avoid these circumstances. The government provides all qualified applicants over the age of eighteen years old with generous amounts of free government grant money to aid them in personal debt relief, though in the past few knew of these opportunities.

On the brighter side, government personal debt grants are becoming more popularly known by the general public, and more worthy and deserving applicants are advantaging them. Millions more are acquiring free government money, paying their bills in full, saving their homes and automobiles, and remarkably, increasing their poor credit scores, dramatically. For obvious reasons, debt grants are vastly becoming a popular choice of debt relief options in lieu of ditching out on your responsibilities and being labeled a risk on your permanent financial records.

Free government money, better than bankruptcy. That’s a no brainer.

Source Article

Making Money From Credit Card Debt – Where to Find Credit Card Debts Available For Sale

The current economic crisis has created a situation where making money from credit card debt is actually an excellent business opportunity.

The following statistics illustrate the magnitude of the problem and potential opportunity. Innovest Strategic Value Advisors, a research company, reports credit card charge-offs were $22.6 billion for all of 2007. That figure rose to $76.9 billion in 2008 and $93.1 billion in 2009.

However, to profit from such a business opportunity you first have to know where you can buy credit card debts and there are three (3) main sources where you can purchase credit card debts:

1. The Government

2. Banks

3. Loan Brokers

Let’s take a brief look at each source.

1. The Government

You can purchase loans from the FDIC (Federal Deposit Insurance Company). Loans for sale are advertised directly on their website. The information that is displayed includes the:

~ Type of loan, e.g. commercial, industrial or consumer,

~ Source of the loan, i.e. the financial institution where the loan came from,

~ Aggregate face value of the loan,

~ Average balance of each loan,

~ Status of the loan, i.e. performing or non-performing,

~ Period of time allocated for review,

~ Bid day,

~ Date by which successful bidder has to pay for the loans.

It’s clear to see the importance of this information but this is still just scrapping the surface when it comes to the analysis you should perform on each loan to make a decision as to whether or not you want to submit a bid for the loans and how much you want to place your bid for.

2. Banks

You can also purchase loans direct from your local bank and by this I don’t mean a local branch of a national bank. The manager of the latter would not have sufficient flexibility or clout to be able to negotiate the sale of any failed loans that they might have. However, with a small, local bank, if you approached your bank in the right manner, an offer to purchase failed loans which the bank has had to charge-off, could seem quite lucrative. Bill Bartmann goes through a very detailed, step-by-step procedure as to how to approach a local back with a view to purchase their delinquent loans in his book best-selling book Bailout Riches: How Everyday Investors Can Make a Fortune Buying Bad Loans for Pennies on the Dollar.

3. Loan Brokers

Purchasing loans from a loan broker can be more expensive but loan brokers segment their loans more and so the profiles of the package of loans that they put together are more similar. And if you’re just starting out in the debt collection business then you’re likely to have greater success if you narrow your focus and not consider loans of a broad spectrum. You’ll probably also find that you’re able to make a profit faster when you take this approach.

One example of a loan broker is the NLEX (National Loan Exchange Inc). It is the “leading …

The Fight to Fix Federal Debt

Our national debt has hit an all time high at $ 14.3 trillion, an amount that can no longer be ignored. Every year, Congress spends more money than they money brought in as income, which leads to a deficit in our national budget. To cover expenses and the spending habits of Congress, money is borrowed and the total national debt is increased. To make matters worse, as the national debt increases the interest on the borrowed money begins adding to the total debt balance, pushing the nation further into financial hardship.

Each day, members of different political parties are lining up to fight for their proposed plan to manage the national debt. Republicans blame overspending on social programs such as Medicare and Social Security, while Democrats believe that under-taxation is to blame for the nation's financial woes. It's clear that Republicans and Democrats don't agree on the best long-term strategy for alleviating the national debt, but members of both parties are apprehensive about raising the debt ceiling. Despite clear party lines, problems with taxation and federal spending are issues both sides are working to resolve. The economy will suffer greatly if no agreement can be reached about how to increase the federal income and how to balance the federal budget. Continuing on the current financial path is not an option that either political party is considering.

Can we fix it?

Regardless of which side of the political spectrum you stand on, some of the proposed ideas could leave all Americans paying for more and getting less in return. The idea of ​​a National Sales Tax, has people of all income brackets fuming. The economy is fueled by consumer spending, so how would a "tax on consumption" be beneficial? The national debt may reduce slightly, over long periods of time, but consumer spending would slow and the number of people who need to receive government assistance for essential items may increase as a result. This idea appears to be a double-edged sword. Along the same lines, eliminating or capping deductions for donations to charities may backfire and result in fewer contributions and an increased need for funding from the government. Reducing benefits for veterans or Social Security benefits may appear as viable options, but how will our respected elders pay for essential living items, and possibly the added national sales tax, when they earn so little each month?

The national debt is a government problem, brought about by years of inadequate budgeting and overspending. It is unreasonable to assume that the debt crisis can be fixed by imposing more restrictions and additional requirements to the citizens of America. It is also unlikely that without such measures, our national debt will be reduced to a manageable state. The compromise may be found in some realistic cut-backs and sensible added requirements we, as a nation, can overcome this financial collapse into debt.

Source Article

US Public Debt and Consumer Debt – Increasing and Dangerous in 2008

According to the latest report on consumer debt put out by the Federal Reserve, the US consumer debt is over $2.5 trillion. Each year the amount of credit card debt in America climbs higher and higher. Why is American credit card debt spiraling out of control? Well, there are several reasons for the yearly increase in the US consumer debt.

One reason Americans are going deeper into debt is because salaries have not increased enough to meet rising inflation. The 2007 Trends in Earnings Variability Over the Past 20 Years report by the U.S. Congressional Budget Office (CBO) stated that approximately “one-in-five saw their earnings fall 25 percent between 2002 and 2003, and about one-in-seven saw their earnings fall by” a decline of more than 40 percent. This significant decrease in earnings for Americans means while the price of gas, food, groceries, clothes, utilities and other basic necessities goes up, the average salary just isn’t keeping up.

Another reason the US consumer debt is rising is because credit card companies spend billions each year on gaining new customers and increasing rate limits for current customers. The average credit card debt for Americans is over $9,000 and even with the current credit crunch, the continuous stream of credit card offers continues to flow.

However, credit card offers don’t mean the recipients have to sign up. Credit card debt in America wouldn’t be growing at the rapid pace it is if consumers were more realistic with their budgets. The attitude of our society has become “I want it now, though I can’t afford it, so I’ll charge it.” If consumers exercised more discipline in their spending, the credit card debt in America would reverse its current course.

Regardless of the reason you may be in credit card debt, you need a solid debt reduction option. Credit card debt consolidation and debt consolidation loans are similar methods of debt relief that can benefit consumers with good credit. Debt settlement and bankruptcy are viable debt reduction options for consumers with bad credit.

US Public Debt in 2008

The US Public Debt (from the federal government) has been increasing for decades. The gross federal debt has increased greatly from $909 billion in 1980 to an estimated $9,575 B in 2008. (The federal debt was about $9,509 billion in July 2008.) In these 28 years the increase has been about $8,666 billion or about 10.53 times for an increase of around 953%. (Source: U.S. Office of Management and Budget, Budget of the United States Government, Historical Tables, annual.) In 2008, we find ourselves facing a federal deficit of from $560 billion to $900 B. (The official figure will be closer to $560 B for political and business reasons.) How much more will you owe if we only spend another $600 B than we collect in US federal taxes in 2008? If you divide $600 billion by 100 million workers then you get $6,000 per worker. If you divide a federal deficit of $600 billion by 160 …

Student Loan Debt Clock Is Ticking Away At 1.57 Trillion Dollars On Election Day 2016

The academic bubble is ready to burst, all the while academics in their infinite wisdom tell us they know best how to run our society and civilization – don't you find that odd? It seems they haven't gotten their own house in order, and yet, want our entire country to run like a giant college campus – interesting indeed. These same academics want to tell us how to vote, re-distribute wealth, and how to think – well, I think their day of reckoning is right around the corner – and I fear what's to come will not be pretty. No, I don't want to be the one to say; "I told you so." Surely, there are others with more social media followers who see the reality of the situation to spread that in-your-face slap when the time comes. Okay so, let's talk shall we?

40% of the student loans are in technical default (90-days in the rears with no further agreement to catch up on payments). That is 583 Billion Dollars in defaulted loans that we may never see payment of. Trust me when I tell you that the College Loan Bubble has burst and is extreme crisis. Why is this allowed to continue? Well, if it stops it will collapse academia, become a huge problem for our Federal Government, add over 1/2 Trillion to our $ 20 Trillion National Debt, and cause the angst of millennials who the Democrats have all but promised "Free College For All "during the 2016 Presidential Election.

Still, by the time the election is over the Student Loan debt will be 1.57 Trillion Dollars, even though the official figures claim it only 1.2 Trillion which was actually the figure before the start of the 2015 Academic Year.

If you don't see the enormity of the problem, let's talk about the auto industry right now. It turns out that the number of "Subprime" auto loan defaults are at another all-time high of 4.5% – Subprime meaning loans made to those without proof of ability to pay or marginal credit ratings, perhaps coming from low-socioeconomic borrowers. Last time this happened the auto industry crashed and needed a big bailout, and we are reaching those same numbers now – and realize this is only 4.5% not 40-50% like the student loan problem.

Scared Yet? Well, it is Halloween 2016 today, and I am, and no, there won't be any good witches flying in on their brooms to win the next election to use hocus pocus to make this problem go away – indeed, both presidential candidates are likely to see the auto loan problem get worse, as well as the student loan debt problem – not to mention our stock market breaking all-time highs with PE Ratios and major stock market indices records.

Source Article

Free Debt Relief Grants Money For Disabled Individuals to Pay Off Debts

Living with a handicapped or a disabled person takes a toll on the life and the finances of the person. With the sharp escalation of expenses, life becomes a difficult journey. It is because of this reason the amount of debt is increasing day by day as it is taking much of the expenses for the family members to take care of such an unfortunate person.

The US Government understands the problem of these low-income groups and hence it has introduced federal debt relief grants for disabled. These grants are being distributed all across the country through different nonprofit organizations, local and state authorities, church and community agencies.

There are various benefits which government has introduced for the disabled citizens. The eligibility criteria vary from different factors such as date of disability, age of the person and level of income.

Debt settlement is a new method to debt relief for disabled. Under this program, a client can find a midway to come to terms with the creditor by reducing the amount which they owe and extending its timeline to pay off. Some of the benefits that the disabled people can get pertaining to debt relief are:

Lawful protection

In normal circumstances if a person defaults in paying off debts, the creditor can sue the person and get it settled through court. But in case of disabled, a creditor cannot do so. The creditor can still get it settled but cannot garnish it from social security, disability benefits or pensions.

Government grants

There are many government grants pertaining to debt relief for disabled. Under Americans with Disability Act (ADA), candidates with both mental and physical disabilities are included. With Equal Employment Opportunity Commission there is a list of conditions that are applied for different kind of disabilities viz. deafness, blindness, mental retardation, autism, cancer, epilepsy, cerebral palsy, HIV and also schizophrenia.

There are even utility payments for the disabled to pay their regular bills and necessities of life. This way the unfortunate people can meet their daily payments and live a normal life.

There are telecommunications payments for the disabled which help them to maintain a consistent communication with the outer world. Under Communications Act of 1934, all the telecommunication companies ensure equivalent services for consumer with disabilities.

Alongside multiple technical provisions are being given and also protection is being given to those who exercise ADA rights from any kind of coercion and retaliation.

Debt relief grants for disabled are also one of those benefits which are being given to the handicapped and underprivileged mass. There are many local and state authorities which are disbursing payments to the families of these unfortunate people to meet their debts and credit card loans saving them from any kind of legal hassles.

Source Article

Debt Relief Grants For Single Mothers

Juggling with multiple responsibilities can at times lead to huge debts for single mothers. This can be a real crisis situation with having bills or money due and the concerned person knocking at the door for the payment. Don't worry, the federal government, your state, local authorities and nonprofits have many debt relief grant programs for single mothers to help them of their grave situation and enable them lead a debtless life.

Read through the article to know the varied debt relief grants that can save you from complexities and let you avail the services and required necessities of daily life.

List of Debt Relief Grants for Single Mothers to Apply for

Debt Relief Grants for Housing Bills: mothers can seek help for housing debt relief from HUD, the largest federal agency for rental needs. Single moms may often incur huge debts for home purchasing or paying rents. HUD is the best source to clear the dues or pay for your rent or security deposits. You can also seek assistance from the varied programs like Section 8 Housing Choice Voucher Program, Public Housing Authorities' Vouchers and USDA Rural Development that offers funds to pay your rents, preventing eviction or homelessness. Moreover, there is help available from several nonprofit organizations, local agencies, charities and religious institutions for any emergency situation. Some names to remember are:

• Salvation Army

• Catholic Charities

• Habitat for Humanity

• Low-income Housing Tax Credits

• United Way

• Legal Aid Society

• American Red Cross

Debt Relief Grants for Home Repairing: substantial funds may be required for home repairing work like electrical wiring, home modification, damage mending, new roofing, removing safety hazards for a secured living. Single mothers with limited income may find difficulty in paying for the home improvement debts hence states, federal government and local authorities proposed few programs for monetary support:

• Housing Preservation Grants

• Community Development Block Grant Program (CDBG)



Debt Relief Grants for Utility Bills: for single mothers with limited income, exorbitant utility bills can be a matter of concern. There are free grant money for your utility, water, gas, energy bills from the federal government, state, utility companies, local agencies and non-profit organizations that help in compensating bills and offsetting the debts. Some of the essential names or programs to count on are:

• The Low Income Home Energy Assistance Program

• LIHEAP Crisis Program

• The Weatherization Assistance Program

• The Home Energy Assistance Program

• Low-Income Payment plan

• H2O – Help to others

Debt Relief Grants for Medical Bills: medical costs are a huge expense for families and for single mothers the accelerating bills, especially without insurance, can be frightening. However, medical attention for family, kids or self is necessity and cannot be overlooked. In such cases financial assistance is required to clear off debts. Financial support, discounts and medical costs are given by the government, state, hospitals, charities, nonprofits and local agencies to pay for the expenses and cover up …

Sovereign Debt Default Scare – Is Dubai Too Big to Fail?

Just a year back, big banks and financial institutions had defaulted big time in many developed nations, especially in the US. Declaring themselves bankrupt overnight, these big financial institutions reported losses in billions of dollars on what we now know as sub prime crisis. So huge were the losses that US Government alone injected more than $700 billion to resuscitate these dying financial institutions. Honest tax payers’ money has been squandered to revive failed private US banks in one of the most aggressively capitalist nations of the world. Reason – these banks were too big to be allowed to fail. On the other hand, in 2009 alone 106 US banks had to close down, but they were not bailed out by US Fed. Reason – they were not big enough to be saved.

So what is the lesson to be learnt from here? Lesson is that as a business institution you have to bungle big time, show billions of dollars as debt in your books, borrow or leverage indiscriminately and then sit back and relax after blowing the whistle. You will face no problem because your government will bail you out since your bungling is too big. And once bailed out, you can then go about using the bailout money to enrich yourself with astronomically high bonuses. You can justify large bonuses by showing existence of big money in your books. So what if now the money in your books is honest taxpayers’ money loaned to you by your government?You can be squatting smug on your haunches with the knowledge that, do what you may – you just cannot fail. You are too big to be allowed to fail!!

That is how investment bankers are using the bailout money in many countries. In fact in UK the public outrage has been such that Government has now slapped 50% tax on bonuses that banks pay to their employees. As a result, Barclays recently announced a pay hike of 150% for 22000 of its investment bankers with retrospective effect from June 2009!! Take that – if you tax our bonuses then we have other means of looting tax payers’ money.

Well so far so good. Big business institutions have been bailed out of thick financial soups by their respective governments. But in doing so these governments have become susceptible to credit crisis themselves. Governments, I agree, are again too big to be allowed to fail. And that is how we found Dubai getting bailed out by its neighbour, Abu Dhabi.

Abu Dhabi has given temporary reprieve to Dubai so as to maintain investor confidence in the region. But such actions of saving nations from becoming bankrupt will be possible only when there are only few and far between instances of sovereign default. But what happens when most nations fall into a debt trap from which they cannot extricate themselves. Many developed European nations are on the brink of sovereign default. Greece, Spain, Ireland are some such names. Then there are a host …