Investor Tip of the Week

INVESTOR TIP OF THE WEEK

We get calls on a daily basis of members asking if we think it's time to buy in Phoenix, Vegas, or in parts of Florida and California. My answer is that while there are some great deals, you've got to be very careful. Every available index is showing red hot risk in those areas.

The top guys at Realty Trac and Foreclosure Radar tell us that defaults are way up from last year, yet NOD's (notice of defaults) and foreclosures are way down. How is this possible?

It's quite simple. Banks are playing a popular Wall Street game called, "Pretend." If they don't report NOD's, they don't exist. This creative accounting shows profits are up! They can pay back the TARP money, give themselves fat year-end bonuses, and attract investors.

As a result, foreclosure inventory in the high foreclosure areas is oddly low. Buyers who mistakenly believe lack of inventory means the market has turned are making multiple offers over asking price. Nothing could be farther than the truth in the bubble markets.

Linear markets, on the other hand, are stabilizing. We can earn high cash flow in these areas while enjoying stability. After 2012, we may start to see a return to normalcy in the bubble markets and can possibly consider a 1031 exchange at that time.