Archive for March, 2009

A good time to get started in real estate?

Thursday, March 19th, 2009

Here is my situation. I work in Manhattan and a make a decent living. I am renting an apartment in Westchester with my girlfriend and I can’t help but want to own my own place and rent it out. I have about $25,000 available to put towards a downpayment, taxes, closing costs, etc. When my lease is up this fall I plan on moving back home to Stamford, CT to save money towards my first home purchase.

I know over the next year or 2 the market will be down and I want to capitalize on it since I have some money, I am young, and I can capitalize on the first time home owners loan (I have great credit as well). I would love to buy a place and rent, or buy a place close enough to NYC that I can commute from if I can’t find a tennant. Any suggestions on how to approach this? I know the first line of business is getting approved for a loan, but what other suggestions have you got?

Answer: How about picking an area with an upside and getting in touch with a local real Estate agent about purchasing a two family investment property where you can live and rent out either a finished basement or an upstairs pad. I think that would be a good start because this is clearly a buyers market and there should be a whole lot for you to choose from. Also making the rental your primary residence helps lower the necessary down payment.

Also keep in mind as more and more people are losing their homes to foreclosure, rental properties will be on the upside for years to come and don’t worry about those folks being bad risk just because they lost their homes as they still needed a stable roof over their heads.

Why we can not allow AIG to fail

Sunday, March 8th, 2009

Many Americans are tired of giving money to AIG. It does not seem to be making things better. However, if the government were to allow AIG to collapse, the rest of the economy would go with it.

AIG is a different kind of animal when compared to the Bear Sterns and Lehman Brothers. Those companies were allowed to collapse because they were more or less self contained. As an insurer, AIG has its hands in way too many cookie jars. Many large and somewhat stable companies have assets that are backed by AIG, if you remove AIG from the equation, these stable companies are now are a huge risk to default themselves. There credit ratings will suffer and you would see another Bear and Lehman like spiral.

The government will keep pumping in capital until the nasty spiderweb that AIG has created can be untangled and bankruptcy can occur gracefully. Until then, get used to the abyss of soul sucking sorrow that is AIG.

It seems that AIG has been a major underwriter of Mortgage Insurance. Of course, in keeping with the times, they were fraudulent about the underwriting of these policys.

AIG categorized its instruments as Credit Swap Defaults, rather than the Mortage Insurance that it really was, because they did not have the liquid assets to qualify these instruments as Insurance.

Say bye to AIG and there would be a domino effect throughout the international banking industry, as many institutions far and wide hold what they think, and are counting on as positive assets, would be in fact worthless.

Here’s the problem: if you insure against loss in a case where a catastrophe can hit almost all your insurance customers are once, you’re screwed.

Was AIG dumb? Yes. Did they understand the risks they were taking? No.

But now look at who bought the insurance. Banks that were trying to hedge their exposures. Did they understand the counterparty risk they were taking by using AIG? No… but AIG was rated AAA so they thought there was no risk.

How much money has the Government handed over to AIG? And how many installments have already been made? I lost count, but one cannot help but notice this repetitive propping up of AIG at any cost. I think I understand why.