Thoughts from the desk of Bob Repass…
Saturday, June 13th, 2015. That is the day my son Robbie married his fiancé and best friend Emma and Angie and I welcomed our new daughter-in-law officially into the family!
Robbie and Emma met in the spring of Robbie’s senior year in High School in 2004. Yes they have been together for more than 10 years already! When I think about their relationship a few things that quickly come to mind are trust, commitment and communication.
See Robbie left for the University of Pennsylvania in the fall of 2004 and he and Emma learned how to strengthen their relationship as well as and surviving the long distance between them for 4 years. These three character traits have not only defined them as a couple but should be a constant reminder to all of us that if we focus on these three things we can succeed in whatever we strive to accomplish.
I could not be more proud of both Robbie and Emma. They both have outstanding careers, Robbie as an Internal Auditor for Caliber Home Loans and Emma as a Physical Therapist assisting spinal-cord injury patients. Angie and I are very blessed!
The Trading Corner
Seller Financing to Play Key Role in Millennial Homeownership
By Eddie Speed
Seller financing will continue to grow. One of the biggest reasons is student debt. According to MarketWatch, 40 million Americans carry student debt and about 70% of college graduates have debt.
So even if a graduate has a good credit score, their debt to income ratio will prevent them from attaining conventional financing. The new 3% down loans won’t help either. Of course there remain regulatory hurdles to creating a seller finance transaction due to the Dodd-Frank Act and other CFPB guidelines. The Seller Finance Coalition is working hard with members of Congress to get some much needed exemptions put in place. We could really use your support, please join us at www.sellerfinancecoalition.org today!
The student debt clock at the time I wrote this article was at a staggering $1,283,681,150,740. It was moving so fast that I had to take a screen shot!
What number will it be at when you take a look? See the student debt clock by clicking this link: http://ow.ly/OX2lP
Already at $1,283,681,601,853 when I finished that last paragraph!!
Cash Buyers Not the Players They Once Were
Cash buyers are no longer they player they once were in the purchase of single family homes. According to research by RealtyTrac, cash sales made up 24.6% of total home sales in May 2015. “Distressed sales in May represented a significantly smaller share of a growing home sales pie as an increasing number of non-distressed sellers continued to cash out on the equity they’ve gained over the last three years of rising home prices,” said Daren Blomquist, vice president at RealtyTrac.
Bank-owned REO sales accounted for 3.9% of all residential property sales in May, down from 6.9% in the previous month and down from 9.0% a year ago to the lowest level since January 2011.
Top 5 States with Highest Cash Sales Share of Total Sales:
- Florida (55%)
- Alabama (52%)
- New York & Illinois (48%)
- Michigan & Kentucky (45%)
- Missouri & Idaho (44%)
Lowest Cash Sales Share of Total Sales
- Maryland (19%)
- Colorado, Massachusetts & Maine (25%)
- Minnesota & Virginia (26%)
- Washington & Wyoming (27%)
- California (28%)
The Top Ten with…
There are many people behind the scenes that drive the engine to make our companies successful. In our continuous Top Ten series, this month we turn the spotlight on one of these people so you can get to know them better. This month the spotlight is on a key member of our Trade Desk team and a Titanium Mentor Student as well, Michelle Winberry.
How long have you been with Colonial Funding Group/NoteSchool: Since March 2012
What is your role at Colonial Funding Group/NoteSchool: Titanium Student and Trade Desk Representative where I assist other NoteSchool Mentor students through the purchasing and closing process of note acquisitions?
Favorite Color: Purple
Favorite Food: Crab Legs
Favorite TV Show: The Profit
Favorite Movie of all-time: I don’t have one
Last Book You Read: Battlefield of the Mind: Winning the Battle in Your Mind by Joyce Meyer (teaching it in Sunday School)
Favorite Sports Team(s): KC Chiefs and KC Royals!
The 3 people you would like to have dinner with (dead or alive): 1.My Great Husband Brian! 2. John D Rockefeller and 3. Mary Kay Ash
What do you like best about working at Colonial Funding Group/NoteSchool: It’s always an adventure! Lots of people who I like very much and the details are interesting to a control freak like me!
Capital Markets Update
Real Rate of Return
by Ryan Parson
Something that I hear from investors time and time again is that there are two recurring issues to deal with in regards to slowed growth (“erosion”) in their investment portfolio: taxes and inflation.
Any discussion of “real” rate of return must account for these two eroding factors.
(Note: there are infinite taxation scenarios based on one’s personal situation. Further, advisors and economists have different opinions about where the inflation rate will be; most believe it will be at least 3%. When modeling these scenarios, it’s important to work with competent advisors for your own portfolios.)
A married couple I’ve spoken with recently, James and Sally from Phoenix, make a combined $225K a year, which puts them in the 28% marginal income bracket based on income. They’re considering the impact of what an investment that yields 8% would actually be on their portfolio.
Now for purpose of this discussion we’re not going to get into what other types of risks James and Sally will be taking with these types of investments. Rather, this discussion is to serve the purpose of understanding the need to seek out appropriate risk-adjusted returns that give a meaningful return back to your portfolio.
To determine the real rate of return on an investment, one must consider the effect of inflation and taxes on the gross return.
Tax year: 2015 Taxable income: $225,000
Filing status: Married filing joint
Marginal income tax bracket: 28.00%
Estimated average inflation rate: 3.00%
I don’t know about you, but not many of our investors would accept a 3% net rate of return (see 8% chart) but yet most do because of their lack of understanding of these erosions. Further, the greater travesty is not understanding how to manage them.
The good news is that there are ways to hedge inflation and reduce tax liability. It’s your job as an investor to seek out strategies and advisors to help you do just that.
For example, are you familiar with strategies available to you, particularly through a tax-advantaged SELF-DIRECTED retirement account that might assist with the tax erosion risk that you face? Are you familiar with what a TRUE self-directed retirement account is?
To avoid these erosions to your rate of return, seek out ways to manage them and to find investments and viable strategies that will help to provide a hedge against them.
When you’re aware of the real rate of return you’re getting on your investments once you’ve taken into consideration things like taxes and inflation, you can take steps to combat their effects.
In closing, my question to you today is this:
What alternative investments are you seeking out in your portfolio that provide a risk-adjusted rate of return so that you are able to make the real return on your investments count?
Quote of the Month
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
– Ronald Reagan