Business Plan That Will Immediately Restore Real Estate Values

Government bailout without a business plan of how to dispose of the troubled housing stock will fail as housing inventories continue to decline without a buyer. This will further decay housing values, increase the cost of the bailout and make for a deeper economic pullback. Any solution that does not include getting products off the books of the government and the tax payers and into the hands of investors or buyers that are willing and qualified to bear the risk of ownership will fail.

The exact solution to shoring up real estate values immediately is laid out in this article:

1) Create a Business Plan to Immediately Dispose of Housing Inventory Create a simple and executable business plan that would involve experienced real estate investors and entrepreneurs who can manage and acquire the risk of the current real estate inventory. This should result in relieving the government of the existing problem, shore up real estate prices, stimulate the economy and use the experience of Americans across the country that handle real estate for a living.

2) Evaluate
Put together regional real estate teams to immediately access every troubled real estate asset on the books. Just the assets from Fannie and Freddie alone would relieve the system. These evaluation teams are very easy to put together and are available for work. Their job would be to evaluate today's property values based on rental income returns with set asides for vacancy and expenses allowing for positive and attractive cash flow to investors. This would make these properties appealing for immediate purchase by qualified investors (see 2 below). This is critical, otherwise the tax payers will have to wait on the housing market to return before these properties are purchased causing homes to sit vacant in neighborhoods for years.

3) Make Assets Available to Qualified Investors
Once values are assigned make these assets available to qualified investors in each regions. These qualified buyers and investors would have to be experienced with real estate. This will allow them to quickly evaluate property values and act. They must have a proven history of managing this type of real estate asset and (very important) have a history of perfect loan repayment with these types of assets. It is critical that we don't wait for just individual home buyers to purchase these properties as they will not move fast enough to dispose of the product and shore up pricing. Bringing investors into the market will stimulate qualified home buyers and they should be allowed to bid on these properties along with the qualified real estate investors. This will stimulate real estate immediately and shore up housing prices.

4) Make Financing and Incentives Available
Provide the market financing and tax incentives below to qualified buyers and experienced investors in each region, which reward the risk they are taking on. These groups or individuals would have to have the following in order to qualify for financing and incentives:
a) A perfect repay history on all debts they have ever incurred involving real estate transactions.
b) Use of their own cash in order to obtain favorable financing terms (cash down is a must as no money down transactions is part of what created this mess).
c) Investors must have a net worth significant enough to support the properties in transition so that these properties do not come back into the market. Government incentives whereby depreciation schedules are advanced to further enhance investors' risk (like the GoZone Tax Incentives used after Katrina), must be put in place.

These simple steps will open up the use of money again, shore up real estate prices immediately, get action into the market that has stagnated, ensure that the government (taxpayers) is paid back quickly, and stimulate the economy by putting people back to work at titles companies; escrow companies; bank lending; mortgage brokerage firms and real estate firms. They will also alleviate any continuing decline in real estate values.

There are financially qualified investors sitting on the sidelines today waiting for the bottom in real estate before they become active again. This is a problem and they must be encouraged into the market.

My plan will take time out of the current situation and provide a true solution for a successful bailout and ensure that the tax payers are handled while jump starting the economy. While Government is saying it is vital they sign this 700b bail out bill immediately, the signing of the bill will not dispose of the problems.

Government cannot successfully manage the expedient disposition of these properties without the cooperation of real estate experts in each region. The RTC took years to get rid of product in the late eighties and real estate prices suffered longer than necessary as a result.

Without investors and entrepreneurs brought in to the solution, real estate will lag for 3-5 years or longer just in disposing of the properties. Our economy cannot afford this.

Please forward this plan to anyone you know in Congress as I would be happy to assist in the implementation of this solution. It is critical to each of us that our real estate values are shored up immediately, that homes don't stay vacant, hurting the entire neighborhood, and that our economy gets a stimulation of production and hope.

Grant Cardone,
Author and Real Estate Expert

Follow Grant Cardone on Twitter: www.twitter.com/grantcardone

Comments

[schatsie]

Be very careful, we do not want another S&L bailout where the connected and well heeled made out like bandits...

[joebhed]

Ummmmmm, here's the rub.

There will be no RESTORING real estate values.
They NEED to go way down first.

They are overvalued, compared to what would give them economic value - that they are affordable in the general economy.

Everyone knows the housing bubble could not last.
Not everyone knows that there MUST be a relationship between some average and median stuff, in order to move forward.
When we have that relationship, you can begin to restore real estate to being an economic activity again.

Here's how it works.
The average selling price of the average house in any area must be functionally affordable to the average American worker in that area.
It MUST be.

So, forget about another gimmick about what some "investors" may be willing to bet on a position relating to the "bottom" of something.

In 2001, the housing boom took off from a position of affordability to the average worker's income.
Since that time, the average worker's wages have gone up some, but housing prices have gone up a couple of hundred percent.

The bad news is that we are about at first base of the run down.

Given today's average worker's wages, the average selling price of the average house needs to come down another 35 to 40 percent, maybe more. Which could take another few years.

THEN, and from there, you can come up with a workable scheme to restore real estate values.

And, I wish you good luck.

[LintLass]

That's what I was going to say.... If all this foreclosed real estate being out of the problem, instead of paying off the greedy, ...why not let people buy houses at affordable prices?

I mean, obviously it's not so simple, why should the taxpayers be footing the bill for these same companies to *keep pricing us out of home ownership? Maybe people could *keep up with their mortgages if the prices weren't inflated in the first place.*

Maybe there wouldn't be so much housing on the *market* if, oh, I dunno, *people could live there?*

Why not make that a priority?

[btex]

It's not possible to re-inflate a bubble. Any more than its possible to win a war on a lie. The markets must be left alone to decide a price. There is no way to legislate a way to support overdone parabolic real estate prices. Besides how many are going to qualify at these present prices with out the loose exotic loans?

[KillTheMessenger]

Aren't you overlooking something? No investor at this point would pay nearly as much for these properties as they are on the books for. Just look at me. I am sitting on a pile of cash, I want to buy a larger home. But I feel that prices still have to come down by 15-20% before I will have an incentive to buy. You can make any number of listings you like, you can paint the White House green and I won't care. I want my price to be 20% lower. Are you going to pay the difference? If not, you can bet that you are not going to see my money.

[Helen Bohenski]

Hon:

I'm as old as dirt and have seen alot of things, but can't understand what the mystery is regarding human behavior! In 2000, after the market crash, smart said " the hell with stocks - let's buy real estate"; simultaneously, the government told the major banks that permission to make regional bank acquisitions to expand their evil empires would be witheld unless they made a substantial effort to lend to minorities under the provisions of the CAR Act. This created a huge demand of weak-hand players for entry level properties; those people moved up to the second tier, etc etc - pushing prices up because more people were buying. Builders and speculators saw they could build for $200 a sq ft and get $600 so they naturally went nuts and created supply for the demand. Then the Fed started raising rates and the music stopped. That's it in a nutshell. Supply now overwhelms demand. Instead of giving a Trillion dollars to wall street, the governmnent should go out and buy homes with it - and burn them down. The problem of oversupply would be solved.

[francoise]

It seems to me that the problem is very complex. I'm not over-worried, because I think that Americans are very resilient, optimistic (to the point of being sometimes dangerously brave), and incredibly creative. You guys know how to seize opportunities because you're sure you'll be successful. Whereas when facing adversity, Europeans tend to be frozen by their fears of the future. Hence I'm pretty sure you'll be out of this crisis earlier than us.

I think that the real estate prices inflated because the demand for homes increased. And the demand increased because of the sub prime mortgages which allowed "poor" people to qualify for loans. The problem is that with no social safety net, with no personal savings in the bank, and with no family solidarity system, as soon as there's a little slow down in the economy, "poor" people can't afford paying back their mortgages.

The banks knew the risks. That's why they turned the risky loans into financial packages and sold them. They wanted to get rid of the crap. Vultures were attracted by the interesting fast return on investment, and the rotten financial packages are now all around the world in the coffers of all banks.

[RedneckDem]

Everyone keeps saying lending to poor people is to blame for this fiasco. In my city I can go to a poor neighborhhod and a wealthy one and see the same amount of for sale signs. They gave unqualified loans to all regardless of race or income. They also turned some decent programs to assist poor working class Americans in purchasing a home into a crooked scheme to get fees. Middle class people who had always wanted a home bought on horrible terms with the mortgage person whispering sweet returns in their ears. Above all, most people assumed that their incomes would grow to make the payments easier. We have lost our way morally. We send American jobs overseas and give tax breaks for it and the allow them to offshore the profits. We allow foreign countries to basically pick an American made product, copy it and then flood the US market with the copy until the American company has no choice, but to shut down or send the plant and the jobs overseas. The financial meltdown is the result of passing the tipping point of how long the American people could keep consuming until we realized that our incomes weren't even coming close to keeping up.

[francoise]

Our problem in Europe is that we have as a rule that a bank can not lend more than it possesses in reality. With the devaluation of the rotten financial packages, they have less real wealth, hence they are not allowed to lend as much. The credit crunch is stopping our economy.

Moreover all around the world people now distrust next to any financial package. What if there are some sliced rotten American loans in it ?

That's why I think the bailout is needed at once. As soon as the American government will promise to buy any rotten financial package, the markets will be able to start working again. The distrust will disappear, because traders and bankers will be sure to deal with honest financial packages, and not sh*tty ones.

Then there will be time to find solutions. Your solution to restore the value of real estate. And other solutions like for example : bonuses to traders on the long term, after they've done good honest transactions for 5 years, not at the end of every minute.

And stop asking foreigners for a million bucks investment for them to get an entrepreneur visa, half the sum should be fair enough. But there I'm being self interested ;-)

[jenhammon]

What I really don't understand about all this is why does the government need to get involved in private business? If a company goes belly up... well... isn't that just something that happens? Doesn't some other business come in and take it over? Why is the government trying to handle this?? Is it just me or does this stink of some weird big brother b.s.? Is this some kind of "deal" that we (the government) are working?? It seems like a bunch of people trying to make decisions they are not authorized to make. At least Grant's plan puts the whole thing back in the people's hands...

[Henry]

Grant,
I think you have paid to much attention to movies. It does not work that way in real life.

[moneynow]

This is on on the money, let the experts put the market value on these assets and alow the market to self correct. SEND THIS TO BUSH AND THE CONGRESS AND SEND GRANT CARDONE TO WASHINGTON­!!!!!!!!!!­!!!!!!!

SIGNED
MONEYNOW

[peterg76]

They're not trying to restore real estate values; they're trying to embezzle money. Besides, if actually they fix the problem, they'll need a new pretext the next time they want to embezzle money.

[Rule Of Law]

peter--that's the part everyone who mimics the MSM meme of "oh, they were so incompetent" misses every single time! This was a Heist, a Robbery, a Rip Off, plain and simple and they're not interested in real solutions or saving the middle class homeowner--just the opposite in fact. How can you have a fascist dictatorship if people still own homes or have jobs and money in the bank?

[peterg76]

One conspiracy theory is that the whole purpose of the "bailout" is to keep the banks out of bankruptcy court - where they'd have to open their books and if there was genuine fraud in the criminal justice sense, they wouldn't be able to hide it any longer