May 2016

We specialize in providing flexible short-term hard money and transactional loans for real estate projects. We also invest in equity of strong real estate projects with proper leverage and strong sponsors.

Monthly Letter

Dear Readers,

I spent the weekend with the Venture Alliance mastermind group, but made it home on time to see the Family. It was a very interesting trip to the Jekyll Island, GA. This island is famous for hosting the historic meeting where the Federal Reserve Bank concept was conceived. The 1910 secret meeting known as the “duck hunt” on Jekyll Island included Senator Nelson Aldrich, his personal secretary Arthur Shelton, former Harvard University professor of economics Dr. A. Piatt Andrew, J.P. Morgan & Co. partner Henry P. Davison, National City Bank president Frank A. Vanderlip and Kuhn, Loeb, and Co. partner Paul M. Warburg. In 1913, Federal Reserve Act was passed by the US Congress, laying the foundation for the Federal Reserve System (FED) as we know it today.

FED is a cartel of big banks for the benefit of big banks, but under US Government charter to do “public good”. FED’s noble goals of full employment, and low inflation are window dressing… Right now FED is effectively paralyzed to keep rates low. FED has flooded the economy with cheap (low cost) money. Banks have too much sitting in deposits, and don’t know what to do with it as is. Quality loan demand is low because banks reverted to very conservative view of the world after the 2008 crisis. Banks just don’t know how to underwrite higher risk loans, and don’t want to lend in that space at all.

If FED were to raise rates, it would shrink bank profits, as banks would be forced to pay more on deposits. US Government doesn’t want the rates to go up as debt service on the national debt would go up.

I just don’t see anything other than low rates environment for the next few years.

Another interesting angle is to look at CPI. CPI has been low for a reason. I believe that it’s been manipulated to be low. Increase in CPI would trigger increases in checks for Social Security recipients. US Government cannot afford acceleration of payments on this front as it will destabilize the budget quickly.

Furthermore, I speculate that there is the real fear that if FED raises rates, banks will be forced to try to get more aggressive in their lending practices. This might trigger another balloon… We already have a massive balloon in Student Loans. There is probably a sizable balloon in car loans too.

Our economy has been propelled on “fiat” money creation through lending. We have, in essence, been overspending, living beyond our means. In addition, our society is facing a wave of massive entitlement spending via the retirement of “Baby boomers”, and the ratio of working members of the society to retired people continues to shrink.

What’s scary is that the low rate environment could quickly, over a period of 3-5 years, become a hyperinflation situation if US Government budget turns to a big deficit.

Most societies throughout the history of the world preferred to print Money or Debt than to tax its citizens heavily. All of these “fiat” banking systems eventually hit a hyperinflation period. That is inevitable because massive debt has to be devalued at some point of time. Hyper-inflation is the way to do this. It is the “forgiveness” of the past sins of overspending.

I think the same thing will happen in the US. We just don’t know when.

Kind regards,

Mike Zlotnik, Managing Director


Recent Deals Examples

  • Del Valle Texas - Real Estate Deal
  • Gulfport, Florida
  • Purchase Price $68,775
  • Rehab $23,000
  • After repair value $139,900
  • Loan Amount $66,000
  • Funded May 6, 2016

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Thank You Friends!

Welcome new clients and Thank You to friends who’ve trusted me to work with you, your friends, family and coworkers.


The Surprising Origin of Mother’s Day

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According to founder Anna Jarvis, Mother’s Day was not intended as a gift-giving celebration.

The day originated with Anna’s mother, Ann Reeves Jarvis, who in the late 1800’s established mother’s day work clubs to pursue peaceful projects, such as helping wounded soldiers and curbing infant mortality.

When Ann Reeves Jarvis died, her daughter Anna was inspired to continue her mother’s work. Through her efforts, Mother’s Day was established by the US President on the second Sunday in May, 1908. Since then, many other countries have adopted the same Sunday.

The day became a commercial gold mine centering on buying flowers, candy, and cards. That development disturbed Anna, who dedicated herself to an unsuccessful attempt to return Mother’s Day to its more socially-conscious roots.


Free Consumer Report

8 Dumb Things that Smart People Do When Buying a Home

This laundry-list of mistakes highlights what buyers wish they’d known before they started buying.

Ask me for a copy of this free report to help you—or someone you know—become a better, and happier home buyer!

Click Here to Get a Report


Life Hacks to Make Yourself More Interesting

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If you’ve ever wanted to be better liked, or feel more comfortable in a group, here are a few approaches to making yourself more interesting.

Listen to motivational speakers. We tend to take on the mannerisms of people we listen to. Speakers have honed their style to be more appealing. Pick a speaker you admire and listen to their presentations. When you share their content with others, you’ll tend to share in their manner.

Finish tasks in 1/2 the time. Bosses, co-workers, employees, family, and friends all admire someone who gets things done even more than someone who does things perfectly. Be the person who gets things done quickly, and done well, even if not flawlessly. You not only will feel more confident, you’ll gain an incredible amount of respect.

Be healthier. People are generally attracted to robust, healthy people. It doesn’t matter your age. Vibrancy is attractive. Walk more, eat better, and gain some muscle.

Be willing to walk away. Sometimes other people are arrogant or dismissive. You are not required to make them feel better about you. If you sense a person isn’t interested in you, the faster you walk away, the better. When there’s a break in the conversation, say “Excuse me, please,” then walk away.


Create Complex, but Memorable Passwords

Longer passwords are exponentially harder to crack than shorter ones. For instance, a 10-character password might take a hacker 5 days to crack. But a 14-character password would take him 72,946,048 days to crack. Even the password This Is My Password is much harder to crack than $Rt&7, due to length alone. Here is some additional advice:

  • Avoid ending or beginning a password with these:
    • All two-digit combinations (56)
    • All dates from 1900 to 2006 (1962)
    • All three-digit combinations (678)
    • All single symbols ($)
    • All single digit, plus single symbol (8%)
    • All two-symbol combinations ($%)
  • Mix upper and lowercase in the middle of your password, avoid all common dictionary words, add numbers and symbols in the middle.
  • One idea is to pick a quotation or phrase that’s easy to remember. Use the first letter of every word, and add a random number or capital letter to increase the complexity. For instance, “To be or not to be” might turn into “tBon2B.” Then add random symbols, like “tB$on#2B.”

The Role Our Homes Play in Global Warming

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You might be surprised to learn the extent to which housing contributes to global warming. For example, US emissions associated with residential energy use consist of between 20.5% and 35% of all carbon emissions for the US. Similar measures hold true for Canada, Japan, and other first world economies.

Interestingly, of the greenhouse gas production attributed to residences, 70% is thought to be from the production and use of electricity, and only 30% from direct use of fossil fuels, such as oil and gas.

Given that electricity production is the largest contributor, it makes sense to reduce residential processes that use electricity — in everything from wastewater treatment to the use of light bulbs.

On the bright side, according to The UN Panel on Climate Change, there are significant opportunities for both economic and climate benefit in green construction. For instance, solar panels can obtain nearly net-zero energy efficiency, while providing good paying jobs. Other benefits to improving household emissions include:

  • Even low to mid-cost energy remodeling can save significant energy, with light bulbs being the easiest way to reduce energy consumption and costs.
  • Green products and practices curb carbon emissions.
  • Energy-efficient homes improve our indoor environment, health and comfort.
  • Retrofitting existing homes with green products creates jobs by employing a wide range of workers.
  • Remodeling and revitalizing existing homes has positive effects on neighborhoods and communities.
  • Green homes tend to sell for higher prices.


Just for Fun

Jokes to Drop into Your Next Conversation

  • Explaining puns to kleptomaniacs is difficult because they always take things literally.
  • What’s the best thing about Switzerland? I don’t know, but its flag is a huge plus.
  • I told my doctor that I broke my arm in two places. She told me to stop going to those places.
  • I asked my friend in North Korea what living there is like. He said he couldn’t complain.
  • I was wondering why the Frisbee seemed larger the closer it got. Then it hit me.
  • Have I told you this déjà vu joke before?
  • I didn’t know my husband stole things from construction sites, but when I got home all the signs were there.
  • They all laughed when I said I wanted to be a comedian. Well, they’re not laughing now.

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Story: You Are What You Think You Are

You’ve heard the expression, “What you see is what you get.” Psychologists tell us that nothing controls our lives more than our self-image. We live like the person we think we are.

Arnold Schwarzenegger was not very famous in 1976 when he met with a newspaper reporter. The reporter asked Schwarzenegger, “Now that you’ve retired from bodybuilding, what do you plan to do next?”

Schwarzenegger answered confidently: “I’m going to be the #1 movie star in Hollywood.”

The reporter was amused. At that time, it was very hard to imagine how this muscle-bound body builder, who was not a professional actor and who spoke English with a strong Austrian accent, could ever hope to be Hollywood’s #1 movie star!

So the reporter asked him how he planned to make his dream come true. Schwarzenegger said, “I’ll do it the same way I became the #1 body builder in the world. What I do is create a vision of who I want to be, then I start living like that person in my mind as if it were already true.”

Sounds almost childishly simple, doesn’t it? But it worked! Schwarzenegger did become the #1 highest paid movie star in Hollywood. And after that, he set his mind on being the governor of a major US state, and he succeeded at that, too!

In the words of Napoleon Hill, “Whatever the mind can conceive and believe, it can achieve.” What are you conceiving and believing about yourself?

My Advice

Is it possible to get a mortgage if I have poor credit?

The short answer is, yes, it’s possible. But it’s not as easy or cheap as it used to be. Lenders reserve the best interest rates for borrowers with at least a 720 FICO score.

But if you have a score in the 600s (even the low 600s), it is still possible to get a mortgage at a higher interest rate. In that case, you must also have an otherwise solid portfolio — decent savings, a firm job, and rising credit history. It also helps to be buying in a neighborhood where prices have been stable. Lenders are not eager to write loans for homes in declining value areas.

Having at least 20% down payment will help your situation. But if you don’t have 20%, talk to the lender about special programs designed for new home buyers.

As you can see, the factors vary. The best move is to meet with a lender about your specific circumstances. Let me know if you need a referral to a great mortgage consultant.