What's coming next?

That Winters coming post really got me thinking. I keep waiting for the other shoe to drop, but now I'm starting to see things slowly get worse, not quickly. The foreclosure and default levels are now at all time highs. 1 in 8 American homes is in default. I have a few buddies in the contracting, landscaping and asphalt business. They just can't find work, or are working so cheap to get the job it almost isn't worth it. One of them just fell 90 days behind and just got fired.

On the flip side(pun intended) I have another friend that has successfully flipped 5 homes this year. Each flipped for a decent profit. I know there will be any money to be made in the car business the next few years. There are wants and needs, and people are only spending on needs right now. If you have a car you don't need another one. I hope to be out of business by October.

The government scares me. The things they are doing is only going to stretch out the pain. Cap and Trade, and the health care reform is going to pinch small business in a big way. It will cost millions of jobs. Obama playing "Rob in da hood"(Robin Hood) Taxing the rich to give healthcare to the poor will backfire miserably. Over taxing the rich will cause further investment decay, and possibly the wealthy and their businesses to leave the country all together.

The stock market is sideways, and more cash is on the sidelines than ever. The only way to get a mortgage is through the FHA, other than that banks just aren't lending. Hell you can't even get a credit card, a 5000 dollar personal loan, or lease a car. Until lending comes back we are dead in the water. I see the downward spiral continue for another 3 or 4 years, and an overall crappy economy for the next 10.

I think buy and hold, reasonably low to mid grade rentals the way to build wealth. You need to buy cheap enough(which at 50%LTV you can right now) to be able to undercut your competition, because rental prices are coming down. Household startups are at an alltime low. Kids coming out of school can't find jobs and are just chillin with Mom and Dad. I think that banks are starting to get reasonable enough that you can buy a few flips as long as you can sell below market, and stay under 200k purchase prices. The market may be slow but people are still buying if they see a perceived value.

I would love to hear other peoples comments on where they think this trainwreck is headed, and what they plan on doing to profit from it. I think the next 10 years will be the best time to be a contrarian Real Estate investor, both on the flip and buy and hold side. I think it will be harder than in the past, and you must be willing to play the landlord game for the next 12 to 15 years before you can sell for a big hit. I also think that learning how to short the stock market, and learn how to option trade a sideways market will be good income streams. The next thing I need to do is have a low overhead cash flow business. Possibly home inspections, especially with the cap and trade inspections coming. What's your thoughts on the trainwreck, and what are you doing to profit from?

Contrarian success story

Just talked to a friend who is a Norristown landlord. He has bought close to 20 homes in Norristown this year for around 40 to 50k a pop. He has added around 9k a month in positive cash flow. At 40k for a property that can rent for 1100 a month sec 8. Depending on how you borrow the purchase money you could have around a 400 to 500 dollar a month positive cash flow per unit.

Here is a hypothetical contrarian riches analysis. Buy 40 properties in Norristown over the next 5 years. You plan on holding and being a Landlord for 10 to 13 years. At 20k per month cash flow it's 240k per year times 10 years is 2.4million cash flow. Now it will be safe to assume these properties will sell for 75k 10 years later. That is fair market value today. On the conservative side we are making a 30k profit per unit pre tax, which will be around 23k after tax. Based on these numbers there is just short of a million dollar profit. All told between cash flow and capital gains the investor stands to make around 3million bucks on less than a 2 million dollar borrowed investment. Anyone got 2 million bucks to lend???? That's the missing link to this 3 million dollar puzzle.