5 Reasons NOT to buy US real estate

http://nomadcapitalist.com/2014/04/01/five-reasons-buy-us-real-estate/

Five reasons not to buy US real estate
by Andrew Henderson | Apr 1, 2014 |

The future of US real estate investments?
Dateline: Tallinn, Estonia

I frequently talk about my five magic words for enhancing your freedom and prosperity: “go where you’re treated best”.
This is based around my idea that no one place is perfect for everything. For instance, the country with the world’s safest banks… but that charges you $80,000 to register your car if you dare live there.
In my mind, the US real estate market has been propped up by a bunch of people who don’t follow that rule. How many Americans do you see buying foreign real estate? The insular nature of American culture means that, unlike wealthy Russians or Chinese who gobble up overseas properties at lightning speed, few Americans look beyond their own borders for opportunities.
Worse, the US government’s fascination with thrusting homeownership on the public – complete with unsustainable tax deductions that makes every homeowner a crony capitalist – distorts the marketplace.
Back in 2005, I was just starting my business in the broadcast infomercial industry. I was living in Phoenix, Arizona at the time and real estate was hot as a pistol. People were camping out in front of new developments to pay insane prices for plots of land with little cookie cutter homes on the edges of the desert.
For me, this was good business. The real estate industry in California, Arizona and beyond was spending money like water. Everyone with a pulse wanted to produce radio infomercials for ego and profit. But as much as I enjoyed the success, I knew one thing: buying some tract house at an inflated price was a recipe for disaster.
Back then, my clients were shouting at radio listeners that “mortgage rates would never get any lower!” The idea that you could finance a house for 6% interest was unheard of at the time, and every bartender-turned-mortgage guru was making sure you knew all about it.
Of course, they were merely salesmen, not economic prognosticators. I later purchased a house not only at a fire sale price, but a 3.75% interest rates.

The point of this is simple: I benefitted from the mortgage frenzy in a way that benefitted me, without having to deal with the bad parts (such as buying a home that would plummet in value).
When I decided to travel full-time rather than just six months a year, I made the long-term decision to sell that house. And when the real estate agent told me I would earn a 60% return on a short-term holding, I knew something was wrong.
Yes, my conscious decision to wait until the bottom fell out of an obviously exuberant market paid off handsomely. But it paid off handsomely in large part because prices got so low that every hedge fund was buying up properties to rent out, drive up prices, and eventually dump. I believe that the nice price drops are well on their way in places like Arizona as cash buyers exit the market.
Five reasons not to buy US real estate
All of this got me to thinking about all of the reasons not to buy US real estate. I came up with five reasons not to buy, and I’m open to your comments below.
Poor rental yields
The average gross rental yield in the United States is a measly 4.2%, narrowly beating yields in Canada. Of course, Americans and even some foreign investors can get mortgages with as little as 10-20% down, making leveraged yields higher. Of course, the amount of leverage in the US real estate market is a large part of the problem.
Anyone with $25,000 lying around can become a landlord, often having no clue what’s involved. When he or she realizes they should actually have a few bucks stashed away to fix a leaking roof, they could lose the property and effect the entire market.
I saw this firsthand during my regrettable seven months living in California, where a guy earning $80,000 a year (in Los Angeles, mind you) not only had a highly-leveraged primary residence valued at $1 million, but owned four new construction condos in the suburbs that he paid $400,000 each for.
I can’t say I was surprised when I started getting foreclosure notices in my mailbox one day.
If you have no money and want to gamble in the US real estate market, go ahead. What do you have to lose when not putting up your own money? If you actually have some money, though, you shouldn’t settle for a 4.2% yield – nor the likely possibility that your fellow investors will crash the market.
Many of the places I’ve been in Asia offer yields of 8-9%. In Nicaragua, I saw a few properties with gross yields as high as 13%! (That’s why I’m offering anyone who joins The Nomad Society this month gets a free ticket to a three-day investment tour in Nicaragua.)
As a lifelong investor, I understand the power of leverage. However, the fundamentals of the US market are weak and don’t allow for much growth without leverage. This forces a bunch of ill-advised investors into the market who may ultimately increase your yield merely by causing the value of your property to plummet.
If you don’t have a lot of money to invest, there are plenty of properties in frontier markets like Cambodia for around $30,000 – the same as an investor’s down payment on a starter home. And because fast-growing markets like that actually have fundamentals for their price increases, you can actually do fix-and-flips that are based on real value, not bubbles.
Speaking of fundamentals..
The US real estate market has weak fundamentals.
What will drive US real estate going forward? One of the world’s lowest birth rates? The country’s declining status as a “wealthy” country? Most Americans would be surprised to learn that Singapore, not their homeland, is the richest country on earth. Next up: Luxembourg, Qatar, and Liechtenstein.
Americans who understand how bankrupt the western world is likely wouldn’t want to invest in Italy. The average salary in Italy is only about 18,000 euros. However, salaries in the United States are declining, as well.
On top of that, while there is a trend on “onshore” some jobs back from places like the Philippines, I believe further anti-business government policy will cause a long-term elimination of jobs due to further offshoring, companies moving their operations overseas, and technology replacing positions.
If real wages are decreasing, who will buy your real estate for a future appreciation gain, or rent it for a good rental yield?
Very little growth in the US is truly organic. It’s all on paper. In Southeast Asia, growth is very simple. People are getting better educations and higher paying jobs as their countries experience more entrepreneurship, more tourism, and more of other things that allow wealth in the country to increase.
The US, on the other hand, has just about hit a brick wall. Compare the number of people getting MBAs who would have dropped out of high school thirty years ago to sell gum on the street. In the US, the number is very low. In Cambodia, it’s very high. That is good for emerging markets real estate, but not so good for US real estate.
On top of that, governments can vote to keep investors out on a dime. Canada recently torched its Immigrant Investor Program, which attracted thousands of Chinese millionaires to buy high-end real estate in Toronto and Vancouver. Now that the government cancelled the program, real estate experts in Canada are bracing for the worst.
A single act of jingoism could send the value of your real estate tumbling.
Governments can (selectively) increase taxes on a dime.
Sure, this is true of any jurisdiction. It’s the same reason I wouldn’t be in a rush to buy real estate in Spain even with their offer of second residency.
But among “gotcha” tax jurisdictions, The Land of the Free must take the cake. This is a country whose President claimed his Obamacare wasn’t a tax… only for the Supreme Court to later rule it was to avoid having it overturned. The US government is the master of playing both sides of the coin.
Let’s say you’re doing well and you buy a nice home in the US. Your local or state government, which is likely drowning in red ink from decades of fiscal imprudence, realizes it needs more revenue and decides to append a “luxury property” assessment to your home. After all, you’re not living in a trailer park with the 99%, so you ought to be the one to bear the burden, you greedy fat cat.
While there are laws in states like California that purport to cap property taxes, there’s nothing stop almost any government from imposing “special fees” or something similar to wring more money out of you. In jurisdictions with no caps on property taxes, governments can simply raise rates. If you think they won’t, remember that “it’s for the children” is the easiest way to get voters to approve a new tax on you, and property taxes are part of what funds schools.
American voters will gladly raise your cost of property ownership in two seconds.
If you’re buying US real estate as an investment, you could be equally vulnerable. In a country where success is demonized and the rich are viewed as being deserving of punishment, it’s not inconceivable that local governments could impose special taxes on rental property. After all, owning a house you live in is one thing. Renting it is another.
The US government has proposed taxes and fees on investors from Wall Street to Main Street, and they’d be all too happy to curb your already mediocre rental yields by making you pay for their fiscal waste.
US real estate is denominated in US dollars.
An obvious but an important point. As the value of the US dollar declines and countries like Russia seek to wean themselves off of the global reserve currency, the global value of your real estate assets in the United States will decline. Sure, you’ll be able to buy locally made products (how ironic, right?), but imports will cost a fortune.
Remember what happened when Iceland’s economy totally collapsed several years ago? It cost a fortune just to go to McDonald’s. I suppose some American investors don’t ever intend to leave the United States to begin with, lessening the blow of a US dollar collapse on their lifestyle, but everyone will feel the pain.
Courts can seize US real estate, even if it’s held in an offshore trust.
We talk here about the benefits of using an offshore trust to protect your assets, not only from creditors and angry ex-spouses, but from future government confiscation. However, the entire point of an offshore trust is to be offshore.
If the government where an asset is located wants that asset badly enough, it will get it. Governments have repeatedly shown they don’t respect even their own rule of law.
One recent example of this involves infomercial king Kevin Trudeau, who is currently serving a ten-year sentence for “contempt of court”. While Kevin rented his primary residence in Chicago to avoid asset confiscation by a government that was constantly at odds with him, he did own a property in California through an Isle of Man corporation.
When the government imposed a $37 million fine on him, it eventually got around to forcing the sale of the house. Had it not been encumbered by a mortgage, the government would have sold it and pocketed all of the profits. That’s because some nut job on a California court could easily circumvent any provision of an offshore trust he likes. It may not be “legal” according to the laws of the trust, but what does a bankrupt nation care about other countries’ laws?
After all, the United States has been busy enforcing FATCA on as many other countries as possible, forcing banks in other countries to PAY for the privilege of tattling on Americans who bank with them. The United States doesn’t respect other countries’ laws, and if they ever claim you owe them money, no amount of asset protection will save you from the wrong court.
Of course, some of these reasons to avoid real estate investments in the US could be applying to other bankrupt western countries that have a kleptomaniac streak. When it comes to investing in real estate, “go where you’re treated best”.
http://nomadcapitalist.com/2014/04/01/five-reasons-buy-us-real-estate/

Common Core creates new wave of home schoolers!

A new out-break of freedom as GenX parents reject statist monopolized education!

The department of education is barely older than most of these parents, yet it continually speaks to them as if they were the children.

Children are people- not mechanical property of parents or the state. Children deserve to have choice in their educations, not statist-mandated   tests and programs.

Adults enjoy free choice. When you go to lunch , you have dozens choices- Asian, Mexican, home-style, Italian, smoking and non-smoking.

As an adult, you typically enjoy your lunch due to the CHOICES you have. No one forces you to eat the same lunch day after day, much less a lunch mandated by an-ever shifting cadre of statist nincompoops.

Homeschool is a great way to introduce freedom and enjoyment into the educational life of the children in our families. Let them develop curriculum that enhance their talents, and challenge them.

We love them, we want them to grow into thinking individuals and not robots.

Homeschool offers the best chance.

 


 

MORE PARENTS CHOOSE HOMESCHOOLING DUE TO COMMON CORE
by DR. SUSAN BERRY 27 Mar 2014 241 POST A COMMENT

As Common Core champions like Jeb Bush, Bill Gates, and the U.S. Chamber of Commerce continue to attack parents, teachers, and taxpayers for what they claim are “myths” spread about the centralized standards initiative, many parents across the nation are not convinced.
They are refusing to subject their children to the stress, pressure, and confusion associated with the Common Core by opting out of the assessments aligned with the standards, or by withdrawing them from school and choosing homeschooling instead.
WHNT 19 News in Alabama reports a growing number of families making the decision to withdraw their children from school in order to homeschool because of “confusion,” “chaos,” and stress related to the Common Core standards.
“It [Common Core] has caused chaos in our house, and it’s not worth it,” said Lori Peden, who has withdrawn two of her children from McBride Elementary in Muscle Shoals, Alabama. “The teachers are not comfortable teaching it. They’re frustrated. Parents are upset, kids are not making good grades. That’s what I’ve seen.”
Peden said she never had plans to homeschool her children, but did so after she observed her son struggling with Common Core math assignments in which he was required to find and learn up to half a dozen different pathways to the same final answer, an endeavor that created confusion and constant stress.
“In math, they take a very long road to go a short distance,” said Peden. “You’re fighting over which method to use and how to figure out how he needs to do it. It’s a lot of time wasted, a lot of effort wasted.”

Megan King, a parent from Kansans Against Common Core, is also homeschooling two of her children because she is unhappy with the Common Core standards.
“My oldest is in middle school, and is on an advance track that I felt comfortable leaving him where he is at, but even with him I am seeing problems in the area of English,” King told Breitbart News.
King said she pulled her kids from public school as Common Core was being implemented.
“I noticed the dumb and confusing way math was beginning to be taught, and as I looked more and more into Common Core, I didn’t like what I was seeing on so many levels,” she explained. “My 4th grader had only read one literature book through the year. I asked his teacher about their reading and she said they had been reading small non fiction books (informational text).”
“I just felt my kids were not going to learn at a level I know they can and should be learning at,” King said.
Though homeschooling has been an adjustment for the entire family, King said the results have been worth it.
“I do recommend homeschooling,” she said. “It’s very rewarding, but I had to quit my job as a preschool teacher in order to homeschool, so we have had to really tighten our belt financially. But, even if a state finds its way out of Common Core, it will be years before things are what they were before No Child Left Behind and Common Core, so we, as parents, have to get creative and find new ways to educate our kids.”
Justin and Jennifer Dahlmann of Kansas also have decided to homeschool their children in response to the implementation of the Common Core standards.
KAKE.com reports that the Dahlmanns, who have four daughters from ages two to nine, said Common Core had been implemented at their children’s private school.
“Our own kids were taking these standards that are driving the curriculum and we didn’t know anything about it,” Justin said. “That’s when we started doing the research on it and realized how overbearing it was.”
The parents asserted that the Common Core standards are making education more confusing, as opposed to encouraging more rigorous critical thinking, as the standards’ supporters tout.
Homeschooling, for the Dahlmanns, is, in some ways, a form of protest of the “top down” Common Core standards.
“If this does nothing more than wake people up to becoming more involved with their children, that’s great,” Justin said. “But absolutely parents need to become more involved in this.”
William Estrada, Director of Federal Relations of the Home School Legal Defense Association (HSLDA) wrote in December of 2012, that he believes “children – whether homeschooled, private schooled, or public schooled – do best when parents are fully engaged.”
Estrada said that centralized education policies do not encourage parents to be engaged in what and how their children are being taught.
“The CCSS [Common Core State Standards] moves education standards from the purview of state and local control to being controlled by unaccountable education policy experts sitting in a board room far removed from the parents, students, and teachers who are most critical to a child’s educational success,” Estrada wrote.

 

1000’s sign White House.gov petition- for Alaska to join Russia

Today for my WTF moment I found this Fox News article. I can understand wanting to secede and I recognize the right to do so- whether from your ex-girlfriend, your boss, your state, or country. But come on, Alaska! You don’t secede to join Russia!
Thousands sign WhiteHouse.gov petition for Alaska to secede — to Russia
Published March 27, 2014

http://www.foxnews.com/politics/2014/03/27/thousands-sign-official-white-house-petition-to-return-alaska-to-russia/?intcmp=trending

Mar. 10, 2014: A frozen beach on the Bering Sea coast is seen near the last stretch mushers must pass before the finish line of the Iditarod dog sled race in Nome, Alaska.REUTERS
Moscow’s annexation of Crimea was condemned worldwide, but some people in Alaska apparently are yearning for the days when they, too, were part of Mother Russia.

A petition on the White House website created by “S.V.” of Anchorage is calling on Alaskans and others to “vote” for Alaska to secede from the U.S. and become a part of Russia.

In less than a week, the petition, titled “Alaska Back to Russia,” has garnered nearly 30,000 signatures, though it’s unclear where they are from.

“Vote for secession of Alaska from the United States and joining Russia,” the petition says.

The petition, though strangely worded and difficult to understand, describes how Alaska was originally settled and populated by native Russians.

Secretary of State William Seward purchased Alaska from Russia in 1867 for $7.2 million, in a decision decried at the time as “Seward’s Folly.” The territory officially became the 49th state on Jan. 3, 1959.

Even if the White House responds to the Alaska petition, it is almost certainly going nowhere. The Alaska petition offers no specifics for how the proposed secession would even be executed, whether by referendum or some other process. Further, the Supreme Court ruled, in the wake of the Civil War, that unilateral secession is unconstitutional.

The White House typically issues an official response to petitions on the official website if they receive 100,000 signatures in 30 days — in this case, the deadline would be April 20. A similar petition in 2012 calling for Texas to secede from the U.S. reached this goal, and the White House responded by saying “our states remain united.”

“Our founding fathers established the Constitution of the United States ‘in order to form a more perfect union’ through the hard and frustrating but necessary work of self-government,” the official response to the Texas petition said. “They enshrined in that document the right to change our national government through the power of the ballot — a right that generations of Americans have fought to secure for all. But they did not provide a right to walk away from it.”

The coming collapse of the international monetary system with Simon Black and Jim Rickards

I suggest signing up for Simon Black’s updates at Sovereign Man. Also subscribe to Nomad Capitalist, International Man, and Capitalist Exploits.

It’s time to start thinking about getting your assets and your ass somewhere safer. The US is like a heavily armed bully, desperately broke and with a serious drug problem.

Do you have kids you want to teach about real money and wealth?

So I have two kids- aged six and nine as I write this today. Like most parents I’ve thought a lot about how to best teach my kids about the things I’ve learned and their parents views on things. Unlike my own upbringing, we decided that teaching them could never take the form of beatings or spankings and that simply exposing them to learning experiences would be better than constant lectures and rules.

One neat area that came up pretty quick due to our farm and rural lifestyle was “how do we properly compensate the kids for all the hard work they do around here?”

As far as most kids go, my kids have it pretty rough- I mean there are animals to feed, beds to be made, animals to water, hooves to trim, wool to keep clean, dishes to do, floors to sweep, coal to shovel, ashes to go out…

There’s composting to do, gardening, weeding, watering of plants, there’s shoveling of all the “by-product” of keeping animals…Image

A lot of parents would look at these little humans as “free labor”, which is just a fancy word for a “slave”. That won’t work in our voluntaryist household.

A lot of parents would pay an “allowance”. But what is that? Nothing sets a kid up better in my opinion for a life time of welfare than a regular payment compliments of the “big brother/big mother” of the house. We don’t like “welfare words” around here.

In my house, we co-own a lot of stuff, like the animals. The sheep we co-own with each other. The goats belong to my nine year old. The hogs are mine. A person’s room is their property, but my wife and I co-own the flooring and walls. Figuring out who owns what establishes responsibility. Private property, when it is established and respected, is the basis for a healthy and productive society- so why not a household as  well?

If my children want to make money for either spending or saving, they make it exactly like their parents do. I advertise different jobs I need doing around the house or the kids come to me with ideas of something that should be done. We discuss what it will “look like” to have it done (or not) and then we negotiate a price for the services. At first prices swung wildly with both the kids competing against each other for the work and trying to “out bid” the other but before long, cooperation and specialization began to occur.

One kid started making both beds so that the other would help with the goats she owned, and the younger one was too little to shovel the “animal products” over the fence into the trailer so he subcontracted that out. There are just a handful of examples, but you get the idea.

Payday is the best of all. How this works is the kids prepare invoices for the old man for the work they’ve done that week. So why other kids are learning which Pokemon beats the others (or whatever the other kids are up to these days) my kids are learning how to run their own businesses. They know about bidding, invoicing, and management. Right now they don’t have a very broad customer base, just the other people who live in the house, but they have a good basis of how things really work.

When they are getting paid, I give them three different options-

1) Get paid in fiat dollars. They pick this one if they want to buy something immediately.

2) Get paid in junk silver coins. They always end up with a few of these because  some invoices include my bills down to tenths of ounces I owe them. Other times they want to be paid in all junk just because they want their “pokes” to get bigger quicker.

3) Get paid in bullion. They really like those silver Buffalo coins, Chinese Pandas, and Perth Mint’s Kangaroos. Anything with animals on them. Of course, my son apparently has a “thing” for Queen Elizabeth II and goes for anything that has her on it.

 

Welcome to FPFM!

People who know me say I’m a person with strong opinions- let’s say that’s true. I have opinions about all kinds of things. But let’s start out by saying I think most folks DO, so how how does that make me different?

It’s what I do with my opinions, and just as importantly-
What I DON’T do with my opinions.

What I don’t do is go around thinking that my awesome opinion ought to be a rule.

I don’t go around thinking that my opinion ought to be crammed down anyone’s throat (but let’s face it- you’re reading this on MY blog so this is different).

And I never, never, never go around thinking that just because I might find a magic number of other people who, along with myself of course, constitute a “majority”….

and that said majority ought to take said opinion and make it into some kind of “law”.

“Law” in quotes? Why?

Because “laws” are just strong opinions someone else thought up, talked the majority of people sheep (assume you live a a so-called democracy here) into petitioning their friendly neighborhood tax-farmer who then goes about forcing the rest of them to follow along.

That’s it. Nothing more.

The basis of all just law is compensation for damages to person or property.
So if you need a law to keep lesbians from getting married, or a law to force a Christian to bake a cake against his will, or a law that requires all 18 year olds of the male gender sign up for possible future involuntary military service…. Than what you have is an OPINION, and that should be kept to yourself.

What does that mean? It means have opinions, voice them, try to convince folks that you have the facts. But never forget-

Good ideas don’t require force.