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Books : Insiders guide to 52 homes in 52 weeks ( Financial )

First, an agreement of high moral character should have the equitable characteristic that a value offered should be equal too the value received between two parties. The casino economy relies on gaming theory and odds yielding disproportionately favoring one party over another in competitive drives for profits.

Motive for profits is always difficult to discern. One profit motive could be the author devised sure fired method to become the real estate broker for 52 homes; he researches homes that are nearing foreclosure or individuals suffering from divorce, high consumer debt, or unemployment; he offers the individual 5k with the agreement, the individual will transfer title and the individual will vacate the home allowing the trader too rent the home at a higher monthly rental price with the agreement at the end of 2 years to pay a fixed amount upon the sale of the home. The trader agrees to pay the initial owner of the home a fixed amount of money and hedges for profits on the margin as local housing prices climb over the next two years due to strong marketing in the region and increased demand. Higher margins in rental prices also hedge down the risk for the trader in case the housing market takes a turn due to recession forces and softens the blow of bankruptcy should a significant number of homes lose value. The trader demonstrates a remarkable ability to acquire 52 homes then after two years market these homes, selling 80 percent of them, which makes him a phenomenal broker with an exclusive clientele. If the cost too broker 52 homes was 5k a piece, one would think that more real-estate agents would follow suite. The incredible appreciation in the value of homes has cause a renewed interest in employment seeking real-estate licenses. In 2006, 800,000 new real estate jobs hitting the market seeking sellers willing to share 6-7% profits for the sell of the home. The trader is gaming for much higher returns on his investment.

The second motive to acquire 52 homes in 52 weeks was to capitalize on market appreciation margins. If home prices were statistical actuaries then building a computer model would be in order. If such a mathematical model were built than minimal profit margins could be calculated based on the trajectory of future home prices. The profit margins could range from 10% to 50% or more after two years. The trader may argue his profits are not dishonest because a contract was agreed upon; the trader may tell the initial owner the profits are justifiable because he carried the risk for two years where the market could have turned sour; and the trader may argue that the profits are part of the casino economy or the game being played. The initial owner will remorse and cry that the deal was unfair and the trader will tell him, “you don’t complain when you buy a car that the price is unfair. The market determines the price of the car”, “how am I different” because two years previously there was no indication of mania, so the projections were seemingly accurate and not deception intended. The trader will argue against market timing and accurate price predictions and suggest the real risk was on his shoulders.

Manias are like jackpots, the payouts can be enormous, however, assuming no real estate Manias emerged the real estate sale payoff would remain reasonable with a couple of million dollars being capitalized. The trader is under no contractual obligation to share in an unpredicted increase in profit margins with the initial owner of the home. “Let the buyer beware”. However, if the profit margins become public knowledge and the initial buyer become angered then the trader will need to exit and look for new territory. Catastrophe is the unknown series of events that triggers panic.

The risk management involved in buying 52 homes in 52 weeks suggests either that the investor has deep cash reserves in case of a panic or that the loaning banks have become extremely liberal in their loaning practices. Rental income is a short-term security against suddenly trend changes. During recession the trader will slow down the number of home being sold and reduce his profit margin. However, during depression the trader is sunk. The homes are liabilities, trouble with renters making payments threats mortgage payments, the house values drop, and the banks call in the defaults. The trader is busted. The banks loaning the money are using investment money to create earnings. Quality investments are ignored and replaced with opportunities to loan out money for interest. The housing prices have a ceiling and eventually correct as over optimism drives down the price as buyers repent and return to more conservative price values.

IRS liens on a home are dangerous. The liens can be purchased by third parties and if the initial homeowner does not pay the lien within a time limitation ownership passes too the third party. The third-party can then payoff the lien and sell the home for profit. The third party is betting that the type of person with an IRS lien on his home is either incapable too repay the loan or incompetent of the danger lurking around him. This loophole exploits the vulnerability of the homeowner and disproportionately favors the trader in the transaction. In this case the trader will lose no money.

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