A Safe Investment Strategy

After years of unprecedented market gains the recent financial meltdown has caused investors nationwide to wake up with a head-splitting financial hangover. Believe me, I know your pain.

The worst was taking a 90 percent loss while vested in a technology mutual fund. Who could have predicted that a well-run fund could lose? It was managed by top notch, Harvard educated managers. That one hurt a lot. Real money saved over years and lost in mere months.

The security of your investments is becoming more and more important these days. Investors want to be able to anticipate decent returns in the stock market, but the market takes them on a roller coaster ride that would be the envy of any amusement park. One day it’s a 200 point rise and setting a new record high on the Dow, then the next a 300 point tumble that takes six weeks to shake off.

If you’re like me, you have taken that ride more than once over the years. It’s happened in a big way twice in the past decade alone!

The series of highs and lows can leave you with a feeling of hopelessness. How can you know if a company is cooking the books? How can you predict if there will be another terrorist attack that will cripple our Country for months? Who has a crystal ball that can reveal when the next financial market meltdown will wash over us? Whenever these cycles hit personal fortunes are wiped out in a blink of an eye.

You may be thinking, “So what else can I invest in?”

The answer is to invest in real estate…but maybe not in the way the first comes to mind.

Real estate is an asset that you see and touch, is insured, and produces monthly income. Historically it is one of the safest investments available and there are several ways to get started. Here’s a few:

1) The “Speculator” Approach – you could become a real estate “speculator” and buy properties with the hope that they will go up in value and allow you to reap windfall profits when you sell. Of course, this type of approach has a large amount of risk which has left large numbers of speculators who were consumed with “Flipping Frenzy” over the last few years in a very tough place when the market turned and did not favor their investment approach.

2) The Landlord Approach – on a more traditional level, you could buy a home, duplex, or small apartment building and rent the property out. Over time as you collect rent your tenants will pay off your mortgage. This does take some time, work, and experience. This approach is rather safe and can result in a good return in both the short and long term. The downside is that there can be a large amount of time required to make this work.

Now what if you find yourself in large group of over 200 Million Americans who want the benefits of real estate investing but don’t have the spare time or hard-nosed demeanor needed to be a successful landlord? While not as well known as the first two methods, there is a third approach.

3) The Passive Method – this style of investing is known as making “Private Mortgage Loans”. Private Mortgage Loans, when set up properly, can provide your portfolio with a great return in any real estate market. Up, down, flat…it doesn’t really matter.

The investment model is simple. You directly loan money, at a very low loan-to-value, against a piece of real estate. The borrower is typically a tried-and-true veteran landlord that has a portfolio of equity-rich properties and also is familiar with the ins-and-outs of finding tenants and managing rental property.

Your return comes in the form of interest payments from your borrower and because you establish the loan terms together you can have the payments come regularly or have them rolled into the loan and paid out in one lump sum when the loan term is over.

To provide you with the safety you want, your investment is secured by a first mortgage. As long as you follow common-sense lending practices then you can enjoy a level of confidence in your investments that the stock market cannot provide.

Private Mortgage Lending is a vehicle that can help you quickly recover from harsh stock market losses. Using this approach you can realize returns greater than 10% and never get called to fix a leaky pipe. Unfortunately, most investors aren’t even aware this opportunity exists.

Now that you’ve read this article, you can’t claim ignorance as an excuse. Stop what you are doing and start looking for someone who needs a private mortgage with whom you can do business with. Find a landlord at your local real estate investor association, hit a round of golf together, and see if it makes sense to do business together. Then take action and make your first investment. Start small if it makes you feel better, but get started.

Failure to take action puts you in jeopardy of letting it slide to the bottom of your to-do list. If that happens, in a year you’ll wonder why things have not changed for you financially.

Investment Capital Gives New Mexico Businesses a Boost

As New Mexico’s lieutenant governor, one of my highest priorities has been to support small businesses throughout the state. I’ve owned a small business and know the challenges that confront people like me – particularly in finding the money and getting well-founded advice on how to start and maintain a business. The largest chunk of the business community is businesses that have fewer than 25 workers. While major employers like state, federal and local government, the military, financial service industry and health care providers provide a large number of jobs, small businesses are the ones creating new jobs and providing stability to smaller communities around the state.

In addition to an improved business environment and tax structure, providing investment capital has been a priority of our administration. Investments in large projects like Eclipse Aviation capture the headlines, but they’re not the only ones. Statewide, money to small businesses has been increasing. Private equity capital has been flowing into New Mexico at an accelerated pace, much of it aimed at the vast pool of technology developed at the national research labs and universities.

The State Investment Council has played a leading role in attracting venture capital funds. Since 1996, it has given money to funds that agree to set up shop in the state and invest in New Mexico companies. Those investments have increased over the past few years as nearly 20 funds have helped New Mexico businesses. One of them, Mesa Capital Partners, helped Aridien, Inc., a Belen company that makes the desiccant products you find in packaging. Aridien, which had four workers when it began searching for money to grow, will likely employ 30 people by year’s end, thanks to Mesa’s investment.

The SIC also helped establish a fund managed by local investment professionals who put money into New Mexico businesses. Several funds are now headquartered in New Mexico, and Flywheel Ventures and Verge Fund both raised in excess of $20 million from investors including the SIC. Two other funds, New Mexico Community Capital and New Mexico Growth Fund, were created to invest in traditional businesses like manufacturing, service and distribution.

To aid even smaller businesses, legislators in 2000 created the New Mexico Small Business Investment Corp. With initial funding of $10 million, the SBIC has developed a series of partnerships with financial professionals to make loans and smaller equity investments. The SBIC has been an active partner in the Small Business Forums that I have conducted in 25 communities over the past four years. I am pleased to see that loans have been made to more than 1,300 small businesses in almost every community. These are loans that traditional lending sources probably wouldn’t have made. One went from ACCION to Jerky by Art, a one-man beef-jerky manufacturer who went from feeding only his friends to shipping his 20 flavors all over the country.

Based on these successes and the growing need for help, legislators increased the SBIC’s funding to more than $45 million. Gov. Bill Richardson and I have actively supported these increases with the hope that more New Mexico businesses can qualify for investments or loans. To help expand the investment program, I am pleased to announce that the SBIC and its partners have formed an initiative called Finance New Mexico to teach small businesses how to get money. Training and resource providers, including the Small Business Development Centers, Empowering Business Spirit, ACCION NM, The Loan Fund, WESST Corp and others, are partnering with the SBIC and its financial partners to make it a bit easier to get loans or investors. With these weekly articles, electronic broadcasts and a Web site, Finance New Mexico will give business owners critical information about strengthening this backbone of our economy.

Look for future articles to assist you in obtaining business skills and funding resources for a start-up or existing business.