I was speaking last week with a long-time friend who is a senior executive with one of the major banks in the country.
He told me that the new strategy for his bank (and the other big ones are on the same track) is to create loans that amortize over a 25-year period instead of the traditional 30-year period.
These new loans are five year fixed interest rate loans that are fully amortizing with a balloon due at the end of the 5th year.
The bank's goal is to set their customers up so that they will refinance in five years.
The bank's expectation is that in five years rampant inflation will raise asset prices dramatically, making refinances easier.
Further, many of the problems that exist in the economy now will have taken care of themselves, and refinancing should be easy (or easier).
This executive is convinced that the bank is not setting their customers up to fail, but rather, they are setting their customers up to be able to take advantage of the improvement in the economy five years from now.
This strategy should tell all real estate investors exactly how they need to move.
Now is an excellent time to begin buying real estate for hold periods that do not last longer than five years.
Inflation will create an appreciation opportunity that will be tremendous.
Even though today appreciation does not exist in the marketplace, the appreciation opportunity will return not long from now.
And right now, like always, cash flow is king because it reduces the risk of not being able to make payments during tough times.
Get in, grab some appreciation, and get out - or reevaluate and refinance.
Economists and financial executives who I know around the country feel the same way, and therefore, it is reasonable for some investors to take advantage of the dip in the economy that has washed out so many other investors.
Let's call this the "5 Year Rule.
" The transfer of wealth from people who have had a lot of assets in the past to those intent on making tremendous amounts of wealth going forward, will occur like never before.
And that is the reason that syndication businesses like mine are succeeding.
The reason that syndication presents a tremendous opportunity for both syndicators, as well as private investors, is because those who are unable to take advantage of opportunities by themselves must pool their capital with others under the guidance of professionals who they trust and believe have the ability to rebuild value back into distressed assets that exist in the marketplace.
Regardless of the vehicle that you choose to invest in or through, don't sit back and watch this opportunity go by.
You'll thank me for this advice soon enough.