Financial Porn

Financial Porn
http://i.investopedia.com/inv/dictionary/1.gif A slang term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investors' financial health. Short-term focus by the media on a financial topic can create excitement that does little to help investors make smart, long-term financial decisions, and in many cases clouds investors' decision-making ability. http://i2.investopedia.com/inv/dictionary/2.gif Expanded media coverage, specifically the advent of 24-hour cable news networks and the internet and the tools it has provided the financial industry, has led to a large increase in financial porn.

Examples of financial porn include constant advertisements of easy-to-use trading-strategy products that purport to turn minimal investments into small fortunes, media coverage of the latest and greatest sector trends and magazines with front pages that claim to have the next 10-must-own mutual funds of next year. Many of these products and ideas expose investors to great risks posed by both the movement of the market and the risk of fraud.

The term was first coined by Emmy-winning Jane Bryant Quinn who is an American personal-finance writer.

And this includes all the so called Holy Grail methods.

I won't be able to make a fortune from foreclosures with no money down?

It's possible. Very possible, and actually getting a little easier in this down market.

Rule of thumb in US: All foreclosures need to be paid in cash!!!

When they say 'no money down' they usually none of your money down. They mean a bank or private investor's money--something hard to come by these days.

Hehe. My dad does pre-foreclosures. The problem is most houses have no free equity as the values have flipped.

Makes no sense to take on those kind of properties, and when it goes thru foreclosure the bank gets first crack at the deed. They'll take the property, and most of the time there won't be anyone else bidding on it because subsequent bids have no equity to cover them. So the bank takes the property and holds onto it. At that point you're in the bank-owned properties market, and various banks have various ways of handling that. In order to work w/ a bank tho you'll need to be able to qualify for a traditional mortgage... which means a down payment, a steady income and good credit.

The alternative is to take properties that have no immediate equity, haven't entered foreclosure yet, but could be fixed up and improved. Pay off whatever is owned to the bank, take the property on contract, do the work, then refi&rent (with a lease option) or flip it out. Since you're taking the property on contract you don't need a standard down payment, but you still need cash to make everything happen. Nobody's going to give you their house if you bring nothing to the table, and hard money investors will charge a fortune in interest. If you've got a track record w/ a mortgage company you can get a construction loan instead, but you've still got to have good credit and an income to make it all happen.

I prefer tax deeds personally. You pay the amount of taxes that's owed, but you keep track of all your expenses the right way and it all goes to redemption. You have to do a title search and send out notices to all substantial parties, which usually means the mortgage holder. They have the option then of paying you what's owed on the tax deed (meaning your risk is very small, basically break-even minus the time you've spent on prep work), or letting it go thru to proof. If your deed is proofed you can file for a quiet title and take ownership of the property in the clear (mortgage goes poof). The risks are much more defined since you can always choose not to take to deed if the property ends up being garbage, and the rewards are whatever the property might be worth. If it goes to deed you can flip it out to other investors, have them do all the fix-up work and let them have half the equity... passing on all of the carry and repair risks in the process.

Anyway, it all goes to risk. Which is what "financial porn" is all about. A bunch of garbage that understates the risk in a way to make things look waaaayyyy too easy. There's risk everywhere, know it before you get involved.

I've been doing tax liens and deeds for awhile now.

In fact, a good chunk of my profits from forex have been going there for awhile. Rabid, any chance we can talk more in private (off forum or member's lounge) about tax liens? I'm trying to start an LLC to 'invest' in them. (and subsequently remove any personal liability I may get).

Absolutely, msg me or use the IM icons and we'll chat. I actually came the other direction, started a business, invested the profits in real estate, flipped them to my dad and let him manage and run the rentals for a finder's fee, took that money and traded w/ it.

I've avoided using real estate as the end product since I really don't enjoy being a landlord, still it's a good way to get into a home. We've been hit so hard locally that some places are being sold at 50% recent appraisal by, get this... real estate agents. The irony is that I still rent, laff... mostly because I don't feel like doing yard work when I could be taking an afternoon nap instead.