Tag Archives: PeoplesAlly Foundation

1202 2012 Conference speech – FARJHO as a solution to the scaling problem for property investors

I spoke last week as a panel speaker on the scaling issues for investors at a conference for institutional investors to treat single family residences as a new asset class for institutional investment. The conference is dubbed “Single Family Aggregation : REO to Rental Forum – A Forum for Private Equity, REITs, Institutional Investors and Bank Rent-to-Own Programs” organized by IMN on November 29 to 30 at Scottsdale, AZ, http://www.imn.org/Conference/Single-Family-Aggregation-Strategies/Short_Agenda.html. The following link is a copy of my presentation slides “Introduction to FARJHO and SwapRent”,
https://www.box.com/s/wmyjnwhzm8yagrf9gjkx.

Until today, institutional investors such as corporate pension funds, insurance companies, university endowments and non-profit foundations have not been able to treat the single family homes as a separate investment asset class. What is the main reason?

Single family homes, unlike a multi-family residence apartment building, are usually spread out in many different sub division development projects in the suburbs. The management of the entire operations that include the maintaining each individual property with its own landscaping and the dealing with the tenants are usually much more demanding and difficult to handle. As a result, the annual yield derived from the rental income for institutional investors would be reduced for the increased cost to manage these diverse groups of properties spread out in a larger number of geographical locations.

In addition, the turn-over of the renters for single family homes would be much higher since over the past decades, with the easier credit and low interest rates, eager mortgage brokers have found tenants of single family homes as easy preys to sell a mortgage to. “Why rent when you could own at a cheaper cost?” Owners of single family homes hoping to rent would have suffered from much lower annual rental income yield due to the high renter turn-over and higher operational cost for the property maintenance. That by the way also seems to be one of the major reasons why our country has had the sub-prime mortgage induced economic problems at the moment.

The new FARJHO invention which basically turns renters to become co-owners with the property investors at the same time, seems to have solved these problems by killing the two birds in one single stone for property investors. Since the renter would have a vested interest as a co-owner with the other joint property investors in the FARJHO LLC that owns and holds the title of the home property – vacancy will most likely be near zero and the cost to hire a third party property manager is totally eliminated. The renter who is also a co-owner of the property could become the best property manger, care taker, house sitter, business partner for the rest of the joint property investors than a pure renter without an equity interest in the property would ever be. To understand this better, simply ask yourself when was the last time you ever washed a rental car? This seems simply to be another way that the invisible hand of Capitalism is at work again.

As result, both retail investors and institutional investment funds would no longer have to worry much about either potential vacancy or incurring the expense of hiring a third party property manager any more since renters would have a skin in the game with the other investors, and hence, much secured higher yields derived from rental income for all the property investors.

What we plan to do is to use our technology platform at http://FARJHO.com to act as a service provider to institutional funds, accredited investors and/or retail investors from the crowd, i.e. crowdfunding, to find like-minded aspiring and existing homeowners who are interested in the all cash based FARJHO transactions to co-own homes across the country without involving anything related to the conventional home loans or mortgages. The timing will be subject to the successful publication by SEC of the Crowdfunding Rules under the JOBS Act which has been scheduled at the beginning of January of 2013.

In parallel, a currently work-in-progress project of a homeowner’s social networking portal http://WeHomeowners.com or http://WeHomeowners.org will also be set up under our 501(c)(3) non-profit PeoplesAlly Foundation (http://PeoplesAlly.org) for existing homeowners who may consider switching to FARJHO home ownership structure some time in the future. This may even allow the Section-8 tenants to own a small piece of the home equity of a single family home anywhere of their own choice via a Section 8’ed FARJHO that I had blogged about before, instead of having to rent only in a multi-family apartment located at a run-down neighborhood.

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1001 2012 Obama’s HARP, Romney’s housing plan, Bernanke’s QEs or the new equity sharing FARJHO under JOBS Act? – with lyrics from Loca People

It is presidential election season again, so we have started to hear more about the candidates’ economic plans. Nothing attracts more attention from the public than the housing issues. Within the past weeks, we have Romney having revealed his housing plans, Obama having pushed again for his HARP, but  none of them has anything economically new to offer other than using it as another chance to repeat the partisan ideological preaching and the fight over whether government led programs vs. the presumed free market ways to let our country’s housing finance problem heal itself may work better than their political rival’s plan. It seems that they only care more about a simple old fashion plan that appears to work better than the other’s plan rather than supporting an innovative plan that will indeed work but that may incur political risks to introduce.

Disappointed, without getting a satisfactory answer in both of their plans, so I went to the Federal Reserve again. There I found out that Chairman Bernanke and his cohorts were still pumping out nothing but even more and more QEs. All day, all night … All day, all night … All day, all night … Nothing but more QEs to push for more loans, more leveraging and more easier credit, hoping not only to bring us back but to further turbo-charge us to where we had started this whole financial mess from to begin with over a decade ago … I can almost hear Bernanke dancing and chanting at the Fed, Viva la Hipoteca! Viva le Prestamo, Viva los QEs! What the Beep!

So I called up my friend Johnny. I said to him, “Johnny, La gente esta muy loca!”

Well, jokes aside, what we really like to do is to ask those politicians with a real workable housing plan please stand up. For the right, it is easy to just say let the free market heal itself. Free market solutions without the government leadership or competition without rules would indeed simply lead to either a crony capitalism or a ruthless predatory free-for-all anarchy. For the left, once they have replaced the crony capitalism and they’ll easily end up with even worse power hungry crony socialists.

What we need is perhaps not yet another round of old ideological political debate now, but rather some educated rational thinking and technically competent debates of what the new and economically innovative ways may be to own homes without piling up more debts as well as what the new technologically efficient and productivity enhancing ways are to deliver these new economic benefits to the consumers without being misguided and fleeced by unscrupulous financial middlemen yet again. These real stuffs to fix our faulty housing finance system may seem to be what the politicians need to focus on in order to bring the real tangible benefits to our country.

This is the 6th year since I have been researching, publishing and blogging on the various economic benefits of using property equity sharing or cash flow sharing concepts and methods to offer many new alternatives to our current faulty exclusively mortgaged home ownership centric housing finance system. Many of these new findings and creations are available to my personal academic research web site, http://swaprent.com.

More detailed info on the SwapRent original creation process in 2006 is available at https://www.box.com/s/437c60e4d8931365b9e4 and on SwapRent application in the 2009 JHFI (Journal of Housing Finance International) by IUHF (International Union of Housing Finance) paper at https://www.box.com/s/feae725ede7042c53412. For the much simpler FARJHO solution, here again is the link to the FARJHO white paper, https://www.box.com/s/cc0de069ab5c3fd3007e.

Thanks to the democratic power of the Internet, SwapRent and FARJHO have conceptually and academically been gaining momentum and endorsement day by day with a world-wide audience. We are currently preparing to solidify these new innovative ideas and beta launch these new consumer services at the transaction oriented http://farjho.com and a broader social networking portal for home owners, http://wehomeowners.com as our free market based solutions to our country’s housing finance problems. The purpose is perhaps much more mission driven than financial. Since these new services could also be offered on a not-for-profit basis, i.e. through PeoplesAlly Foundation (http://peoplesally.org), we do need many supporters from the crowd to come on board to help us make these new consumer services a reality.

As explained in earlier blog posts, due to the recent breakthrough by a few visionary law makers with their innovative regulatory provisions of crowdfunding and the relaxed marketing rules of private placement funds contained in the JOBS Act, we may finally see the light at the end of the tunnel in bringing these new inventions to life as new free market based consumer services soon.

Viva la Innovation, Viva la JOBS Act, Viva la FARJHO!

(Quoted lyric above from “Loca People” by Sak Noel)

1125 2011 A Thanksgiving holiday message to OWS folks – make yourselves rich by occupying jobs created by FARJHO and SwapRent on Main Street

Once I went to a seafood restaurant in the village while I was vacationing in the South Pacific island resort. I saw many buckets of live crabs laying around the floor. All of them had a lid on but one. I was curious to ask the owner of the restaurant why this particular bucket had no lid on. The owner said, “Oh, those are the socialist crabs. They don’t need a lid. As soon as any crab climbs up higher, other crabs in the bucket will pull them down for sure. So no crabs could ever climb up higher and get out.”

Hmmm …. I sort of got it right away why they were called socialist crabs. The socialists simply spend too much time worrying about how other people would make more money than they do rather than spending time to learn new skills to compete in the free market and make more money for themselves. They seem to enjoy more on how to pull other people down rather than working harder to learn how to climb up themselves to get out of poverty.

Why bother asking us to support their cause to indiscriminately tax all the rich people after some of the 1% may have made their money legitimately through their hard work and intelligence under a free market system? There should be no problems for them to protest to get the people power to mobilize the mass to put those crony politicians out of office and those crony capitalists in jail but blindly ask the country to tax the rich indiscriminately seem to be shooting blank and will not get anywhere. It also seems rather unfair. If those brave OWS folks have the guts, why don’t they simply stand up, shout out loud and name those cronies that have brought our country’s economy to its knees so that there could be a fair trial to bring them to justice?

Our country’s problems are the abusers, i.e. the crony capitalists and politicians that abused the capitalism system, not capitalism itself.

So if there are innovative ways (e.g. FARJHO and SwapRent) created by organizations like PeoplesAlly Foundation that common people on Main Street could finally get to bring the housing finance business and hence the money back to Main Street and let Wall Street cronies become the losers in a fair competition under the free market system, why wouldn’t that be a better choice? It did not happen before due to the intellectual power that Wall Street had long held for them to hold our nation hostage. Wall Street always seem to have the money power and political power to suck even more talents to feed on their own success. That is the situation that needs to be changed, through competition, not revolution!

Why can’t we try to bring the brainy power from Wall Street back to Main Street and have them work for common people on Main Street? If we could deploy these new equity sharing based housing finance innovations of FARJHO and SwapRent provided by PeoplesAlly Foundation through the credit union industry and the local community banks to compete directly with Wall Street with their dysfunctional mortgage securitizations system and their loan shark culture to beat the hell out of them, wouldn’t that be a more glorious battle to fight for?

If protesting could do anything for the OWS folks why don’t they focus on rallying the political power to make sure Main Street could have a level playing field to compete intelligently with Wall Street in their own games of finance in order to bring the housing finance business back into their own hands and manage it intelligently to create wealth for themselves on Main Street?

As I said before, the OWS folks may be able to occupy themselves with many more new jobs created by these new equity sharing FARJHO and SwapRent related business opportunities and in the process, they could also get themselves much more decent and comfortable shelters on Main Street through FARJHO and SwapRent than simply sleeping in cramp tents in Zuccotti Park or other city squares.

0707 2011 FARJHO combined with Section 8 rent assistance – Section 8’ed FARJHO!

Recently I attended an excellent seminar put together by the Orange County Housing Authority explaining how Section 8 rent payment assistance program works in Orange County. We have been on the lookout for developing more FARJHO and SwapRent based housing affordability programs for PeoplesAlly Foundation so that the new economic benefits could extend to low income working families. It seems that there potentially could be a great match.

One of the very convenient ways for Joint Property Investors (JPIs) to make lower risk investment through FARJHO LLC structures is to pair up with the Section 8 recipients in each state as the AHOs (Aspiring Home Owners). Since these potential partial home owners are most likely low income working families therefore these services are handled and provided through PeoplesAlly Foundation instead of InvestorsAlly, Inc.

The goal of both PeoplesAlly Foundation (PA) and InvestorsAlly, Inc. (IA) is to provide free market based solutions to housing affordability, joblessness and unemployment of our capitalist society so that capitalism could stay intact, irrespective what may happen next to the middle class American people in the unfolding economic crises. None of the solutions provided through either PA or IA would be dependent on tax payer’s money. Free market based solutions are absolutely a must to save our country’s economic future.

The reason why it may provide synergy when linking up with the Section 8 rental assistance program is that FARJHO could make the assistance money for the working poor already committed by the Congress to work much more efficiently. Here is how.

Section 8 rental assistance payment recipients could already choose where they want to live. It has become a tenant oriented assistance program since 1998 rather than building specific as in the past or as in many other affordable housing projects which are often plagued by many problems. So what if some of these recipients have worked hard and earned some savings or inherited some small sum of money? Let’s say it is $50,000. It is not large enough to buy a home here in Southern California and they can not use it as a down payment to borrow a mortgage to buy a home with a 100% ownership since they have very low income to service the debt.

Why not let them own a piece of the property that they rent through the FARJHO structure? It would be a win-win for the Section 8 rent assistance recipients and the landlords. By having a part of the ownership, they would treasure and love the homes that they rent from the Section 8 approved building landlords. They would get to have a percentage of future appreciation value of the property that they own and they would take care of the properties as though it is their own. Most importantly, it would develop a self prestige that they may have become a proud home owner (although partial) and be a more useful and stable member of the local neighborhoods that they reside in. That could be one of the best features of capitalism at work made possible by the new FARJHO structures. Landlords would for sure no longer have as many problems with the tenants as they once did!

Furthermore, since the Section 8 recipients could choose where they want to live, they no longer have to reside in multi-family housing complexes. It is a perfect chance for some of them to choose a dream house to buy through FARJHO from the pools of HUD REOs or even the Fannie Mae Homepath REOs so that they could help our governments clear those massive unsold REO inventories.

Isn’t this a perfect way to help the working poor in America realize their American dreams without using any more of the tax payer’s money or using any form of those dangerous mortgages and/or securitizations?

We look forward to starting to work with some of the housing authorities in many cities, counties and states in the near future to make Section 8’ed FARJHO a reality soon.

 

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