Kona Kohala Blog

Wow!  What a crazy 100 days it's been since obama took office.  I never dreamed one person, okay, three people if you count Princess Polose and Prince Harry, could dismantle so much of our country in such a short time.  I really didn't think so much damage could be inflicted and still have most of the populace thinking this guy is helping.

Just like Juan Peron and Hugo Chavez, obama has nationalized first, our banks, now our auto industry.  He has single handedly scrapped private enterprise and replaced it with government controlled industry and we all know how well the government does with industry.

After dumping untold billions of dollars into the failing auto industry he's admitted it didn't work so he's turning the majority ownership over to the union, the UAW and all that tax payer money, yours and mine, is lost.  Do not doubt for a moment that what we are seeing is socialism, pure, unadulterated socialism.

So, what does this mean for investors?  Buy real estate!  Why?  Let's start with all the funny money that's been printed in an effort to save industries and companies that should have been left to die.  Interest rates are being held down by the feds, the private banks (yes, the federal reserve is a private banking consortium) are being told to keep rates down against their better judgment.  One of the reasons loans are so hard to come by is that the lenders can't make obscene amounts of money loaning at 4% to 5%. 

Given a little time, we'll see all this new money hit the streets and we're going to have inflation.  When the begins, probably by years end, the feds will have to raise interest rates giving the banks official approval to raise their rates.  Loans will start to be made.  As time goes by, inflation will continue to grow; it can't help but happen when you create over a trillion dollars in play money.

Why real estate?  Let's say you buy property today at todays rates and you're paying your mortgage in todays dollars.  When inflation begins we're going to see it spread across the board meaning we'll be paying more for everyday items but we'll also be making more.

If your budget allows you to comfortably make payments on a home or second home or even an investment property then when your income goes up with inflation, that mortgage will make up a smaller percentage of your income.  This is assuming you get into a fixed rate mortgage which, today, has a lower interest rate than an adjustable loan.

The value of real estate will also be going up giving you even more equity and buying power.  Remember, everything cycles so we will recover from this recession but we will also have a down turn following the up turn.  Planning ahead now for the turn around can not help but be in your best interest.  Property is on sale and while we may not yet be at the bottom, we are close.  Buying real property is an excellent hedge against the impending inflation.  Even buying an investment property now that you can sell when you're ready to retire will provide the money you need then to buy your dream home at the then market value.

As long as the administration understands that a strong housing sector is the only guarantee of a strong overall economy they won't mess with it.  Housing will not be nationalized like so many business sectors like banks, finance and now the auto industry.  Real property, held for a substantial length of time, minimum of 5 years, is the best investment you can make. 

Talk to your investment and tax advisors.  Make sure this kind of investment will not cramp your style and that it fits in your budget.  Make sure that you won't have to sell before the market has had time to recover; be conservative in all your estimates then seriously consider real property as a viable option for your portfolio.

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