Well, maybe tea is not the best commodity for this old cliche'. The commodity I actually have in mind is oil. With an explosion in personal income among the Chinese population, the people of

China are well on their way to a growth boom that will easily rival the big industrial boom in the

United States during the early 20th century.

The Chinese government, being the good, forward looking communists that they are, have been quietly planning for this new found growth by acquiring controlling interests in oil supplies around the world. I am watching this trend closely. During a future teleconference we will have a detailed discussion of how excessive demand for oil could affect real estate markets in the U.S.

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Join me for a 90 minute weekly teleconference beginning next Thursday at 8PM. It's only $29 and is limited to the first 24 registrants. You will be live on the call so that you can

ask questions of me directly. I will open with a discussion of specific real estate issues that affect each of us. We will spend about 45 to 60 minutes of each call talking about the real estate investing topics of your choosing. You can discuss a specific deal you are working on, and you can ask questions about strategies or procedures.

Got an issue or question on your mind? Let's talk.

An 800 number and pin code are provided for the call.

For more info, or to register, click here:

http://www.realestateinvestorhelp.com/Weekly%20Teleconference.htm

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As real estate investors, one of the things we enjoy is an industry that has a natural tendency to remake itself to fit the economic conditions at hand. Because demand for real property is so sure and reliable, the residential real estate market as a whole cannot simply outsource to a cheaper country, or go out of business. Rather, the way the deals get completed will adapt and change with the economy.

During the late seventies and early 1980's interest rates for a typical mortgage were well above 10%. At some points, even reaching highs near 18%. This was the era that saw the invention of creative real estate financing. At the time interest rates were approaching new highs, there were still plenty of sellers with mortgages that had been created in the 1950's and 60's. These mortgages had interest rates comparable to todays low rates. This meant that sellers who had these low rates and wanted to sell could create a "wrap" mortgage at a higher interest rate. Sell at a profit, and still provide their buyer with a rate that was lower than a typical lender could provide.

Buy at a low interest rate and sell at a higher interest rate. That is the essence of banking. So, many sellers could see the opportunity to create a stream of income by selling on a wrap mortgage. This helped ignite what would become one of the biggest money makers of all time, the creative real estate financing seminar. And with it, the birth of today's real estate "gurus".

Over the past two years this cycle has reached it's low point. We are currently headed for an upward turn in the cycle. As of this writing in May of 2004, economic factors such as strong job growth and the possibility of increasing inflationary pressure will lead to incremental increases in interest rates. In fact, we may have seen the lowest rates of the decade, and quite possibly the lowest interest rates of our lifetime. It has been over 30 years since interest rates were at today's low levels.

This was helped along in the 1990's, as the end of the cold war helped to reduce government spending.

Given present world instability and the developing competition in major commodity markets such as oil, it is reasonable to predict that interest rates may not be this low again for another 30 years.

As terrorism and world instability create the need for more military and government spending, this supply / demand scenario is going to flip-flop. We have not been involved in the war against terror long enough for the financial effects to really start to show, but they will.

Here are some predictions concerning the future of real estate investing over the next 5 years:

1. The rental market will recover over the next year or two and rentals will once again be in big demand with low vacancy rates in areas with strong job markets.

2. Residential sales to owner occupant buyers will significantly decline after fixed interest rates reach 7%. This will lead to softening of retail prices, but Atlanta metro will be somewhat immune to any major downturn in the real estate markets due to strong job growth, so don't worry too much about real estate bubble talk, unless you over paid for your house in an area that had rapid appreciation, such as Kirkwood. I suspect that wholesalers and retailers in the city are already feeling the effects of rising costs and weakening demand.

3. If you are a realtor, you can probably expect a buying frenzy this year, as the logic to "get one while rates are still low" becomes a reality.

4. Once interest rates get to 8% and above, a new round of creative financing options will develop. Sellers who need to sell in what will be a soft market, may find that it is more necessary to negotiate and offer better terms to move a property quickly.

6. Owners of rental property will benefit, while quick turn wholesalers will find it tough going.

7. Hard Money loans could become so expensive as to render them unprofitable. This would effectively end the wholesaling business as it has existed in Atlanta for the past 10 years.

As a whole, Atlanta will still be one of the best overall markets to be in for a variety of economic and lifestyle reasons. But I do believe that buy and hold investors will be in the best position for the long haul.

Join me at an upcoming teleconference if you wish to discuss how you can go about taking advantage of the changing landscape in real estate investing.

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Permission to reproduce is granted as long as a link to reihelp.com is included with the article.

Copyright Donna Robinson 2004 All rights reserved.

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