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New White Paper Available: The Great Housing Workout

The Great Housing Workout White Paper

Arixa Capital has released a new white paper focused on the U.S. housing market and single family homes as an asset class for investors to consider. The white paper is based on Arixa's concrete experience investing in this area in recent years, working with local operators who buy properties in a specific geographic area, renovate them, and either lease the homes or resell them.

The white paper explains various ways that investors can gain exposure to this asset class, which Warren Buffett recently endorsed as underpriced and attractive. The author explains the advantages and disadvantages of various investment strategies for both active and passive investors.

The white paper also explains that the activity of thousands of local operators is already helping to work through the backlog of foreclosed homes. Attracted by appealing profits, local operators will help the housing market to heal over the next several years. Policies that aim to solve the problem on a mass scale are neither needed nor advisable.

For a copy of our white paper, please click here.

Case Study of a Commercial Real Estate Bridge Loan

This podcast outlines a recent loan we originated, secured by a strip shopping center located in Ohio. This loan was compelling based on the income of the property. The attractive income outweighed the negative factor of the property being far from our office.

Jan Brzeski Featured in Pensco Webinar in September of 2010

In late 2010, Jan Brzeski of Arixa Capital Advisors, LLC, (formerly known as Standard Capital, LLC) was a featured speaker in Pensco Trust's webinar series for self-directed IRA investors. Using the links below, you can access the audio file of that webinar as well as the presentation that was distributed to the more than 250 participants in the webinar. As of the time of this posting, Standard Capital has invested successfully in dozens of new loans beyond those that were held at the time of the webinar. In addition, all of the loans we held at the time of the webinar have paid off profitably. To listen to the audio of the webinar, please click here. Please click here to download the webinar's power point and follow along.

WSJ: A Bull Market in Rental Housing

To access the article Jan discusses below, please click here: A Bull Market in Rental Housing - WSJ This article from the Wall Street Journal makes the case that buying apartments should yield attractive returns today. It is true that prices are down from their peak and the outlook for future increases in rental income is positive. However, the article sidesteps the single largest challenge for apartment investors--the market is overheated. In Los Angeles, there are hundreds of wealthy individuals and families searching for small properties to buy for all cash. They have pushed down capitalization rates, defined as initial cash flow from operations divided by purchase price, to the 5% to 6% range. Even though interest rates are low, the initial cash-on-cash return for apartment investors in California, defined as cash flow after debt service divided by the buyer's down payment, is in the low single digits.

For a very long term investor who has lots of extra cash to invest, buying apartments does indeed represent a valid investment investment strategy. However, for professional investors and others with limited resources to invest, buying apartments in Southern California at full retail value should be considered with skepticism. At the moment we prefer to make short-term loans to opportunistic investors who are buying assets from banks. By taking a strategy that is far off the main beaten path, and focusing on loans that are too small for real estate private equity funds, we cut the competition by 80 to 90% vs. the competition to buy apartment deals. With less competition comes better risk-adjusted returns, in our view. This is not to say that we won't buy any apartments...only that there needs to be a very unusual situation in order to entice us to spend time chasing an apartment acquisition, given today's high prices relative to cash flow.

WSJ: Mega-Banks and the Next Financial Crisis

Please see the following article: Mega-Banks and the Next Financial Crisis In the article, fund manager Paul Singer argues that we may be headed for substantial inflation. The Fed "is treating confidence in fiat money--paper money--as inexhaustible." Loose monetary policy is being used as "virtually a complete substitute for sound fiscal, regulatory and taxing policy."

Mr. Singer has a point. Listening to the discussion and debate in Washington D.C. and Sacramento, one can't help but notice how far removed our elected officials are from the rules that govern a typical family's finances. Worse still, there seems to be very little resolve to tackle the tough issues, such as bloated pension promises, ever-rising government health care costs and raising the retirement age.

If Mr. Singer is correct, what does that mean for real estate investors? Here are a few observations about investing in an inflationary world:

* Owning real estate is a pretty good inflation hedge. Like gold, it is a hard asset and the supply is fixed. * Borrowing money for a long period of time at a low fixed rate is a good idea. The real value of the debt and the interest payments will shrink over time. * Lending money for long periods at fixed rates is a terrible idea. Avoid investing in long-maturity bonds because their real value will plummet if inflation comes back strongly. * In addition, any investment that is premised on the unlimited good credit of the U.S. or state governments, or on the credit of giant financial institutions, is risky.

What does all this mean for our program of making short-term real estate loans? Inflation would reduce the real return of these investments. However, because they are typically due in 6 to 24 months, they will fare much better than long-dated debt investments.

February 2nd Panel Discussion Video

For those of you who were unable to attend our February 2nd panel discussion, or would simply like to listen to the discussion again, the UCLA Ziman Center was kind enough to record the event this year. Download the file here to view on your computer's media player: The New Normal Panel Discussion, February 2nd, 2011

or watch the video online at http://www.anderson.ucla.edu/x25943.xml

If you have suggestions for making the event even better next year, or would like to reach us for any other reason, we would love to hear from you. Please email Kari Burns at kburns@stndcap.com.

Podcast: Jan Brzeski addresses 10 FAQs on trust deed investing

Jan Brzeski has created a podcast to address 10 frequently asked questions about trust deedinvesting.

- What is trust deed investing? - What are the benefits and disadvantages? - How does trust deed investing differ from other real estate investing options? - What is Arixa Capital doing in the area of trust deed investing?

Click here to download.

We hope you find our white paper informative. Please feel free to contact us with any questions or comments, or to get more information about Arixa's Capital's services.