2009 is not generally considered a "good" time to be involved in the investment business, in fact 2009 is not generally considered a good time to be involved in almost any type of business. The international media have been trying to explain for months why we find ourselves in the current financial crisis and every guy you talk to in your local pub is explaining what we should be doing to emerge triumphantly from it.
Every day there is a news story about a company that we all know and assumed was financially secure but appears is now failing, and this is typically followed by a small local story about a small family company who can no longer continue to trade. A combination of the above means that our cities and towns are slowly being reshaped in front of our eyes, brands that we grew up knowing and taking for granted will now be replaced with new ones and our children will roll their eyes because we will merely be showcasing our age by even mentioning them.
It is easy to develop a negative attitude during a time like this and many businesses make an active decision to do.......... almost nothing. It is understandable as it is human nature to maintain the status quo in times of uncertainty until a clear picture can be established and a logical plan created.
Most businesses reason that they were successful prior to the crisis and so it is not their model that is flawed and that they must simply wait for the crisis to ease and things will return to former glory. In many cases I completely agree, a few strategic cuts here and there to keep costs in line is probably the best strategy when you are selling cars, clothes, holidays etc, as long as you are able to survive.
The banking and investment sectors were hit hard with the current crisis as not only do people typically have less liquid funds to invest they want to take less risks with what they do have. This is where the current problems end for most businesses, people simply have less money.
For the investment sector in 2009 there is also a huge confidence problem to contend with. Prior to the current crisis banks were generally accepted as the safest place to keep your money for obvious reasons but with various institutions failing and others coming alarmingly close it appears that even this is in question, all things investment and finance are now under scrutiny and treated with an element of caution and in some cases outright distrust.
So, when your product is not based on necessity, the industry is generally not currently trusted, there is a general lack of liquidity, the currency markets are showing volatility and to add to the woe 75% of sales were previously to clients who used the banks money to make the majority of their purchase but now this source of finance is greatly reduced it comes as no surprise that the real estate based investment sector is feeling the pinch.
The investment sector is about making money and our company www.ipinglobal.com had made a decision at inception to use the global real estate industry as a vehicle to help our members (now 40,000 of them) to achieve this. We had been very successful for several years selling predominantly residential real estate investments in mature and emerging markets globally, but since mid 2007 things had started to slow down significantly. Like I discussed before we were confident in our ability as an organisation and knew that under usual market conditions we would continue to grow but our research showed that this was not just a cold front that will pass in a few months but more a bitter winter that will last around 2-3 years.
As a company we were able to look at the current economic conditions and see glimmers of opportunity, we understood that this next 3 years will see the major players in our current market space disappear or shrink and were confident that if we were bold and effectively changed our proposition to members to actually facilitate the economic conditions (Investor Channel Podcast) we could not only survive but grow in terms of market presence and credibility significantly.
With the above in mind IPIN began talking to asset management companies and investment groups to find and create products that are able to actually leverage the current situation and provide our members with effective investment solutions.
In November 2008, myself and 8 other members of the IPIN team travelled to Pakistan to hold a property related investment seminar in Lahore for many of Pakistans wealthiest families and businessmen. We had selected Pakistan as we had seen huge growth in members joining IPIN from the sub-continent in the preceding months and unlike IPIN members from many other areas of the World they were still actively investing. We made a swift decision to consolidate the IPIN brand in this area and grow confidence in our business there by making the effort to hold an IPIN event locally. As a company we took various security measures which involved our staff having armed police security at all times which we had secured prior to arrival with letters to the head of police and president Zadari himself. When there we found that that our Pakistani IPIN members were charming and honoured that we had made the effort to visit them personally despite the press coverage Pakistan was receiving in our home location, they understood fully that we had been advised not to visit but had made an educated decision to do so and without exception were keen to show us that things are not as our newspapers portray.
During our trip we found the people of Pakistan warm, welcoming and educated and at no time felt unsafe in any way. We had invited a number of property developers and business partners from around the World to present investment options and very quickly we noticed almost exclusive interest in the US distressed asset product presented by an asset management partner company.
During the trip the interest in the product grew and we discussed the possibility of working even more closely with the group to offer this product and a variation requiring only 75k USD capital investment on a semi exclusive basis to IPIN members. These discussions continued after our return from Pakistan and resulted in several additional meetings before IPIN was able to launch its DDAP (Direct Distressed Asset Purchase) Strategy to members.
The DDAP strategy essentially allows members to invest within a fund structure or purchase portfolios of (initially US) non-performing mortgage notes and foreclosure properties at discounts of 72.5%. IPIN members have the option to use the asset management company to completely manage the investment and all exit strategies targeting a minimum 20% annualized return. The asset management company work on a profit share system to ensure that the goals of the investor and their own are 100% aligned and use debt restructuring as the preferred ethical strategy allowing homeowners to stay in their homes while providing a revenue stream to the investor.
In addition IPIN also worked with another asset management company to launch the SES (Secure Exit Strategy) in Dec 2008, this is another product that allows members to actively benefit from current economic conditions. The lack of liquidity has made it very difficult for developers to raise construction finance without additional security. The SES works with selected developers to provide pre-sales and allow them to unlock required construction finance. This product is in such demand that IPIN and its strategy partners are able to negotiate strongly and provide an investment environment for IPIN members that can offer high upside (25% annualised typically) with ultra low and in some cases zero risk to invested capital.
Since launch both products have been gathering momentum and IPIN hopes to be able to announce first member returns in the near future along with continued company growth despite operating within a market space that has been hit arguably the hardest by the events of the last few months. By taking a positive and pro-active approach IPIN has been able to adapt itself to the current environment and continue to offer intelligent investment solutions to members worldwide.
The IPIN membership is now learning about our opportunities and making an informed decision to invest after having the opportunity to discuss the security and workings of each investment opportunity with an IPIN portfolio advisor. IPIN and its members have been able to find opportunity within the current crisis by being able and having the confidence to innovate and change. IPIN will now continue to take this approach and feels confident that it can continue to provide effective investment solutions for members regardless of market conditions.
IPIN Mantra 2009 - "IPIN presents innovative real-estate based investment solutions that intelligently and ethically leverage the current liquidity crisis to empower the investor and enable high annualized returns with ultra low risk exposure"
IPIN Investment Strategies 2009
Distressed US assets at 67% - 72.5% discounts - DDAP Direct Distressed Asset Purchase) Strategy
An opportunity to purchase portfolios of distressed US assets at deep discounts. The optionalasset management utilizes various ethical exit strategies to generate strong investor returns.
- Invest from $75k * Achieve 20% annualized returns (projected)
- Full asset management option creating hands free investment
25% annualized returns with no risk to capital - SES (Secure Exit Strategy)
A strategy that leverages the current liquidity crisis and allows investors to provide difficult construction financing to selected developers on favourable terms that provide strong returns with ultra low risk exposure.
- Invest from $15k * No ownership costs or associated risks
- Returns are not subject to market conditions
This article was written by Danny Bance, Managing partner of IPIN.