Wealth building on board the Moneytrein.com  

August 29th 2005, not a great day if you happen to live on the gulf coast states of Mississippi, Alabama, and Louisiana. On that day, arguably the worst hurricane to hit the gulf coast came ashore. Hurricane Katrina roared in with 150+ mph winds and a tidal surge that towered over the buildings that it was about to crush.

So the cleanup began. The American Red Cross, the Southern Baptist Disaster Relief, the national Guard, and thousands of huge hearted volunteers arrived. The chore of clearing debris made even more difficult by the knowledge that as the next remnant of a home or vehicle unturned may reveal another who didn't get escape.

In the months that followed, government officials began addressing the issue of rebuilding. Ideas of housing, grant programs, architectural styles all were set in motion and the reconstruction began. Or has it?

Biloxi is being rebuilt from the ground up, basically creating an entirely new waterfront city. An estimated 55,000 new homes will need to be built in the next few years, and less than 10,000 (less than 18%) of these homes have already been built. While the dollar value of building permits has exceeded one billion dollars in the Biloxi market, less than fifty two million dollars has been spent on new home construction. That is 341homes. (Source:The Journal South Mississippi Business)

The state of Mississippi has determined that there are still 40,000 homes to be rebuilt in order to bring its six southernmost counties up to their pre-Katrina count.

Based on a (2005) pre-Katrina population of 445,375 individuals in the six coastal counties of Pearl River, Hancock, Stone, Harrison, George and Jackson, this figure places the number of standing homes before Katrina at about 110,000.

State estimates indicate that 2+ years later, the 40,000 are still not livable - they remain either as slabs from water damage or crippled by excessive wind damage to walls, ceilings and roofs.

Why the slow going? After all the GO Zone act allowing the 50% accelarated depreciation was swiftly put in to place, laws were changed allowing casinos to be built on shore, the Mississippi gulf coast was the 6th fastest appreciating maket in the country according to Forbes.com, jobs were increasing. As another writer has so crassly put it, this was the "perfect storm." Try telling that to the hundreds of thousands of suddenly homeless.

Two things happened. First there was the news media. The coverage from the networks and the news channels riveted us with footage and stories of the destruction of New Orleans. They gave us captivating speeches by the politicians from that city who promised to be their savior. Then, the celebrity bandwagon started, with prominent entertainment figures shown walking the streets and asking everyone else to help. In the meantime, Mississippi was digging out.

Secondly came the "programs". Prior to Katrina, Mississippi was a 30%+ rental population state, but landlords are either still waiting for their insurance checks or they have received teir checks and decided not to rebuild. So as an incentive, the Mississippi Rental Assistance Program was introduced. The purpose of this plan was to entice private investors to build badly needed rental housing.

For doing this, the investor was to receive a forgivable loan for up to $40,000 for a single family home or $73,000 on a duplex. This was conditional on the home being rented for a period of 5 years at a rent set by the governing bodies. This rent would mean a negative cashflow for the investor, and would be made further negative if the investor did not cover utility costs therefore providing the tenant with a utility credit. This is also conditional on the property not being vacant for a period of time.

Vacancy exceeding a certain period triggers repayment.

• Sale of the property before the end of 5 years triggers repayment
• The loan appears as a lien on the property during the 5 years
• The loan is an application/selection process not "guaranteed" as some claim
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So how does all this tie in to the greed factor? It's simple, groups all around the country have marketed this program to investors with a "100% certainty" that they will get this money or they don't have to do the deal. Here is how this has hurt. Katrina hit August 29th 2005. The deadline for this program was October 31, 2007. To this date no money has been disbursed!

This means investors haven't built any new homes, and to compound the problems the temporary housing for victims is making them sick. Literally! Investors all want this forgivable loan so that the new 328i, or the once in a lifetime cruise become reality, forgetting about the $400+ a month that they are negative in a property they can't sell for 5 years.

In closing, take a good look at the 50% bonus depreciation, weigh in on the growing market that is the Mississippi gulf coast and help this region get back on track. You may profit more than just financially.

Neil G. Blair-Bennett *GOZonehomes.com*