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If Michael Anthony gave you one million dollars of John Beresford Tipton’s money today, where would you spend it? I saw a trio of experts on CNBC last week talking about which of these three areas was currently the best investment: real estate, gold, or stocks. The experts agreed that stocks are too volatile, but the consensus was that gold (even though it’s expensive) and real estate were best.

Why? Because at some point, we’ll see inflation, and the two best hedges against inflation are gold and real estate.

Even better from our perspective here at DBNR, the experts also concurred on the fact that we’re bouncing along the bottom of the market in terms of real estate value. According to this column from the Bigger Pockets blog, the Commerce Department says the number of vacant homes eclipsed a record 19 million units in the first quarter of 2010. That’s a near-record 10.6% vacancy rate, where 8% is considered normal. At the same time, rental property vacancy rates are hovering around 11%, the highest they’ve been since 1956.

Hopefully, this is the point at which we’ll start to see some bounce back. The CNBC experts predict that both commercial rental and vacant vacancies will decline, which represents the beginning of a cycle where rents increase and property values start to escalate.

Except for one little glitch.

The banks - especially the ones flush with bailout money - don’t seem to be putting it back into the system. We’re hearing lots of anecdotal evidence of loans (especially jumbos) being hard to get, particularly if the applicant is self-employed. The banks are being particularly persnickety about loaning money to people whose income dropped last year - but that includes most of the people we know, whether they’re self-employed or had to take pay cuts.

That actually is good news for DBNR. If people with money can’t get loans, they rent in the interim. The more people who do that, the faster vacancy rates go down and rents go up. And because companies like ours that circumvent the traditional lending process, we can provide housing and rental property for those who want to buy or invest.

The handwriting on the wall is clear. Prices and interest rates are still low. When there’s a sincere recovery, it’s sure that higher interest rates and higher property values will follow. Anybody who can buy now should take advantage of real-estate’s long-term advantages, both as an investment vehicle and an inflation hedge.

Regular readers of this column know DBNR Investments’ goal: in response to this unprecedented housing crisis, we’re committed to putting people back into homes that need them, want them, can afford them, and who are willing to work to keep them.

But regular readers also know that it’s not as easy as it sounds. Not for us, and not for the people we’re trying to serve. It’s arguably difficult to help someone make the transformation from living paycheck to paycheck to a financial life that involves long-term commitments. It requires a stick-to-it-iveness that is not part of many people’s makeup.

But when I do run into that kind of person, it always makes me smile.

I’ll call this man NavyDaddy, not only because it’s his e-mail name, but also because it clearly represents two of the things he’s most proud of: his service to his country, and his kids. He and his wife live in a small town in Michigan, and she called our toll-free number about a house in Gary, Indiana, about an hour away from where they live.

Now, we make every attempt to return every phone call within 48 hours, but sometimes that doesn’t happen. People are usually okay with that, except that Mrs. NavyDaddy was so excited about this house that she called a second time. And she left a message on our Web site. I’ve been doing this long enough to know that this is someone committed to changing their situation.

I called them back and talked to NavyDaddy, a man with the wonderful lilting accent you only find in eastern Tennessee and South Carolina. I learned more about their situation. She’s pregnant with twins. They live in a 40-year-old trailer in a mobile home park. They have illness and disability issues, which means that they derive their income from social security, but the amount still qualifies them for this particular house. In fact, the amount they’re paying for rent in the trailer park is almost the same as they’d be paying for this house in Gary.

I also learned how much he wants to provide for his family. He wants to go see this house in Gary, he tells me. He wants to know if there’s a way to get it without having anyone else bid for it.

As much as I want to help him get this house, I tried to convey to him that it was not in move-in condition. The house and the roof are structurally sound, but the inside needs work. I was not about to have a pregnant woman move into a house in such condition. I told him that he could certainly see the house, but he had to take a notepad, write down everything that needed to be done, and provide a plan for how he was going to do it. Was he going to fix it, or was he going to hire someone, and on what time frame?

I also sent him an emergency contact form, which includes next of kin information. It’s not that I’m expecting anyone to die, but I want information about relatives in case I have to track anyone down later. I knew NavyDaddy was different when he sent me the name of his landlord instead. Nobody has ever volunteered landlord information. Having been burned before, I asked the landlord a lot of questions about the mobile home park just to make sure he wasn’t a shill. He wasn’t.

That made NavyDaddy one of those clients I live for. The story’s not over yet, but I’m eagerly anticipating a happy ending for NavyDaddy, his wife, and his kids.

It’s spring, and there are signs that the economy is blossoming along with the flowers. The stock market threw off the cloak of panic from what looks like a trader’s typo earlier this month and is back at its previous levels. Personal income, personal consumption expenditures, and personal income were all up in the latest figures from the Bureau of Economic Analysis.

However, there are some disturbing trends.

Item: While the Bureau of Labor Statistics reported multiple industries increasing their numbers, the overall unemployment rate edged up from 9.7% to 9.9% in the latest reports.

Item: We have heard of some clients with equity in their homes, secured assets, and dual six-figure incomes being turned down for refinancing requests because one of the parties is self-employed and (guess what!) their income decreased last year.

Item: The federal government is still working on legislation to “fix” the mortgage issue, but some experts feel these new laws may cause more trouble than they solve. As Robert E. Story Jr., chairman of the Mortgage Bankers Association, wrote in an editorial earlier this month:

“Enacting broad risk retention, requiring lenders to keep a portion of the original loan on their books, has the potential to eliminate a sizable percentage of the mortgage-lending capacity in this country. There is an entire segment of the residential mortgage-lending industry that only does mortgages and does not take deposits from customers. Those lenders make loans to borrowers, sell the loans into the secondary market (with representations and warranties) and then use the money they receive from the sales of the loans to make the next mortgage to another borrower.

Requiring these independent mortgage lenders - many of which are small businesses - to retain a portion of every mortgage they sell would render their business model unsustainable. Elimination of this critical segment of the market - often smaller lenders that serve underrepresented areas and borrowers -would limit capacity and choice for consumers, driving up borrowing costs or limiting access to mortgages altogether, which is the last thing we need in a real estate market that is just beginning to see signs of recovery.”

While these developments roil the traditional segments of the industry — including many of our friends and colleagues — we can’t help but feel that they will end up helping DBNR Investments’ business model to blossom along with the spring flowers. As we noted in last month’s column, The Road Ahead, we’re making a transition to a new phase of real estate investing.

Because lending institutions are still unable to deal with the massive number of abandoned mortgages and the distressed property left behind — whether because of their own inertia or governmental regulations — we feel we’re offering a valid alternative in the marketplace. With the government and in turn lenders turning back the clock fifteen-plus years on qualification criteria for getting new loans, they have effectively blocked a majority of the U.S. population from the ability to finance a home.

DBNR Investments is renewing its commitment to putting people back into homes that need them, want them, can afford them, and who are wiling to work to keep them, and we are doing this without forcing buyers to endure the expense, hassle, and frustration of the conventional real estate and lending communities. We believe we can return to a time when deals were based on performance and trust, and in doing so, contribute to the revitalization of property and local municipalities.

In dealing with the Soviet Union, Ronald Reagan had a favorite saying: trust, but verify. It was something the Russians understood innately, because as it turns out, when he said it, Reagan was quoting Felix Edmundovich Dzerzhinsky, one of the architects of the Soviet secret police.

Although Dzerzhinsky and Reagan used it in the context of politics, the concept has strong roots in business. There, it’s called due diligence. Just as with the U.S. and the U.S.S.R. in the old days, both sides in a business transaction have strong motivation to accept the word of the other. Common sense, however, dictates one take steps not only to confirm what you hear but to consider its validity.

I find myself thinking about trust and due diligence a lot these days. When I was watching U.S. senators questioning Goldman Sachs on CNBC recently, I was struck by how little seemingly rational and intelligent people relied too much on the first and too little on the second. The topic of discussion was stated-income loans - loans given based not on documentation, but on the borrowers’ word. Borrowers stated their income, and the figure was accepted.

The use of stated income began logically enough. It was used with high-net-worth individuals, people so well-entrenched that their companies paid most of their expenses. They really had no income per se; there was no need of it. But these people clearly had other assets, assets whose existence could be verified.

The meltdown that we just witnessed came when the banking industry realized that it could charge more money for loans with additional risk. So they adapted stated-income loans for a much larger pool of people for whom it was never intended. Fold in derivatives, in which the risk was supposedly shared, and you have institutions buying into loan pools, thinking 1) that someone had performed due diligence on the original set of loans and 2) that real estate values were only going to go up.

Too much trust, not enough diligence, and a trillion dollars of value went poof.

As I’ve written about previously, in putting people who have never been homeowners before into distressed properties, I’ve had to reconfigure my thoughts about trust and due diligence. Trust has three components: sincerity, reliability, and competence. If I can’t judge a buyer by their credit history (because they don’t have one), I have to come up with new ways to judge them. How much money is in their bank account? How much does what they say align with what I see and hear? How fast do they get back to me with information?

Interestingly, it has paid off financially. We had originally planned to sell properties in exchange for notes, and then sell the notes to re-circulate the cash. We initially planned to sell notes in the first six months after the transaction, but because the risk is higher, we pay more discount say, 60-70% of the note’s value. After a year, the discount goes way down to about 25 or 30%, because people have demonstrated that they can make their payments on time. More competence, less risk, more value for us. It’s built-in evidence of due diligence.

It’s working great for DBNR. I wish the bigger financial companies were as committed to getting people back in homes as we are.