Debunking Myths – Part 1

 Apartment Riches  No Responses »
Apr 062011
 

A myth can hang around so long that people think it’s the absolute gospel truth. Lets look at some common sayings and bits of conventional wisdom that could do you more harm than good if you adhere to them religiously.

Myth: Location Location Location
Reality: Location is more important to your tenants than it is to you

Sorry, but this famous triptych truism is wrong. Certainly, location plays a role in determining value. But it is not the ONLY factor. Nor is it even the most important factor for you, the property owner. Imagine if doctors lived by the mantra “exercise, exercise, exercise.” It’s sound advice. But it’s not the remedy for a broken leg or sore throat.

To assess location, you must first profile the property’s target market. You can then determine if a property’s location gives you maximum exposure to the target market. For example, bedroom communities outside the city center have A.M. and P.M. sides of the street, indicating the commuter traffic flow into and out of the city. Traffic flow is the lifeblood of many retail businesses. Donut shops want to be located on the way to work. Pizza on the way home from work. Traffic flow is less important for offices, industrial and apartment buildings. Here, access to public services like rail and schools will likely be more critical than which side of the street the building sits on.

Location is more important to your tenants than it is to you. It’s a great marketing tool for getting tenants, but it is not the pedestal upon which you should be basing the value of your building.

Myth: Future value is worth paying for today
Reality: Future value should not factor in your purchase formula

You may have heard me say that the term “pro forma” is not Latin for “pretend,” but it might as well be. That is because nobody can predict the future. Pro forma numbers are a calculated guess – and the calculation is often meant to deceive you… sellers give you a work of fiction when they deliver their pro forma numbers.

You don’t buy a new car based on its future “collector value.” Likewise, when buying real estate, don’t let pro forma numbers drive you down the wrong path.

You want to buy a property based on actual numbers. Focus on the profit-and-loss statements: Get the year-to-date and go back two years as well. Also get the current rent roll. These 3 numbers will reveal the true story — no crystal ball required.

We’ll be looking at more myths in upcoming blogs… stay tuned.

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The Real Estate Social Network

 Apartment Riches  No Responses »
Apr 042011
 

We live in the age of the social network. Just as the Agricultural Age was railroaded by the Industrial Age, which was given the pink slip by the Information Age, it can be argued that we have now entered the Social Age. Networking on Facebook has become a national pastime. I would not be surprised if it clocks in more hours than football, baseball, and video games combined.

Networking is certainly an essential part of almost everyone’s career. Networking is especially important for real estate investors. It is how you find pocket listings… get inside information to analyze markets… find private investors to fund your deals… and locate trustworthy people to manage and maintain your properties. Whether you stick to your hometown and invest in local properties, or follow the trail of opportunity to emerging markets far from home… networking is how you build your power team.

Networking is also how your personal reputation spreads. All of which means if you do not have networking plan, then you’re probably going about it haphazardly and sporadically—and thus you’re not making the most of the opportunity.

You can build a good reputation by adhering to 3 simple rules:

1.       Say what you’re going to do and do what you say.

2.       Don’t be a pain in the butt.

3.       Make doing business with you easy.

A reputation for being direct, honest and trustworthy is a prized asset. But lets face it, any nasty S.O.B. can also have a reputation for being direct. That’s why it’s also important to distinguish yourself being easy to work with. Some contractors may even choose you over other jobs where they’ll make more money because they know you present fewer hassles. Being nice pays off.

Time is Money For Everyone Involved

You can also add a fourth vital characteristic of a good reputation: timeliness. Just as you appreciate vendors who meet due-dates and don’t waste your time, others will appreciate the same from you.

When you’re checking references, it’s okay to ask how timely, honest, direct and easy to work with someone is.  After all, people will be asking the same questions about you.

Another “Age” will inevitably come along and people will log off of the Social Age. In a sense, it has always been the Age of the Entrepreneur whether farmers, industrialists, communicators, or Internet junkies ruled the world. As an entrepreneur, you know how important it is to maximize all resource available to you. Don’t overlook the emerging power of the Social Network.

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My 3 Favorite Words

 Apartment Riches  No Responses »
Mar 292011
 

Ask 10 people on the street what “Cash Flow” is and it is likely 10 people won’t have a clue. That’s why none of them are millionaires.

Cash Flow, of course, is the tide of money that flows in and out of your financial life. When you have more money going out the door than coming in, you have the average debt-burdened American.

To be rich you need POSITIVE CASH FLOW, the 3 most powerful words in the English language (or any other language you translate it into.)

“Positive” cash flow means you are just the opposite of the average American: you have more money coming in than going out. Reaching this point was the definitive game changer in my life. You ought to write “Positive Cash Flow” on your bathroom mirror because this is the ultimate prize. It sets you free.

Now if you’re job brings in more money than you need, that’s great. But you’re still WORKING. With real estate, the cash comes in whether you work or not.

Here’s how positive cash flow creates effortless wealth with real estate…

Say a tenant pays $1,100 a month in rent for Unit 101. And this unit’s share of the mortgage and other building expenses is $600 a month. That’s gives you $500 a month in positive cash flow. You’re making $500 while the tenant pays off every penny of your investment.

Multiply $500 by every unit you own… a 3-unit building gives you $1,500 a month is extra cash… a 6-unit gives you $3,000. Life is good.

The money doesn’t end here. Your building is increasing in value. And there are big tax benefits. I hope you’re starting to see why owning an apartment building is better than a goldmine. During the Gold Rush days more than 99.99% of the prospectors went bust. But the entrepreneurs who sold them picks and shovels made millions. They had tapped into the real Mother Load: cash flow.

I want you to be the rich entrepreneur offering a basic service everyone needs: a roof over their heads. It’s a great trade off… you provide people with a place to live… and they provide you with Total Financial Security.

Financial freedom is a great thing. Look at what comes with it…

- No more unpaid bills piling up.
- No more credit card hassles or late payments.
- No more feeling you’re at the mercy of the economy.
- No more bosses or worries about keeping your job.

I could go on, but you get the point. Financial free is liberating and Positive Cash Flow is what makes it possible.

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Watch Out For Knob & Tube Wiring

 Apartment Riches  No Responses »
Mar 082011
 

Knob and tube wiring was very commonly used in the last century and if you are looking to buy a home that was built somewhere between 1880 and 1930, then you will probably find this kind of wiring in the house. No one uses this kind of wiring right now. We now have more loadbearing kinds of wiring and we need them too simply because of the fact that we use a lot many electrical devices than we were using back then. Hence, if you come across some property that has knob and tube wiring, you have to be very careful about it. It may not be the best idea to buy such a property, unless you intend to change all of its wiring, which could hike the expense of living in the house.

The knob and tube wiring used open wires, mostly made of copper, running through the floor or any flat line and held together by means of ceramic supports which were known as knobs. The knobs were used to support the wires on the flat surface and they were also used when wire intersections needed to be made.

Quite understandably, this kind of wiring poses huge electrical hazards. In those old homes, these kinds of wirings were installed in ‘safe’ rooms, which people didn’t frequent much. This was possible in those times because homes were bigger and people could afford to have a room solely for their wiring needs. Also, there was the fact that people had grown accustomed to such a kind of wiring in their homes and they knew how to live with it. In today’s times, it is simply inconceivable to have such a kind of wiring. The open wiring can be fatally dangerous to people living in the house, and we certainly don’t know how to live with such a kind of hazard. We cannot even begin to describe how lethal this kind of open wiring system could be to pets and children in the house. Knob and tube wiring is best avoided; there are no two ways about that.

You will find homes in which knob and tube wiring is present and insulated. Your real estate agent might tell you that because the wiring is insulated, it is safe. However, this is not the case. Knob and tube wiring can heat up the room significantly, and if such heating happens a lot of the time, it is possible that the insulation will melt down. This can pose a big risk of electrical fires and shocks. So, insulated or not, knob and tube wiring is always perilous. And, if you read between the lines here, you will have understood that knob and tube wiring can cause your home to become unduly hot.

Also, such wiring is only capable of driving a small amount of electrical power within the house. In those days, most of the electrical and electronic gadgets that we use today weren’t discovered. People still relied on their fireplaces for warmth and there were simple iceboxes to keep their foods cold. Today, each room consumes more electricity than a whole neighborhood did in the 1880s. Definitely, knob and tube wiring is not cut out for our electrical usage in the 2010s.

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Documents Needed When Buying a House with Cash

 Apartment Riches  No Responses »
Feb 152011
 

If you are in the fortunate position of being able to afford to buy a house using only cash, and with no requirement to rely upon the additional support of a commercial lender in order to make up the shortfall of the asking price, then you need to be aware that you will be required to produce some documentation.

The reason for the need for purchasers who conclude a transaction using cash only to produce relevant documentation is to prevent, deter, detect, and catch fraudulent and criminal activity.

Specifically, many criminals seek to launder their ill-gotten profits that they have made through their various criminal enterprises by the purchasing of real estate with cash. By making a large purchase with their dirty money, they then have a plausible and legitimate excuse for having such a significant amount of wealth to their name and so this can further muddy the waters for law enforcement who are trying to competently investigate the conduct of the criminal.

That said, purchasing a home with cash is actually much easier and speedier a transaction than by paying with alternate forms of credit such as with a home equity loan or mortgage, and the level of paperwork involved is fairly minimal. Once you have identified a particular property that you are interested in purchasing, make sure that you do your due diligence, determining the structural condition of the property along with a search of the title deeds of the property.

Should both of these searches (which are entirely voluntary by the way, however, it is strongly recommended in the most emphatic terms possible) turn up no adverse results, you will then need to initiate contact with the seller and provide them with an offer.

Once you and the seller have finally reached a consensus as to the purchase price, the next step will involve the purchase and sales agreements being verified and signed by a qualified property attorney. The attorney will probably require that you provide a bank statement, proof that you have the necessary amount of funds, along with photographic identification such as passport, drivers license etc. This both confirms that you do indeed have the requisite amount of funds and that you are actually legally competent and entitled to conclude the transaction in question.

In the interests of both safety and convenience, you may want to convert either all or part of the funds required for the final settlement of the transaction into cashier checks. The benefit of cashier checks is that unlike money, they can only ever be used by the recipient and so this means that if they are stolen, they can be easily traced and the thief apprehended.
Once the settlement has been duly concluded to the satisfaction of both parties to the transaction, the deeds will be transferred as appropriate. Your real estate attorney will be better able to explain the precise mechanics involved in this specific part of the process.

And there you have it! The property is now legally yours, for you to use as you see fit.

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Why You Need To Continue To Market Your Property

 Apartment Riches  No Responses »
Jan 272011
 

As Benjamin Franklin once very aptly noted:
“There is nothing certain in this life, save for death and taxes.”

Given the significant downturn that the US economy has taken in recent times as a result of the global recession and credit crunch, this has meant that unemployment levels have shot up, and more and more people are either bankrupt, facing bankruptcy or are out of work. In addition, the average credit rating has diminished which means that people find it harder than ever before to secure financial support from commercial lenders.

Because of their lack of money, both in terms of personal savings alongside their eligibility for loans, this means that the number of people who are able and willing to purchase property is at an all-time low. Indeed, many people are now having to cannibalize their pensions and saving accounts in an attempt to stem the ever increasing tide of debt that looms over them menacingly and threatens to engulf them entirely.

In these financial turbulent times, it is every man for himself and so the average purchaser is not going to lose much sleep over the idea that they let down a seller who they were going to purchase a home from.

Therefore, it is imperative that if you are selling your property that you keep your options open and are prepared to relist your property in the event that the transaction should fall through. Gazumping, as unpleasant and frustrating an act as it is, can never be truly contained or controlled, and when the economy is in distress, the temptation to perform gazumping rises in turn.

However, so far we have considered the worst case scenario for a seller, i.e. where they have a property for sale but they are unable to conclude and finalize the deal because the purchaser withdraws from the transaction due to financial constraints. The seller may actually receive an offer from a more qualified buyer, i.e. someone who is able to meet the full balance of the asking price in cash and immediately as opposed to an undecided purchaser who is trying to secure a loan from a bank.

By leaving the property listed on the open market, the seller will not only protect themselves from disappointment (not to mention loss) in the event that the current purchaser should withdraw, they can also potentially make more money. For example, a seller may have a property that is in a prime location with plenty of access to educational facilities which renders the property especially desirable to a couple who either have children or who are trying to conceive. Such a purchaser maybe more willing to pay above market value of the property in order to secure the property of their dreams, and this in turn means greater security, more money, not to mention peace of mind for the seller.

Never take anything for granted, especially when it comes to something as potentially lucrative as real estate.

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The Safe Island Technique When Talking to a Seller

 Apartment Riches  No Responses »
Jan 132011
 

When you are talking to a seller of a property, trying to get the best deal from them, you should inevitable gear up for a lot of questions. You are, after all, the buyer of property. As such, it is good if you get to know as much about the property as possible. This is where you can use the Safe Island Technique, which was popularized by an internationally famous speaker named Floyd Wickman.  So, what is this Safe Island Technique all about and how does it help you in your selling process?

The Safe Island Technique is a way of getting to know everything in advance. This is wonderfully put into use by doctors. When they are performing any procedure on a patient, they continuously keep telling the patient what’s happening and what’s going to happen next. This removes the suspense from the daunting scary procedure and makes it not-so scary anymore.

This is what the Safe Island Technique is all about. When applied to the real estate selling process, it employs asking a lot of questions to the seller so that you know what is going to happen next.

Why does this become a good technique for handling real estate property investigations? The main factor here is that it removes the stress out. When you know what’s coming next, what part of the procedure is the next in line, then you aren’t unduly worried about what you will have to do next. It also helps put the sellers themselves at ease.

When you are going to see a property, you can make things easier on them by using this technique. For instance, you can tell them that you would like to ask some general questions about the property first. Then you would like them to show you the property. You would like them to tell you what you need to know. Like, tell you about the number of rooms in the house, the amenities and features available, the windows that open to the east, any potential problems and so on. This helps you make a proper judgment about what you would like to ask more about the property.

Then you tell them that you would like to sit down and discuss more about the property. This would be a talk about the price, and negotiations about the property could come in. you can tell them that you would like to bring in an assessor or inspector to professionally look over the property and give his or her opinion about it.

So, in short, the Safe Island Technique is a way of “guiding” the seller through the entire process. They are relaxed about what they are doing, because you have laid out to them what exactly they are supposed to do. There are no surprises waiting to be sprung, either on them or on you, and that makes the whole process become quite a streamlined process for both parties involved in the real estate selling process.

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Everyone Can Become An Entrepreneur

 Announcements, Success Diary  2 Responses »
Dec 082010
 

There is a common belief that only few people that have the desired attributes can be entrepreneurs, but this is not true. Entrepreneurship is for everyone and there are numerous reasons for supporting this statement. The first and the foremost reason in this regard is that everyone has a dream which they want to fulfill or at least have a desire to improve their quality of living. This perception of human beings leads to encouragement for working hard and getting what they want, this perception is commonly known as intuition. It is a kind of potential in human beings that leads to creative imagination

Human beings are the best creation of God that is given the power of creative thinking and through this thinking they are able to do a lot of creative tasks. This creative thinking can be from the past, present and future and can relate to anything which the person dreams about. For instance this thinking can be about what is the purpose of coming to this world? What can I give to this world and what best I can do for people? And questions like these can help you drive your vision or dream which you want to fulfill.

One could learn about its strength and weaknesses by searching his personal history in the past in which he has a number of experiences that caused him difficulties and obstacles in his way of success. From this past experiences the person could learn not to repeat his mistakes in future and to use his weaknesses as his strength. This is common thinking of every person that he looks into his past and gets out his mistakes but one thing that differentiates entrepreneur is that he accepts his past mistakes positively and continues with his present and future in the right direction so that his past shadows do not affect his dreams of future

Moreover accepting the reality of the present situation of what you are, what you have, what you do not have, what you enjoy and what you cannot enjoy. Thinking about your duties and responsibilities and for the purpose you came to this world all leads to the attributes of becoming an entrepreneur and these attributes are not the one which are only present in people who are highly intelligent or intellectual. These qualities are inborn in every human being all you need is to polish them in an appropriate manner

It should be kept in mind that only those people succeed who have belief in their dreams and this belief is so strong that no one can shake it from his words or it cannot be affected by the past experiences of the person. Having a positive approach for the future and thinking optimistically is the right way for achieving your dreams and it opens up more opportunities for you. Thus it is now very clear that our past, present and future are all very interlinked and it can be controlled in the manner we want. If we take our past experiences in a positive way then it will definitely lead to positive future whereas on the other hand if we make our past experiences have an impact on our present and future life then you cannot achieve your dreams and entrepreneurship is the same thing as how you deal with different issues positively.

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Happy Thanksgiving!

 Special Messages, Where's Dave?  3 Responses »
Nov 192010
 


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Commercial Real Estate: Fourth Quarter Comeback?

 Apartment Riches, Investor Alert  No Responses »
Nov 172010
 

Over the past couple of months, I’ve been trying to tell you that the Commercial Real Estate wave is approaching, now it looks momentum is picking up:

From http://www.sfgate.com

Richmond, VA (PRWEB) November 17, 2010

After stumbling around on a wet playing field for three quarters, trying to establish momentum despite being mired in a soggy economy, the commercial real estate market has finally found its rhythm and is ready to snatch victory from the proverbial jaws of defeat. According to “Fourth Quarter Comeback,” the latest podcast produced by John B. Levy & Company (available online at www.jblevyco.com), institutional investors have switched from defense to offense, sending a clear signal to everyone on the sidelines that buyers have taken the field and that the outlook for the commercial real estate market is healthy.

“The real bright spot in commercial real estate is that CMBS 2.0 – the updated version of the old CMBS that fell off a cliff in 2007 – is back, and that’s no hype,” says Andy Little, partner at John B. Levy & Company. “We’re actually seeing a lot of deals getting done, and there’s a whole new depth to the market. While some businesses might look at the results of the mid-term elections and think we’ll have a lot more clarity going forward,” Little adds, “I believe we’ll have a lot more gridlock. Either way, commercial real estate is going to come out of all this just fine.”

One of the reasons Little is optimistic about the health and stability of the market is that he sees a pricing efficiency in place. Today, CMBS lenders are pricing loans within 5 to 10 basis points of each other. Six months ago, even three years ago, differences in loan prices ranged from 25 to 50 basis points. This tighter range of prices indicates that there are bond buyers in the market for CMBS securities and that there is a depth to those buyers.

“The mood of the institutional investor has changed,” says Little. “In the third quarter, investors took the defense off the field and put in the offense, and that move has set the stage for a fourth quarter comeback. What we need now is for banks to get back in the business of lending. There’s always a necessary tension between fear and greed that drives the market,” Little explains, “and banks need to stop operating in a fear mode and start working in the greed mode.”

Three of the four legs of the commercial real estate finance market are strong. Life insurance companies are actively lending, as is CMBS 2. The government sponsored entities – Fannie Mae and Freddie Mac – have remained strong throughout all this turbulence. The problem, according to Little, rests with banks. On the whole, banks just aren’t lending, and records show that they are still shedding real estate loans from their books.

“The top 25 banks – JP Morgan, Bank of America, Citibank, and the like – they’re going to lead us out of this,” says Little, “but it may take the next three to six months. But the smaller banks, the community banks . . . they’re another matter. Community banks are the ones who have the construction loans, who were doing retail. They are still heavily concentrated in real estate loans, and that problem will take some time to clear.”

Are you convinced yet? Hop on with me and my students and grow wealthy in this economy before it is too late! Call the office at 781-878-7114 and mention this article and my strategists will give you a free strategy session to see where you are in your real estate education and where you need to be next to be able to capitalize on this opportunity!
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