Kathy specializes in teaching people how build multi-million dollar real estate portfolios through creative finance and planning. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn more about Kathy & the Real Wealth Network at http://www.RealWealthNetwork.com
By Richard Page | CPA/RETIRED IRS AGENT
As many of you will recall, Proposition 13 generally “froze” the reassessment of residential income properties. Simply stated, the County Assessor did not, from year to year, generally reassess the Properties. Proposition 13 does allow for a modest increase.
When a property is sold, the County Assessor may, at that time, reassess the Value based upon the new sales price.
Additionally, Proposition 13 does permit the County Assessor to re-evaluate the Value if a Homeowner or Apartment Owner does substantial “new construction” to the property. However, Proposition 13 prohibits the Tax Assessor from “ re-evaluating new construction for property tax purposes when the purpose of the ‘new construction’ is to seismically retrofit an Existing building”. In 2010, the California Constitution was amended to memorialize this arrangement.
Simply stated, if you are required to undertake Earthquake retrofit, and you spend substantial sums of money for that purpose, the California Constitution will protect you, provided:
A specialized Form is being enacted at the present time. Nonetheless you may contact the Assessor’s Office, Robert Lippson, (213) 974-7736, or email@example.com for this information.
Of course, all of these governmental “exemptions are always time-sensitive. Owners must submit the “form” prior to or within 30 days of the completion of the seismic-retrofit work. They must submit documents supporting the claim no later than six months after the completion of the seismic-retrofit project. The Property Owner, his contractor, architect or civil structural engineer may complete the claim forms and providing the supporting documents.
Once the taxpayer/ Apartment Owner has submitted the claim form and the supporting documents, the City Building Department may be required to identify the portion of the project that was the seismic-retrofitting component. That will determine whether the property is “exempt” from the new assessment, or has undergone new construction … unrelated to the seismic-retrofit that may trigger a new assessment.
As always, it’s important and essential that you attend the ACTION monthly Membership meetings. Tax consultations and matters involving property assessments are highly complex and incredibly difficult to address.
It is essential and important that you consult your Certified Public Accountant, Public Accountant, and others in preparing these forms so that you can benefit from the exemption.
Richard Page has a tax controversy practice in Santa Monica. His phone number is (310) 450-8875, and his email is firstname.lastname@example.org
By Michael Millman | Action Apartment Association
Prior to the enactment of Costa-Hawkins, communities like Berkeley, Santa Monica and West Hollywood had well-documented antagonism between Tenants and Apartment Owners.
Today, there is harmony. Vacant units are repaired, restored and beautified. They’re offered for rent at Market rates. People love their rental units, and are secure and comfortable in paying a negotiated Market rate. The units then fall under Rent Control, and the annual rental adjustments are limited and restricted by municipal formulas. Over the last five or six years, the rate of increase has been less than 1% in West Hollywood, and slightly higher in Santa Monica.
80% of the Rent Control units in Santa Monica are probably rented at or near Market rent. Everyone’s happy. Those Tenants who are “rent burdened” or have some other type of financial hardship are able to live with security in their rental units because the rental building enjoys “decontrolled” rental arrangements.
Yes, an elderly Tenant in a large one-bedroom apartment a few blocks from Santa Monica Beach probably only pays $400 per month. A similar unit in the building probably rents for $1,600 per month. The Market rents underwrite the people who are protected by Rent Control.
The system works.
The elderly and the disabled get to live in their apartments, and the Owners generate sufficient rent to underwrite the operation. Remember, within a few months, these same cities will adopt earthquake seismic retro fit, and they intend to make the Owners pay 100%. No pass-through. These retrofit projects may cost over $100,000 per apartment unit.
Remove the Costa-Hawkins “free enterprise/vacancy decontrol” and these Small Apartment Owners will give up the Business and simply close down. They don’t have the money. And certainly no bank is going to loan money on an apartment building if Richard Bloom’s new Bill to repeal Costa-Hawkins is passed. Complete economic collapse.
As you will recall, under Costa-Hawkins, condominiums, single family dwellings, new construction, and of course new rental candidates after January 1, 1999 are EXEMPT from Rent Control.
Groups who will FIGHT, CHALLENGE AND OPPOSE this bill:
• The union trade organizations, new apartment developers, developers of senior and very low income complexes, small apartment owners and even the mega apartment owners represented by CAA.
• Those who want affordable housing in Inglewood, Mar Vista, Culver City, and even Santa Monica
• Business-friendly Legislators who want good-paying jobs for their District.
The unintended consequences are very detrimental and dangerous.
People will panic. Apartment Owners will immediately accelerate rental increases in decontrolled areas of the South Bay, Inglewood, Lawndale, Long Beach, Culver City and other jurisdictions. This is dangerous.
Be fair, and remove and Kill this Bill.
By Dwight Kay | Kay Properties & Investments
From eliminating the struggles of property management to owning investment grade real estate, the potential benefits of opting to 1031 exchange into DST properties are many. At Kay Properties and Investments, we’re specialists in the DST 1031 exchange marketplace, and provide our clients with superior, knowledgeable advice to help them make informed decisions about their investments. We also are careful to help our investors understand the risks and disadvantages of real estate and DST properties.
Understanding Delaware Statutory Trust Real Estate
Real Estate investors all over the country are choosing 1031 exchanges into DST offerings as a way to defer their capital gains tax, diversify their real estate portfolio, increase the possibility of increasing their cash flow and much more. But what is a DST 1031 Property exactly? With a minimum investment of $100,000, DST 1031 properties give investors more leeway to spread their proceeds into multiple properties. Some call this similar to 1031 exchanging into a REIT however, a REIT is not like kind for a 1031 exchange and yet a DST is. With the DST we are able to create a broadly diversified portfolio of between 1-50 properties for our investors. Understanding the current DST properties for sale and how to construct a quality portfolio for our clients is what we do best. Contact us today to learn how we can help you with a free consultation. (www.kpi1031.com or email@example.com)
Types of DST Listings
The types of DST 1031 properties available can vary greatly, with the common properties being triple net (NNN) leased single tenant retail, apartment communities, medical properties, office properties and all-cash/debt-free properties. With a NNN leased property, tenants are typically responsible for taxes, maintenance and insurance, potentially leaving the investor with less responsibility in terms of property management and costs and a “net” amount of rent each month.
At Kay Properties we typically have access to 15-30 different DST listings from many of the DST sponsor companies in the industry as well as our own proprietary Kay Properties client exclusive DSTs just for our clients. If you’re interested in learning more about how 1031 exchanging into Delaware Statutory Trust properties could potentially work for you, give us a call today! 1(855) 466-5927
This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. Kay Properties & Investments, LLC, is registered to sell securities in all 50 states. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.
By Kathy Fettke | RealWealthNetwork.com
The Federal Reserve followed through on its latest promise to raise interest rates. Fed Chief Janet Yellen announced a quarter point hike in the federal funds rate Wednesday. But the increase has little to do with the ripple effect on mortgages and consumer loans, and more to do with a message from the Fed about the economy.
This is the first rate hike of 2017 and the third since December of 2015 when the cycle of monetary tightening began after the Great Recession. The first rate hike brought the overnight lending rate a quarter percent off zero. The second rate hike three months ago, raised it another quarter point. The latest increase brought it to a range of 0.75% to 1%, which is still quite low historically.
Consumer loans may notch up a bit because of the rate hike but economists say with so much talk about the increase, many lenders have already priced it in. And some economists say the hike has more to do with Yellen’s desire to portray the economy as “healthy” than it does with monetary policy.
She said during a press briefing: “We have confidence in the robustness of the economy and its resilience to shocks.” And that: “It’s performed well over the past several years. We’ve created, since the trough in employment after the financial crisis, around 16 million jobs.”
Raising the Fed Fund rate is supposed to correspond with a robust economy. Increases are meant to keep inflation in check. If economic growth and inflation are rising too quickly, a rate hike helps slow them down as it tightens the money supply.
Core inflation is about 1.9% right now. Up slightly from the previous forecast and right in the 2% range that the Federal Reserve has been targeting.
But there are big questions about U.S. economic growth.
If you focus on the stock market, you might think the economy has been advancing rapidly. Wall Street has been on a bull run since President Trump was elected with the Dow hitting over 21,000 for the first time ever.
There’s also been a steady increase in jobs with unemployment dropping from the double digits during the recession to under 4.7% right now. That’s giving consumers confidence about the economy, despite flat wages. The February report on consumer confidence says it hit a 15-year-high of 114.8.
But what some economists are pointing out is the troubling lack of economic growth. Chief investment strategist at Clarity Financial, Lance Roberts, wrote in a blog, that: “Outside of inflated asset prices, there is little evidence of real economic growth.” And that’s one thing that Janet Yellen said a rate hike would be tied to — economic growth.
The gross domestic product, or GDP, is our economic report card. And the Atlanta Fed just downgraded the first-quarter GDP to just .8%. That’s well off the 2% that Janet Yellen said is needed for a rate hike, leaving some economists wondering why the central bank went ahead and approved the increase.
Just weeks ago, the GDP was closer to the central banks rate hike comfort zone, at 2.3%. It also increased to 3.4% briefly last month after positive news about manufacturing and construction spending. But when disappointing data on retail sales and consumer prices came out a few days ago, the Atlanta Fed lowered its estimate to the .8% level.
Roberts says that charts show a rate hike at a time like this could actually push us into another recession. He told Market Watch that raising interest rates from ultra low levels at a time of slow economic growth could impact spending and that charts show this type of situation has lead to recessions in the past within three to nine months.
Nobel Prize-winning economist Robert Schiller is also warning people that Wall Street exuberance has gone overboard. He told Bloomberg that traders are captivated by President Trump’s bold plans to slash regulations, cut taxes, and “turbo-charge” the economy with an infrastructure building-boom.
He warns that when situations like this have happened in the past, it hasn’t ended well for the investors. Think dot-com bust and housing meltdown. Both experienced sharp drops in the stock market.
Schiller says investors are shoveling money into the market with the hope that President Trump will make good on his campaign promises. But they are also ignoring the enormous amount of uncertainty associated with getting those new policies through Congress and the legal system.
The Trump Administration is proposing some extreme budget cuts that may not sit well with some of his own constituents. A preliminary budget was introduced that slashes $54 billion from most federal agencies including the EPA, HUD, and Health & Human Services. That money will then be spent on defense. There’s also the affect of the Obamacare repeal. Depending on how many people lost their healthcare coverage, there could be a lot of unhappy voters. And if this political turmoil jostles the stock market, we could see a reversal that could happen quickly, and without mercy.
There has never been a slow letting out of air from a bubble. It usually bursts.
Kendrick Wakeman, the CEO of financial technology and investment analytics firm FinMason, told CNBC that investors are in for a rude awakening. He says no one knows when the stock market correction is coming. But, he says on average, the stock market crashes every eight to 10 years. And when it does, the average loss is about 42%.
He told CNBC that stock market investors need to ask themselves: “Would you hang yourself in the closet if the market crashed and you lost 35 percent?”
I have been warning investors for over a year now that a recession is coming. I’m sure some people think I’m crazy since the stock market has made significant gains since I gave this warning.
But remember, the same thing happened before the Great Recession and the Great Depression. In January of 2008, Ben Bernanke, the Chairman of the Fed said, “The Federal Reserve is not currently forecasting a recession.” 9 months laterin September of 2008, Lehman Brothers collapsed and the financial markets worldwide came tumbling down.
The Federal Reserve is supposed to be in charge of regulating the economy. It’s terrifying that they couldn’t see that recession coming… and even more frightening that they may have seen it coming, but didn’t warn us.
Be extremely defensive in your investing strategies today. Make financial decisions as if it were 2006. People who were prepared fared very well during the subsequent recession.
Rising interest rates can be the exact prick needed to pop the stock market bubble. That may be the very reason the Fed is raising rates – to slow down the irrational exuberance that taking the bubble to new heights.
A slowdown could turn into a meltdown, depending on how big that bubble has become.
How would a slow down in stocks affect real estate?
1. Cities that are more dependent on stock market fluctuations would be more affected by a stock market crash (SF, NY, Seattle).
2. Mortgage interest rates would decline if there were a correction in the stock market as more investors flock to the safety of bonds – which are more tied to the 10 year Treasury bond market.
3. Commercial real estate would get hammered while landlords could fare well as more people are forced to rent, driving rents up.
Now would be a very good time to “cash out” and sell your high priced assets while the market is hot. You can exchange those properties for low-priced, high cash flow properties in recession-proof markets.
If you have concerns about your portfolio or would like to speak with one of our investment counselors about how to find out which markets are best for investing today, visit www.RealWealthNetwork.
Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.
By: Dilip Khatri, PhD, SE | Principal Khatri International Inc.
Los Angeles is on the “Ring of Fire”. The Ring of Fire circles the perimeter of the Pacific Ocean refers to areas of the high seismic activity because of multiple tectonic plates that have been moving/grinding against each other for millions of years. It’s no surprise that we are in the center of seismic activity with total unpredictability. The Earthquake risk element affects every aspect of life in Southern California, most notably our buildings where we live, work, and entertain, because it poses a threat to our very existence.
The Soft Story Ordinance, passed by the City of Los Angeles in 2016, encompasses residential and commercial buildings (4 or more units) that have a weak story line which leads to potential catastrophic circumstances: The entire upper level may collapse on the weak first story. In order to minimize this structural calamity, the Soft Story Ordinance requires building owners to upgrade/fix/enhance their buildings to reduce this risk.
Figure 1 demonstrates this principle and shows the collapse mechanism. It’s no different from having a heavy object on “stilts”. A lateral force applied to the upper floors will cause the structure to tip over. The objective of the Ordinance is not to save the building/property. Rather, the prime and single goal is to save the People inside the building. Many property owners don’t realize this objective, and its important to be clear that the Ordinance is not trying to save property values, it’s main object is Life Safety.
The L.A. Ordinance officially affects approximately 14,000 buildings but that number is changing because new buildings are being added to the list, and other Cities in Los Angeles County are decidedly passing similar Ordinances.
There are several engineering options available to resolve this dangerous condition. At least five repair options are to be considered:
- New Steel Moment Frames
- Strengthening existing Steel Moment Frames
- Strengthening existing Wood Shear Walls
- New Wood Shear Walls
- New Steel Flagpole Columns
Figures 2 and 3 show a few schematics of a Steel Moment Frame and Wood Shear Wall.
My advice to owners is to look at each of these options and evaluate the “best choice” from an economic feasibility standpoint.
Each property is unique and requires personal attention of a structural engineer and contractor. It’s definitely not a “one size fits all” scenario. Look around, shop around, and do some diligence before you commit to a specific solution/vendor approach. The time lines for compliance are 7 Years from the date of notice, 2 Years for plans and permits. If you are interested to learn more about the Soft Story Ordinance, this author has produced an online video for your reference: https://vimeo.com/194302379
Dr. Khatri has 31 years of civil engineering experience involving land development, subdivision, commercial, residential, multi-family, industrial, and educational facilities. Design, construction, and overall management of major infrastructure improvements comprising sewer, water, storm drain, flood control, and grading design.
By Jess Walter
The idea of retirement often conjures up scenes of golden sunsets spent on a porch in California. The days flow by and there is not a care in the world, apart from ensuring that the cookies come out of the oven on time. This may seem like the ideal scenario, however, there is a slightly darker side to retirement that people are loathe to consider. The inevitability of death always weighs heavily on the minds of those who have reached a mature age, and provision for loved ones needs to be considered.
Seniors and Debt – What You Need to Know
Going into retirement without debt used to be the norm, but with the changes in the economy and the ease of obtaining debt, many seniors now have to face their golden years with debt repayments looming overhead. Although there are age restrictions on many types of debt, retirement often occurs before the age cut-off. Seniors are faced with steep monthly expenditures without the corresponding higher income that they’re used to. Furthermore, mounting costs in terms of healthcare often necessitate incurring further debt.
Property Still Remains a Worthwhile Investment
After the 2008 economic crisis, property markets experienced spates of volatility. Purchasing a home has its advantages and affords the owner more flexibility and security than a rental. With this in mind, it’s important to understand that the obligation of the repayment will still continue in the event of an owner’s death. The debt will form part of the estate, and if the remaining spouse is unable to meet the obligations of the loan, they may lose their home. Furthermore, property happens to be an asset in the estate as well, which provides a legacy for the heirs.
Creating a Legacy
Apart from the inherent risks that debt poses for senior citizens, there is also the desire to leave a legacy for their children. Those who are unable to provide a legacy for their children with their assets have the option to take out certain life insurance policies to cover this wish.
Furthermore, investments and assets often form part of the estate, whereas insurances have the option to pay out to the beneficiary directly. This reduces the liability on the estate, which provides heirs with a tax-free inheritance. That discussion with a financial adviser can be the difference between a healthy or insolvent estate.
Jess Walter is a freelance writer and mother. She loves the freedom that comes with freelance life and the additional time it means she gets to spend with her family and pets.
INCOME PROPERTY EXPO IN PASADENA HOSTS HOWARD JARVIS TAXPAYERS AND REAL ESTATE EXPERTS TUESDAY, MARCH 14TH
Surviving California’s Hostile Business Environment, The Soft Story Ordinance,
Property Taxes, Legal Issues & Other Seminars – Admission is Free
PASADENA (March 3) — Commercial and residential property owners, managers and investors can learn what’s new in financing, strategies and products at the 5th Annual Income Property Expo at Pasadena Convention Center, 300 E. Green Street, Pasadena, CA 91101 on March 14, from 9:00 a.m. to 4:00 p.m. Admission is free.
“This event offers experts, resources and strategies for cost-effective management and maintenance of rental, multifamily and commercial properties,” said Paul Smith, producer. Howard Jarvis Taxpayers Assoc. president Jon Coupal will discuss surviving the hostile business environment, plus experts seminars on the seismic retrofit ordinance, market analysis, rent control, landlord/tenant and property law and more will be held including:
- Kathy Fettke, Real Wealth Network
- Jon Coupal, Howard Jarvis Taxpayers Association
- Dilip Khatri, PhD, P.E., S.E., Khatri International Structural & Civil Engineers
- Robert “Rusty” Tweed, Tweed Financial Services
- Tony Watson, Robert Hall & Associates
- Elizabeth Harris, Exeter 1031 Exchange Services, LLC
- Dennis P. Block, Law Firm of Dennis P. Block & Associates
- Gene Guarino, Residential Assisted Living Academy
- Steven Duringer, Duringer Law Firm
- Brian Gordon & Vince Medina, Lotus Property Services, Inc.
- Mike Brennan, Brennan Law Firm
Nearly 100 vendors will showcase the latest in building products, services, materials, energy systems and maintenance. The expo also features all-day networking with industry professionals and sponsors including Apartment Management Magazine, Real Wealth Network, Chase Bank, Robert Hall & Associates, Exeter 1031 Exchange, Duringer Law Group, Tweed Financial Services, Khatri Structural and Civil Engineers, Provident Bank, HD Supply, CIC Tenant Screening, and The Howard Jarvis Taxpayers Association.
This may be the year that billions of dollars in commercial mortgages go belly up. These loans were financed in 2007 and are maturing this year. That means some commercial property owners will be faced with huge balloon payments and for some, a major headache to pay them off.
The Federal Reserve stated in its semiannual Monetary Policy Report to Congress on Tuesday that commercial property prices were becoming a “growing concern.”
Specifically, the report said, “”Commercial real estate (CRE) valuations, which have been an area of growing concern over the past year, rose further, with property prices continuing to climb and capitalization rates decreasing to historically low levels,”
While commercial property debt remains small compared to the overall economy the report said that the rising “valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline.”
According to Reuters, commercial real estate loans by U.S. banks surpassed their pre-financial crisis levels in September 2015, and at last reading for January stood at a record $1.97 trillion. Small banks hold nearly two-thirds of that total, some $1.22 trillion.
Commercial property values in the U.S. have more than doubled from their 2009 low, according to Green Street Advisors’ Commercial Property Price Index. Things started slow down in 2016, with just a 3% rise in values.
And this all comes at a time when there’s also a concern about a tidal wave of commercial loans that will come due this year. Lending standards in 2007 were lax and real estate investors jumped in with both feet, taking on huge amounts of debt in that red-hot market. Back then it was difficult to see anything but skyrocketing real estate market.
Then, the impossible happened. The residential real estate bubble burst, and property valuations plummeted back to earth, and even below the water line. We know now that many homeowners lost their property because they couldn’t make the payments or because banks simply failed.
This is the year we could begin to see the same fall-out on their commercial loans.
While commercial property in the most populated metro areas like New York City and San Francisco are seeing record high prices for real property, the real-estate recovery has been a little lopsided.
There are many U.S. markets where valuations have not caught up yet. It’s those landlords who might have trouble refinancing their monster balloon payments, and if they can’t refinance because they are underwater on the loans, they might have to sell at a loss.
Bloomberg says that prices for suburban office buildings are still 4.8% below their peak compared to Manhatten skyscrapers that have surged 50% higher than they were at their previous peak. So when it comes time to refinance loans for buildings that aren’t worth as much, lenders may want landlords to cough up the difference… and that may not be easy to do.
Borrowers may also have to pay higher interest rates, or they may run into lenders who are now pickier about what the buildings they are willing to finance. Bloomberg writes that lenders may not be eager to finance retail properties, especially malls, as e-commerce takes a bite out of their sales.
Lenders may also have to retain a 5% stake in any loans they make to comply with the risk retention rule under the Dodd-Frank Act. That prevents them from making risky loans and selling 100% of the risk. It also makes banks more selective about the loans they grant.
The fate of the Dodd-Frank Act is uncertain however. President Trump has signed an executive order to begin the unraveling of those regulations and the risk retention rule is sure to be reviewed. But those changes won’t happen over night and maybe not in time.
So just how hard will commercial property owners get hit?
Bloomberg says the delinquency rate is expected to hit 5.75% this year, after several years of declines. Because these mortgages are packed into bonds, there could be more bondholder losses as well.
According to Bloomberg, banks sold $250 billion worth of commercial mortgage-backed securities to institutional investors in 2007. But not all of them are maturing this year because many have already been refinanced or the properties sold. Property owners with less desirable properties and weak financials have already defaulted.
Using data from Morningstar, Bloomberg says the amount of debt that will actually come due this year now stands at about $90 billion dollars. From there, Morningstar is estimating about “half” of those remaining loans will run into refinancing roadblocks!
For people faced with this situation, it’s critical to have a back-up plan. You shouldn’t wait until the last minute or you might end up losing your property. It’s best to start working now on refinancing, or selling the property before you run out of time.
If you are looking for commercial investments, be careful about paying too much and accepting low cap rates. If you just wait a bit, you could find much better deals.
And all this is happening just as the economy is in a major shift. Baby boomers are turning 65 at a clip of 10,000 per day. Their spending habits will change and that will affect commercial property. Plus, technology and innovation is quickly making some industries obsolete practically overnight.
A commercial builder asked me if we’d like to finance the construction of an auto dealership in Sacramento, “because the auto industry has been booming.”
After researching it a bit, I told him that yes, it has been booming, but only because of easy financing. But this is the year that many leases will be returned to car dealers and we could very well see a huge glut in cars for sale. My daughter needs a new car and I told her to wait just a bit longer as we could see some steep discounts this summer.
Never base your decisions on the way things have been. In 2005, Fed Chair Ben Bernanke said, ”We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize…”
Bernanke was dead wrong, and made the fatal mistake of not taking into consideration massive debts from easy lending that couldn’t be repaid. We are seeing some of the same debt issues today, just not in residential mortgages.
We expect to see some bargains in the commercial property world over the coming year. If you’d like to be first to know about those, join the network to get on the VIP investor list. www.RealWealthNetwork.com
By Elaine Simpson, President of Occupancy Solutions, LLC
Set yourself up for leasing success by making a resolution to consistently use these basic leasing tools. If you put all of them in your leasing toolbox and use them regularly and properly, they will lead you to success!
The Tour Path
As they say, “put your best foot forward”. After making sure the office entrance and office look inviting, are clean and in order for the day, take the time to preview the path on which you will take your prospects while touring and demonstrating why your community is perfect for them. Be sure to pick up any trash or cigarette butts along your route. While walking your tour path, be sure to take notes of maintenance or other issues that must be addressed to make your tour route look its best so you can impress your prospect.
Models and Vacant Market Ready Apartments
Preview the apartments that you will be showing. Create a “sparkle kit” of basic cleaning supplies to carry with you so you can clean a mirror, dust a shelf, pick up a dead bug, change a light bulb, etc. Include furniture markers to touch up scratches and scuffs on the model furniture. All the interior lights in the apartment should be on. Set the thermostat to the proper temperature for the day. Turn on the radio and open the blinds.
We love to use Leasing Binders to hold and organize our paperwork. Leasing binders are generally 3-ring notebooks with tab dividers and pockets to hold: availability list; product knowledge; marketing materials including brochures, floor plans, photos and current flyers; market surveys so that you can educate your prospects regarding the competition (remember not to gossip but speak factually about what they offer or don’t offer); guest cards; applications; business cards; calculator; tape measure. Also use page protectors to keep the documents and pages looking clean and crisp.
Product Knowledge Notebook
Make this section of your binder a place to keep all of the information that you can find about the physical asset: year built, number of acres, type of zoning, number of units, unit mix, type of construction, type of insulation, floor plans, room dimensions, window sizes, carpet and flooring colors, lists of upgrades, etc.
List of Competitive Advantages
Make a list of the things that set you apart from your competition to help you sell against them. This list can help you when overcoming objections.
Telephone Call Log
Everyone in the office should be logging their telephone calls. It will capture how many calls were answered by a person during business hours. The data will also illustrate which days and times of day are the busiest. Many people just hang up and won’t leave a message when they hear a voice message so try to answer every call in person.
Terrific Telephone Techniques
The goal is to give and receive as much information as possible in an organized way in very little time in a polite and professional manner that leads to an appointment to visit the community or a lease over the phone. You can create your own leasing script. We don’t want you to sound like a robot, but if you follow along with a script you won’t forget to ask important questions and to give each caller a brief description of the apartment interior and community amenities, invite them to tour and set up an appointment. You should ask for each caller’s name at the beginning of the call and use it during your conversation to personalize the call. Find out how each caller heard about your community so you can track what advertising sources are working and which ones are not working for you. Your list of questions should also include: Desired floorplan? How soon needed? Number of occupants? Pets? Length of lease? Why moving? Your description should include: feature/benefits of apartment interiors; community amenities; utility information; deposits and fees; invitation to visit; location and office hours; directions if needed; instructions on how to apply, etc.
Ear Appealing Descriptions and Words to Avoid
Each leasing consultant should take the time to write out a description of each floor plan within the community and then practice verbally using those descriptions for their presentations whether over the phone, on line or in person. Think of your own “ear appealing” words to use in your descriptions. Examples: exceptional, unique, charming, cleverly designed, stylish, etc. Avoid using industry words. Replace complex, property, site and unit with community and apartment or home.
Proper In-Person Greeting
Stand up to greet each prospect. Look them in the eye, extend your arm to offer a firm handshake, verbally introduce yourself and welcome them to your community.
Whether you use printed or computer guest cards, best practice is to fill out the guest cards for your prospects instead of asking them to do it. You can ask questions and make notes while making conversation. Record their “hot” buttons and note what is really important to them in finding their next home. These notes will help you later during your presentation, tour and closing.
We suggest you show your selected vacant apartment(s) before showing your model(s). This helps prospects envision their own furniture being placed in their new home. Use the information from your guest card and point out the features and benefits you already know will interest them. Take this time to build rapport and start closing the sale.
There are several ways to approach closing the sale. You can set the stage for closing when you first speak to a prospect on the phone or at the beginning of an office visit before you ever leave the office by asking two key questions: 1. What other options are you considering? 2. If you see something you like, are you prepared to lease today? This will start the dialog you need to work your magic.
Fantastic Follow Up
It is a little old fashioned, but we suggest the use of a “tickler box” in your leasing office to keep track of ALL leads from ALL employees so constant, progressive follow up can be done with each prospect until they tell you that they have leased somewhere else or to stop contacting them.
Elaine Simpson, owner of Occupancy Solutions, offers awesome in-person training sessions on this property management topic and many others in addition to e-learning courses and webinars. She can be reached at (800) 865-0948 or www.occupancysolutions.com.