by Terry Brown
Since I've also been in the restaurant business for 30 something years, I thought I'd present to everyone the NRA's views of the State of the Union:
Washington, D.C. (RestaurantNews.com) In reaction to President Barack Obama’s State of the Union address Tuesday night, the National Restaurant Association called for the advancement of several pro-growth policies to allow the restaurant industry—the nation’s second-largest private-sector employer and creator of 230,000 net jobs in 2011—to continue its position as a leading job producer and engine of economic success.
“After adding an impressive 230,000 jobs in 2011, the strongest gain since 2006, America’s restaurant industry is expected to outpace the overall economy in job growth in 2012,” said Dawn Sweeney, President and CEO of the National Restaurant Association. “Restaurants provide jobs in every state and every Congressional district. Throughout the economic downturn, we have been one of the few industries that has continued growing, providing quality jobs that lead to fulfilling careers in our industry and others. We are 13 million jobs strong, and with the right policies, America’s restaurants will be able to create even more jobs and provide greater opportunities to more Americans.
“We applaud the President for recognizing the need to address comprehensive immigration reform now. The Association supports sensible, comprehensive reform that combines worksite enforcement and strong borders with workforce and immigration policies and a visa system that meets U.S. worksite needs. This is an issue that requires bipartisan solution, and although difficult, must continue to be a high priority for federal officials. The patchwork quilt of state regulations is increasingly difficult for business owners and operators to navigate. Congress must ensure that any mandatory E-Verify program is efficient and easy to use by employers of every size. Also, businesses must be able to use the H-2B visa program without new red tape.
“And we appreciate the President’s commitment to energy efficiency, which is critical for commercial and retail establishments as well as manufacturing – and can return equal or more savings.
“As the national economy continues to slowly climb from the deepest downturn since the Great Depression, the U.S. restaurant industry also is on the road to recovery. The federal government should provide long-term certainty, such as depreciation schedules that give restaurant industry and retailers the certainty they need to help spur investment and construction.”
The restaurant industry is the nation’s second-largest private-sector employer, providing jobs to nearly 13 million people, or one in every 10 workers. Click here to see the number of restaurant jobs in your state.
Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises 960,000 restaurant and foodservice outlets and a workforce of nearly 13 million employees. Together with the National Restaurant Association Educational Foundation, the Association works to lead America’s restaurant industry into a new era of prosperity, prominence, and participation, enhancing the quality of life for all we serve. For more information, visit our Web site at www.restaurant.org.
Wednesday, January 25, 2012
Tuesday, January 24, 2012
Some Bright Signs, But Housing Market Still Shaky
by Chris Arnold
When President Obama delivers his annual State of the Union address Tuesday night, the economy will be a top issue — as will the housing market, which is still at the heart of the country's economic problems. Despite some encouraging signs from investors, housing starts are still low and foreclosure prevention efforts haven't done as much as hoped.
The Federal Reserve said this month that the crash in home prices has cost $7 trillion in household wealth, which has discouraged spending by people and businesses.
On the campaign trail in Florida on Monday, Republican Mitt Romney offered this assessment: "It doesn't have to be like this. It can get better; it will get better."
Romney and his fellow GOP presidential candidates haven't offered many specifics about how housing will get better, or when. "I can't predict when it's going to get better other than if I'm fortunate enough to become president I will care very deeply about getting it better in a big hurry," Romney said.
'Encouraging' Signs From Investors
But it is at least possible now to take a glass-half-full view of things. Mark Zandi, chief economist at Moody's Analytics, has been tracking the housing market closely and advising policymakers in Washington.
"The six-year-long housing crash is coming to an end," Zandi says. "It's not quite over. I think we've got a bit more to go with respect to house price declines. But for the first time since late 2005-06, I think the trend lines look actually quite good for housing."
Zandi says the pace of home sales is picking up. But that does not mean that lots of average Americans are jumping back in, getting loans, buying houses and brimming with confidence. Many of those sales are actually investors using cash to buy foreclosed properties. That might not sound so good, but Zandi likes to see that.
"Investors are probably about a third of the existing home market right now — a very important part of the market, which is very encouraging. They sense value," he says.
Zandi says prices have fallen enough that investors can come in, buy the properties, rent them, cover their costs and hold on. "These aren't flippers," he says. "They're looking out three, five years."
When President Obama delivers his annual State of the Union address Tuesday night, the economy will be a top issue — as will the housing market, which is still at the heart of the country's economic problems. Despite some encouraging signs from investors, housing starts are still low and foreclosure prevention efforts haven't done as much as hoped.
The Federal Reserve said this month that the crash in home prices has cost $7 trillion in household wealth, which has discouraged spending by people and businesses.
On the campaign trail in Florida on Monday, Republican Mitt Romney offered this assessment: "It doesn't have to be like this. It can get better; it will get better."
Romney and his fellow GOP presidential candidates haven't offered many specifics about how housing will get better, or when. "I can't predict when it's going to get better other than if I'm fortunate enough to become president I will care very deeply about getting it better in a big hurry," Romney said.
'Encouraging' Signs From Investors
But it is at least possible now to take a glass-half-full view of things. Mark Zandi, chief economist at Moody's Analytics, has been tracking the housing market closely and advising policymakers in Washington.
"The six-year-long housing crash is coming to an end," Zandi says. "It's not quite over. I think we've got a bit more to go with respect to house price declines. But for the first time since late 2005-06, I think the trend lines look actually quite good for housing."
Zandi says the pace of home sales is picking up. But that does not mean that lots of average Americans are jumping back in, getting loans, buying houses and brimming with confidence. Many of those sales are actually investors using cash to buy foreclosed properties. That might not sound so good, but Zandi likes to see that.
A Drop In New Housing Units
The number of new homes under construction dropped off drastically in recent years. It's likely to be two or three years before the housing market starts to look healthy again, analysts say.
"Investors are probably about a third of the existing home market right now — a very important part of the market, which is very encouraging. They sense value," he says.
Zandi says prices have fallen enough that investors can come in, buy the properties, rent them, cover their costs and hold on. "These aren't flippers," he says. "They're looking out three, five years."
Owner Financed Deals make a comeback
by Terry Brown
With 1 year CD rates below 1% (.65% as of today), sellers are figuring out that receiving a large check from closing and having no where to invest it may not be a wise thing.
Currently, bank real estate interest rates are hovering around 4%, owner financed loans of 5% without points or origination fees are a great deal for both seller AND buyer.
Sellers without much financial experience are learning all about balloon payments, pre-payment penalties, interest only mortgages and even doing first & second mortgage combos with a balloon on the second so they can have some cash in the near future, yet still have long term retirement income.
Buyers like the fact that they don't have to qualify via their credit scores or worry about maxing out their income-to-debt ratio. Yes, both entities are winning.
However, sellers must be careful - sometime requesting upwards to 15-25% down payment instead of the 5-7% down payment that many banks require. They also need to remember that this is a business transaction, and treat it as such. Don't get too "friendly" with your mortgagee - you want to keep the transaction professional and not allow your borrower to learn too much about you. The last thing a seller wants is to get the property back - unless perhaps it is a land deal, whereas not much damage can be done to the property. They also need to go through a closing company as they will understand how to properly file all of the closing documents, including an owner-financed lien.
The main thing they want to remember is to not get themselves into the "second" position, such as doing an owner financed deal on a piece of land and the buyer goes out and gets a mortgage to build a house, but then asks the seller if they will allow the bank to take the first position instead of a second. Why? If the buyer defaults on the building loan, the seller would be responsible for the bank loan. Rule: NEVER give up the first lien position on an owner financed deal.
Buyers want to make sure that a closing company is used as well, as they don't want to make all of their payments and find out that the seller sold their property to someone else, because the documents of their sale was never filed. An established title/closing company can solve all of your fears.
For now, there are more sellers than they are buyers. If you learn that a seller has a sizable equity in their property, you may want to ask for an owner-financed deal, even if it isn't indicated - worse that could happen would be that you would be told "no"... Offer a "balloon" payment option of 3 to 5 years, you may see sellers may bite. Again, if the seller doesn't have anywhere to park their cash, they may enjoy earning 5% or more on it for a few years...
Final thing to remember, sellers DON'T want to go to closing with money - so your down payment MUST cover the commission of the sale and their closing costs - otherwise they will not have much motivation to do the deal. Get past these things and you could avoid alot of bank fees that are just profit to the banks.
TB
With 1 year CD rates below 1% (.65% as of today), sellers are figuring out that receiving a large check from closing and having no where to invest it may not be a wise thing.
Currently, bank real estate interest rates are hovering around 4%, owner financed loans of 5% without points or origination fees are a great deal for both seller AND buyer.
Sellers without much financial experience are learning all about balloon payments, pre-payment penalties, interest only mortgages and even doing first & second mortgage combos with a balloon on the second so they can have some cash in the near future, yet still have long term retirement income.
Buyers like the fact that they don't have to qualify via their credit scores or worry about maxing out their income-to-debt ratio. Yes, both entities are winning.
However, sellers must be careful - sometime requesting upwards to 15-25% down payment instead of the 5-7% down payment that many banks require. They also need to remember that this is a business transaction, and treat it as such. Don't get too "friendly" with your mortgagee - you want to keep the transaction professional and not allow your borrower to learn too much about you. The last thing a seller wants is to get the property back - unless perhaps it is a land deal, whereas not much damage can be done to the property. They also need to go through a closing company as they will understand how to properly file all of the closing documents, including an owner-financed lien.
The main thing they want to remember is to not get themselves into the "second" position, such as doing an owner financed deal on a piece of land and the buyer goes out and gets a mortgage to build a house, but then asks the seller if they will allow the bank to take the first position instead of a second. Why? If the buyer defaults on the building loan, the seller would be responsible for the bank loan. Rule: NEVER give up the first lien position on an owner financed deal.
Buyers want to make sure that a closing company is used as well, as they don't want to make all of their payments and find out that the seller sold their property to someone else, because the documents of their sale was never filed. An established title/closing company can solve all of your fears.
For now, there are more sellers than they are buyers. If you learn that a seller has a sizable equity in their property, you may want to ask for an owner-financed deal, even if it isn't indicated - worse that could happen would be that you would be told "no"... Offer a "balloon" payment option of 3 to 5 years, you may see sellers may bite. Again, if the seller doesn't have anywhere to park their cash, they may enjoy earning 5% or more on it for a few years...
Final thing to remember, sellers DON'T want to go to closing with money - so your down payment MUST cover the commission of the sale and their closing costs - otherwise they will not have much motivation to do the deal. Get past these things and you could avoid alot of bank fees that are just profit to the banks.
TB
Friday, January 13, 2012
Fat piggy banks indicate economic upturn
by Giselle Smith
How much loose change do you have at home? The number of quarters, dimes, nickels and even pennies that people keep in their coin jars and piggy banks is an indicator of the health of the U.S. economy. More change saved means times are better.
During the recession, a lot of people emptied their change jars and put those coins back into circulation -- requiring the U.S. Mint to produce far fewer new ones. Increased demand for those circulating coins in 2011 means people have gone back to saving, NPR reported.
"People went into their piggy banks and their coin jars and spent those coins," Richard Peterson, deputy director of the U.S. Mint, told NPR's Planet Money. "Those coins flowed back into the banks and then ultimately back to Federal Reserve. The Federal Reserve vaults started filling up and they turned off the spigot of new coin production from the United States Mint."
The economic crisis hit the Mint hardest in federal fiscal year 2009, when a "massive flow-back of coins from circulation" led the Federal Reserve banks to order only 5.2 billion new coins, according to the Mint's annual report (.pdf file). That number represented the lowest level since the 1960s.
Though FY 2011's 7.4 billion new circulating coins falls far short of the Mint's peak shipments of more than 27 billion coins in FY 2000 -- spurred by concerns over Year 2000 and the popularity of the 50 State Quarters Program -- it represents an increase of 37%, NPR reported.
*************
Terry Brown's NOTE:
I can confirm this article, as I own a national fast food restaurant and a large laundromat. Usually, we have to buy rolled coin from our bank several times a week to have enough change in our restaurant, but over a recent two year poor economic period, we rarely had to open our rolled coins, as we were getting lots of coins from our customers - but that has now changed, and we're having to buy rolled coins on a more regular basis - folks are paying with full paper currency, they are no longer scraping the bottom. Same thing with our laundromat - for years we would average about the same amount of coins purchased from our change machine as we had in coins in our washer/dryers, but during those same two hectic economic years, we averaged about half the coins purchased vs what was used in the washer/dryers - indicating folks were bringing coins to the laundromat. This indeed reflects an economy that is on the rebound for several different levels of economic status. TB
How much loose change do you have at home? The number of quarters, dimes, nickels and even pennies that people keep in their coin jars and piggy banks is an indicator of the health of the U.S. economy. More change saved means times are better.
During the recession, a lot of people emptied their change jars and put those coins back into circulation -- requiring the U.S. Mint to produce far fewer new ones. Increased demand for those circulating coins in 2011 means people have gone back to saving, NPR reported.
"People went into their piggy banks and their coin jars and spent those coins," Richard Peterson, deputy director of the U.S. Mint, told NPR's Planet Money. "Those coins flowed back into the banks and then ultimately back to Federal Reserve. The Federal Reserve vaults started filling up and they turned off the spigot of new coin production from the United States Mint."
The economic crisis hit the Mint hardest in federal fiscal year 2009, when a "massive flow-back of coins from circulation" led the Federal Reserve banks to order only 5.2 billion new coins, according to the Mint's annual report (.pdf file). That number represented the lowest level since the 1960s.
Though FY 2011's 7.4 billion new circulating coins falls far short of the Mint's peak shipments of more than 27 billion coins in FY 2000 -- spurred by concerns over Year 2000 and the popularity of the 50 State Quarters Program -- it represents an increase of 37%, NPR reported.
*************
Terry Brown's NOTE:
I can confirm this article, as I own a national fast food restaurant and a large laundromat. Usually, we have to buy rolled coin from our bank several times a week to have enough change in our restaurant, but over a recent two year poor economic period, we rarely had to open our rolled coins, as we were getting lots of coins from our customers - but that has now changed, and we're having to buy rolled coins on a more regular basis - folks are paying with full paper currency, they are no longer scraping the bottom. Same thing with our laundromat - for years we would average about the same amount of coins purchased from our change machine as we had in coins in our washer/dryers, but during those same two hectic economic years, we averaged about half the coins purchased vs what was used in the washer/dryers - indicating folks were bringing coins to the laundromat. This indeed reflects an economy that is on the rebound for several different levels of economic status. TB
Thursday, January 12, 2012
9 Buyer Traps and How to Avoid Them
by Raul Pineyro
9 Buyer Traps and How to Avoid Them
" A systemized approach to the homebuying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that’s best for you."
No matter which way you look at it buying a home is a major investment. But for many homebuyers, it can be an even more expensive process than it needs to be because many fall prey to at least a few of the many common and costly mistakes which trap them into either:
- paying too much for the home they want, or
- losing their dream home to another buyer or,
- (worse) buying the wrong home for their needs.
A systemized approach to the homebuying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that’s best for you.
9 Buyer Traps
This important report discusses the 9 most common and costly of these homebuyer traps, how to identify them, and what you can do to avoid them:
1. Bidding Blind
What price should you offer when you bid on a home? Is the seller’s asking price too high, or does it represent a great deal. If you fail to research the market in order to understand what comparable homes are selling for, making your offer would be like bidding blind. Without this knowledge of market value, you could easily bid too much, or fail to make a competitive offer at all on an excellent value.
2. Buying the Wrong Home
What are you looking for in a home? A simple enough question, but the answer can be quite complex. More than one buyer has been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that is either too big or too small. Maybe they’re stuck with a longer than desired commute to work, or a dozen more fix-ups than they really want to deal with now that the excitement has died down. Take the time upfront to clearly define your wants and needs. Put it in writing and then use it as a yard stick with which to measure every home you look at.
3. Unclear Title
Make sure very early on in the negotiation that you will own your new home free and clear by having a title search completed. The last thing you want to discover when you’re in the back stretch of a transaction is that there are encumbrances on the property such as tax liens, undisclosed owners, easements, leases or the like.
4. Inaccurate Survey
As part of your offer to purchase, make sure you request an updated property survey which clearly marks your boundaries. If the survey is not current, you may find that there are structural changes that are not shown (e.g. additions to the house, a new swimming pool, a neighbor’s new fence which is extending a boundary line, etc.). Be very clear on these issues.
5. Undisclosed Fix-ups
Don’t expect every seller to own up to every physical detail that will need to be attended to. Both you and the seller are out to maximize your investment. Ensure that you conduct a thorough inspection of the home early in the process. Consider hiring an independent inspector to objectively view the home inside and out, and make the final contract contingent upon this inspector’s report. This inspector should be able to give you a report of any item that needs to be fixed with associated, approximate cost.
6. Not Getting Mortgage Pre-approval
Pre-approval is fast, easy and free. When you have a pre-approved mortgage, you can shop for your home with a greater sense of freedom and security, knowing that the money will be there when you find the home of your dreams.
7. Contract Misses
If a seller fails to comply to the letter of the contract by neglecting to attend to some repair issues, or changing the spirit of the agreement in some way, this could delay the final closing and settlement. Agree ahead of time on a dollar amount for an escrow fund to cover items that the seller fails to follow through on. Prepare a list of agreed issues, walk through them, and check them off one by one.
8. Hidden Costs
Make sure you identify and uncover all costs - large and small -far enough ahead of time. When a transaction closes, you will sometimes find fees for this or that sneaking through after the "sub"-total - fees such as loan disbursement charges, underwriting fees etc. Understand these in advance by having your lender project total charges for you in writing.
9. Rushing the Closing
Take your time during this critical part of the process, and insist on seeing all paperwork the day before you sign. Make sure this documentation perfectly reflects your understanding of the transaction, and that nothing has been added or subtracted. Is the interest rate right? Is everything covered? If you rush this process on the day of closing, you may run into a last minute snag that you can’t fix without compromising the terms of the deal, the financing, or even the sale itself.
Saturday, January 7, 2012
Investors see commercial real estate as a good bet
As 2011 came to a close, some commercial real estate experts found promising signs in often troubled markets.
The office market is gaining interest from investors amid a mixed bag of property-related economic fundamentals such as improvement in employment and business expansions, a recent survey showed. Commercial real estate continues to offer attractive yields compared with alternative investment vehicles, said respondents to a quarterly poll by consulting firm PricewaterhouseCoopers.
"Despite a sluggish U.S. economic outlook, the majority of surveyed investors view commercial real estate as favorably priced and a good play," said Mitch Roschelle, the U.S. real estate advisory practice leader at PwC, as the firm brands itself.
Investors are bullish on the general prospects for office buildings, the largest commercial real estate sector. They expect to see occupancy stabilizing and rents rising in many markets this year. Most attractive are office districts that have abundant tenants in technology or energy businesses.
Rent growth is expected to be highest in San Francisco, New York and the Pacific Northwest. Los Angeles ranked ninth among 51 markets as a desirable place to invest.
Newer, well-located industrial and retail properties are sought out by investors, but apartments took the crown as the most favored real estate category.
"Investors continue to view the apartment sector as an attractive play in delivering steady cash flows driven by solid rental demand and rising rents," said Susan Smith, editor in chief of PwC's survey. "As a result, investors view this sector as a hotbed for further investment activity."
Thursday, January 5, 2012
U.S. is top 2012 property investment pick
by Ilaina Jonas
The United States will remain the top choice of most global commercial real estate investors in 2012, but the country has lost ground to Brazil which ranked No. 2 this year, according to a survey released Sunday.
While the United States offers the most stable and secure option in commercial real estate, investors said improvement in rent and occupancy growth and the repeal of a 1980 foreign investment tax would have the strongest impact on their investment decisions, according to the 20th annual survey of Association of Foreign Investors in Real Estate (AFIRE) members.
For about the past year or so, investors in U.S. commercial real estate have focused on gateway cities such as New York, Washington, Boston, San Francisco and Los Angeles, driving prices up and yields down.
Meanwhile commercial property in Brazil, with its bubbling economy and safer investment environment, has become a hot spot for global investors. Sao Paulo, Brazil's largest city, jumped to the fourth best city for real estate investment dollars in 2012, up from 26th place last year.
The United States is still very desirable and was second behind the UK in attracting cross border investment in 2011, according to Real Capital Analytics preliminary figures.
"The negative is it doesn't promise a whole lot of capital appreciation because the prime markets are already fully priced," AFIRE Chief Executive Officer James Fetgatter said. "By no means will Brazil replace the U.S., at least not in the forseeable future. Brazil is considered now a much safer place to invest and a place where you can get capital appreciation and good yield."
AFIRE'S survey respondents hold more than $874 billion of real estate globally, including $338 billion in the United States.
Sixty 60 percent of respondents said they plan to increase their investment in U.S. real estate in 2012, down from a record 72 percent last year, according to the 20th annual survey.
Some 42.2 percent said they believed the United States in 2012 would offer the best opportunity for the price of their commercial real estate investments to increase, down from 64.7 percent last year's survey.
The United States lost ground to Brazil, with 18.6 percent saying Brazil's property market offered the best growth opportunity for their investment dollars. That's up 14.2 percentage points, moving Brazil up to second place from fourth, and pushing China down to No. 3, according to the AFIRE survey.
Seventy percent of respondents picked one of the three countries as their favorite, while the remaining 30 percent had top choices from 13 other countries on five continents.
Respondents said they would invest more in U.S. commercial property if the fundamentals of rent and occupancy growth were stronger.
Another U.S. barrier respondents cited was the Foreign Investment in Real Property Tax Act (FIRPTA). The 1980 act, originally designed to protect farm property from foreign ownership, subjects foreign buyers to both their domestic and U.S. taxes when they sell their investment, unless their home country has a taxation treaty with the United States.
FIRPTA opponents have argued that the act unfairly penalizes foreign investors of real estate. Such double taxation does not apply if they buy U.S. stocks or bonds.
As for the top cities for foreign investment in 2012, New York remained No. 1. London moved up to No. 2 from No. 3, swapping ranks with Washington. Sao Paulo was fourth, and San Francisco moved up to No. 5 from No. 10 last year.
Europe's sovereign debt problems and looming recession pushed most of the countries there - except for a few such as Switzerland and Poland - off the map for real estate investors. Germany lost about half its support among respondents in terms of stability and price appreciation, according to the survey.
Emerging markets also seem to be getting more popular among potential investors. Respondents identified 25 countries they would consider for investment, up from 18 last year. Brazil topped the list, with China in second place, as each did last year. Turkey moved up to No. 3 from No. 7 last year. India and Vietnam each dropped down one spot, to No. 3 and No. 4 respectively. Appearing for the first time were Colombia, at No. 10, Hungary at No. 12, and Qatar at No. 17.
As for U.S. commercial real estate, respondents said that this year they would most likely invest in apartment buildings, the fourth consecutive year multifamily topped the list. Of all the types of U.S. commercial real estate, the multifamily sector has not only recovered from the post-2007 real estate slump but rents and occupancy are even stronger than before.
Warehouse and distribution centers ranked second, up from No. 5 last year. Office properties were third, up a notch from No. 4. Retail properties - shopping centers and malls - slipped to No. 4 from No. 2. Hotels ranked No. 5, down from No. 3 last year.
The survey was conducted in the fourth quarter by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business.
Wednesday, January 4, 2012
Could the U.S. housing market finally be on the mend?
by David K. Randall
Recent reports paint a mixed picture. In a sign of renewed demand, sales of existing homes hit a one-and-a-half year high in November. Still, home prices have fallen for 13 consecutive months and any recovery would come from a very low level.
In the past there have been false signs that the worst of the housing bust had passed, but if housing is finally improving, it could be a boon for investors. Here are targeted real estate plays for the new year.
BE A LANDLORD
Apartment buildings, rather than single-family homes, could remain the housing sector's growth market in the next few years. Builders are only now starting to address a large imbalance in the market. Construction of multi-family buildings lagged in the 2000s because easy financing turned many would-be renters into homeowners.
Cheaper labor costs and lower property values compared with 2006 and 2007 have convinced developers to begin work on apartment buildings, said Jacob Frydman, chief executive at United Realty Partners, a real estate advisory firm based in New York. Apartment building projects are up 60 percent in 2011 compared with last year. Single-family home starts, meanwhile, have fallen by 10 percent.
Trouble in the single-family home market will also lift the apartment business, noted Oliver Chang, an analyst at Morgan Stanley. Current homeowners who will soon go through a short-sale or foreclosure will most likely turn into renters, he said. Tight lending requirements by banks will mean that "households should move toward rentals in greater numbers than in the past" because fewer potential buyers can qualify for loans, he wrote in a recent note to clients.
Equity Residential and UDR are two of the largest publicly traded REITS that specialize in apartment buildings. EQR may be in a better position because of the quality of its assets, analysts said. Holdings in the New York metropolitan region - a part of the country where housing has held up relatively well - make up EQR's largest market with 13 percent of assets. Battered markets like California's Inland Empire and Orlando, Florida constitute a much smaller portion of its portfolio than at rival UDR.
EQR is up 10 percent so far this year. It yields nearly 4 percent.
Funds are another option for investors who don't want to wade through the holdings of individual trusts. The Vanguard REIT Index fund currently yields 3.4 percent. The index fund holds a variety of REITs not just those that focus on apartment buildings. EQR makes up 5 percent of its total assets.
EQR makes up 8 percent of the assets of the Fidelity Real Estate Investment fund. The fund is up 7.8 percent in 2011, after dividends..
Richard Milligan, an analyst at Raymond James, said self-storage REITs should outperform the broader market again in 2012 as publicly-traded companies continue to take market share from smaller independent operators. He expects foreclosures and short sales to boost the rental industry as downsizing families decide to store excess furniture and belongings rather than sell them.
Public Storage, the largest self-storage REIT, is costly at 44 times earnings. But it could be a momentum play. Shares are up 33 percent in 2011 and hit a 52-week high on December 27.
BUYING THE BIG BANKS
Bad mortgages, along with the prospects of more to come, sunk financial companies in 2011. Foreclosures and short sales should remain steady for the first six months of 2012 as well.
Low share prices and hopes that the recent drop in the unemployment rate will lead to a real estate turnaround have some investors looking at financial stocks as a value play.
"The only double-digit return you'll be able to get in 2012 will be in banks," said Jamie Cox, managing partner at Harris Financial Group in Colonial Heights, Virginia. "Of course, it's easier to say that now they've all fallen 30 percent. But nothing will make banking a more favorable place to invest than to have real estate improve." Cox, who owns shares of Bank of America and JP Morgan Chase & Co, is buying large banks because they are trading at low book values -- the estimated worth of a company's assets on its balance sheet. Bank of America, for instance, trades a price to book value of just 0.24 percent.
He's staying away from regional banks like SunTrust and Zions Bancorp because their businesses are centered in areas like Arizona and Florida that were epicenters of the real estate bust, he said.
Value investors have ETF options as well. Large banks are the top holdings in the iShares Dow Jones US Financials, which has fallen 15 percent in 2011. Wells Fargo and JP Morgan each make up approximately 6.5 percent of assets.
Vanguard's Financials ETF has similar holdings but includes residential REITs along with banks.
Monday, January 2, 2012
Study Finds 38% of Homes Purchased in 2011 Bought with Cash
by Carrie Bay
Despite record low mortgage rates, 2011 has seen a surprisingly high level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence.
Despite record low mortgage rates, 2011 has seen a surprisingly high level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence.
Jonathan Dienhart and Ken Lee, two analysts with the company, say between tight lending standards and a desperate search for yield by investors, cash purchases of homes – particularly for distressed properties – became even more common in 2011 than last year.
Dienhart and Lee analyzed data collected through Hanley Wood’s Housing IntelligencePro, and shared their findings in a blog post.
The two discovered that 38 percent of homes purchased in 2011 were bought with all cash. That’s up from 34 percent in 2010, and double the 19 percent rate in 2006.
According to Dienhart and Lee, this trend is likely to continue in the near term. They note that cash-paying investors are responsible for an increasing share of home purchases nowadays as prior homeowners abandon the ownership market and head back to rentals.
Dienhart and Lee analyzed data collected through Hanley Wood’s Housing IntelligencePro, and shared their findings in a blog post.
The two discovered that 38 percent of homes purchased in 2011 were bought with all cash. That’s up from 34 percent in 2010, and double the 19 percent rate in 2006.
According to Dienhart and Lee, this trend is likely to continue in the near term. They note that cash-paying investors are responsible for an increasing share of home purchases nowadays as prior homeowners abandon the ownership market and head back to rentals.
Sunday, January 1, 2012
10 Simple Steps for Making 2012 a Success
by Alan Shafran
In recent years, it has been hard to ignore all of the negative publicity that has been circulating about the national economy, the stock market and current events. The state of the real estate market in particular has received a lot of bad press. With all of the foreclosures and short sales that have been flooding our market, and all of the problems that have been occurring in the lending industry, I thought it would be in all of our best interests to create a quick business plan to help us focus.
Simplify, simplify, simplify — Find a few things that you are good at and become an expert in each one. We are constantly being bombarded by massive amounts of data, new marketing strategies, advancements in technology and new techniques for serving our clients. To succeed in today’s market, it’s critical that we simplify and streamline our process. Don’t try to be an expert with every new idea or technology; you will only end up being mediocre at everything. Instead, become a specialist, target the markets you know, create strong efficacy and the results will come.
1) Identify the strengths and weaknesses of your current marketing plan. What is working for you? What isn’t? What new strategies are a good match for your individual talents and skills? The important thing is not to over extend yourself. If you want to try something new, for example the mailing of postcards to reach a new farm, make sure you have enough resources to cover the cost of the project for a period of at least six months. If you don’t have the budget, don’t start the project. Implementing a new marketing strategy without giving it enough time to succeed will only dilute the effectiveness of your other marketing programs, because it will sap you of your time, effort and energy. If you don’t have a budget for a new plan, have a look at what you are currently doing and brainstorm about how to refine the process.
2) Improve your sales skills. This starts with writing down a list of the top areas where you feel you need improvement for 2012. The key is to approach yourself with the most critical eye possible. Re-assess your list in light of our current economic climate and the condition of your local real estate market. Make it a goal to become more educated, so that you can speak knowledgeably and project confidence. Find an associate who is willing to put forth the effort and time it takes to improve, practice what you want to say and perform some role playing exercises. If you practice and work hard enough, you will receive the benefit of new business relationships as a result.
3) Understand your branding and the demographics you need to reach. The economic downturn has changed the status for many of our markets. Several years ago, I was selling multiple homes valued over $6 million, but that segment of the market has slowed to a standstill. To be successful, it’s important to constantly evaluate what types of homes people are looking for in your area and what they are willing to pay. After you figure out what type of clients you want to target, take the time to adjust your marketing strategy according to their preferences.
4) Update your pictures, résumés, websites and marketing materials. Chances are, if your pictures and business cards make you look like you are 25 years younger than you actually are, then it’s time for an update. Shocking the customer is typically not a good idea. One of the advantages to the recent slowdown in the economy is that it has given us the downtime that we need to work on this type of thing. Also, it’s always a good idea to periodically revise your résumé to ensure that it speaks to today’s consumer dealing with the modern financial environment.
5) Set a goal for how many buyer sides and seller sides you want to close next year. Remember to include your personal percentage of deals that typically fall through and add that to your top number.
6) For the benefit of our industry, if not for yourself, please make a decision to utilize buyer brokerage agreements next year. Using a buyer brokerage agreement will not only give you and your business a more professional appearance, it will help you eliminate a great deal of time and frustration. Choose not to be used and abused and feel great about it!! The importance of adopting buyer broker agreements was the subject of one of my earlier articles for RISMedia, The Evolution of Buyer-Agent Relationships [2].
7) Decide which new technologies and hardware are worth implementing in 2012. Will you update your websites? Will you create an online listing presentation or a customized website for your seller? As I mentioned before, it’s a good idea to find a few things that you are good at and then apply the time and effort it will take to become an expert in those few things. Trying to become an expert at everything will only lead to mediocrity.
8) Implement a stronger time management strategy for 2012. Create a weekly schedule and stick to it. Schedule the points above, including your training, continuing education, new marketing efforts, appointment times and vacations. If you create a schedule that shows success, then you should achieve your goals based on the amount of time, effort and discipline you are willing to apply to keeping to your schedule.
9) Consider hiring a real estate coach next year. I have benefited from the guidance and advice of coaches for most of my career. There are many terrific companies that can help you accomplish everything that you set out to do. I am a big fan of Tom Ferry’s coaching systems, but I recommend you talk to at least two or three different mentors and coaches to see which one is the best fit for your business.
10) Know that the R.E.G. (Real Estate Guru or REG for short) is watching. To us, the REG is an imaginary, all-knowing embodiment of that top-producing Realtor who always makes the best possible use of his time. We all know that there are times in our day when we are forced to do certain activities that don’t produce a direct result. Somehow the results just come—from straight luck, coincidence or just good timing. We call that REG. REG knows that when we do what we are supposed to do, we get rewarded. REG also knows that when you don’t do what you should be doing….things are going to be tough. So have blind faith, believe in yourself, improve yourself, and go have an amazing 2012!!
In recent years, it has been hard to ignore all of the negative publicity that has been circulating about the national economy, the stock market and current events. The state of the real estate market in particular has received a lot of bad press. With all of the foreclosures and short sales that have been flooding our market, and all of the problems that have been occurring in the lending industry, I thought it would be in all of our best interests to create a quick business plan to help us focus.
Simplify, simplify, simplify — Find a few things that you are good at and become an expert in each one. We are constantly being bombarded by massive amounts of data, new marketing strategies, advancements in technology and new techniques for serving our clients. To succeed in today’s market, it’s critical that we simplify and streamline our process. Don’t try to be an expert with every new idea or technology; you will only end up being mediocre at everything. Instead, become a specialist, target the markets you know, create strong efficacy and the results will come.
1) Identify the strengths and weaknesses of your current marketing plan. What is working for you? What isn’t? What new strategies are a good match for your individual talents and skills? The important thing is not to over extend yourself. If you want to try something new, for example the mailing of postcards to reach a new farm, make sure you have enough resources to cover the cost of the project for a period of at least six months. If you don’t have the budget, don’t start the project. Implementing a new marketing strategy without giving it enough time to succeed will only dilute the effectiveness of your other marketing programs, because it will sap you of your time, effort and energy. If you don’t have a budget for a new plan, have a look at what you are currently doing and brainstorm about how to refine the process.
2) Improve your sales skills. This starts with writing down a list of the top areas where you feel you need improvement for 2012. The key is to approach yourself with the most critical eye possible. Re-assess your list in light of our current economic climate and the condition of your local real estate market. Make it a goal to become more educated, so that you can speak knowledgeably and project confidence. Find an associate who is willing to put forth the effort and time it takes to improve, practice what you want to say and perform some role playing exercises. If you practice and work hard enough, you will receive the benefit of new business relationships as a result.
3) Understand your branding and the demographics you need to reach. The economic downturn has changed the status for many of our markets. Several years ago, I was selling multiple homes valued over $6 million, but that segment of the market has slowed to a standstill. To be successful, it’s important to constantly evaluate what types of homes people are looking for in your area and what they are willing to pay. After you figure out what type of clients you want to target, take the time to adjust your marketing strategy according to their preferences.
4) Update your pictures, résumés, websites and marketing materials. Chances are, if your pictures and business cards make you look like you are 25 years younger than you actually are, then it’s time for an update. Shocking the customer is typically not a good idea. One of the advantages to the recent slowdown in the economy is that it has given us the downtime that we need to work on this type of thing. Also, it’s always a good idea to periodically revise your résumé to ensure that it speaks to today’s consumer dealing with the modern financial environment.
5) Set a goal for how many buyer sides and seller sides you want to close next year. Remember to include your personal percentage of deals that typically fall through and add that to your top number.
6) For the benefit of our industry, if not for yourself, please make a decision to utilize buyer brokerage agreements next year. Using a buyer brokerage agreement will not only give you and your business a more professional appearance, it will help you eliminate a great deal of time and frustration. Choose not to be used and abused and feel great about it!! The importance of adopting buyer broker agreements was the subject of one of my earlier articles for RISMedia, The Evolution of Buyer-Agent Relationships [2].
7) Decide which new technologies and hardware are worth implementing in 2012. Will you update your websites? Will you create an online listing presentation or a customized website for your seller? As I mentioned before, it’s a good idea to find a few things that you are good at and then apply the time and effort it will take to become an expert in those few things. Trying to become an expert at everything will only lead to mediocrity.
8) Implement a stronger time management strategy for 2012. Create a weekly schedule and stick to it. Schedule the points above, including your training, continuing education, new marketing efforts, appointment times and vacations. If you create a schedule that shows success, then you should achieve your goals based on the amount of time, effort and discipline you are willing to apply to keeping to your schedule.
9) Consider hiring a real estate coach next year. I have benefited from the guidance and advice of coaches for most of my career. There are many terrific companies that can help you accomplish everything that you set out to do. I am a big fan of Tom Ferry’s coaching systems, but I recommend you talk to at least two or three different mentors and coaches to see which one is the best fit for your business.
10) Know that the R.E.G. (Real Estate Guru or REG for short) is watching. To us, the REG is an imaginary, all-knowing embodiment of that top-producing Realtor who always makes the best possible use of his time. We all know that there are times in our day when we are forced to do certain activities that don’t produce a direct result. Somehow the results just come—from straight luck, coincidence or just good timing. We call that REG. REG knows that when we do what we are supposed to do, we get rewarded. REG also knows that when you don’t do what you should be doing….things are going to be tough. So have blind faith, believe in yourself, improve yourself, and go have an amazing 2012!!
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