Skip to content

It is the best of times it is the worst of times.


Not a day goes by without a fresh spin on real estate appearing in a few local newspapers nationwide. Many of these articles just regurgitating facts provided by some p.r. person with an interest in having those facts spread out into the marketplace. I have to laugh when I read in my local paper about how the average price of a home has risen 30% in the last year.

Sounds good doesn’t it? It is not. It is an accurate deception and that’s how they can justify printing it. In this case, when you understand that the few homes that are selling are the million-dollar plus homes way up on the hill, you begin to see how this “fact” can skew another less exciting “fact” that shows clearly that near my neighborhood, homes that sold for $265,000 a year ago are now offered at $230,000 with no takers. New townhomes originally offered at $259,000 are now listed at $210,000. Still the spinmiesters want you to believe that everything is rosy. What’s interesting is that while they are wrong, they are also right, without knowing it.

Things really are all right. Maybe not where everybody seems to focus, in the single family detached marketplace, but the industry as a whole is sound. For example, in most cases, when single family suffers, multi-family benefits. Every coin has a flip side. Your challenge is to make sure you know how to respond to the marketplace and benefit accordingly.

With all the confusion with the financial markets right now, I have been asked many times, “What should I do?” Well it’s really easy when you think about it. The first thing you should do is call your lenders.

With the pressure on the financial markets and the dropping of the Fed Rate, now is a perfect time to consider refinancing you properties. Assuming you have a met your ongoing obligations as a mortgagor, you may be able to refinance you properties with a significantly lower interest rate than what you are now paying. This provides a series of great benefits. For example, if you leave your monthly payments the same and just refinance the balance of your note, you will be paying off the principal balance faster than you would have under the old agreement. In many cases, you as the owner could drop years off their mortgage term. Just think what you would do with the mortgage payments when the property gets paid off that much sooner. Is that your early retirement? Is it capital to pay down other debts? Is it investment for new a venture? In whatever case, it is more money sooner than you would have had. And that is good.

The real pro understands the structure of real estate investment opportunities and operation and is wise enough to capitalize on market movements when they occur. While your neighbor is losing sleep worrying over his mutual funds, you should condense your investment period and shorten the time between today and the day you will have met all of your financial goals. At Middle Class Millionaires, we’re happy to help. Good luck. Work hard. Success awaits. Go get it.

2008 01 28 Roger Beattie General Real Esate Comments (0) Permalink

Maximize real estate values and incomes during inflationary times.


The US Department of Labor in Washington D.C. announced mid January that inflation has hit a 17 year high. And what’s more is that at the same time, personal earnings have actually fallen behind this increase by .9 percent. Most people will see this as terrible news. But this dark cloud has a silver lining if you own rental housing.

When you consider these two financial factors while recognizing the ridiculous increases in single family real estate prices, you may well find that this is a great time to take advantage of the market by improving your existing properties in ways that will allow you increase revenues. There is a real good chance that the cost of financial improvements, due to still low interest rates, easily makes the improvements not only affordable, but profitable. People need a place to live and will pay accordingly. With less people being able to buy homes, it forces more people (with more money) into the rental market thus fueling the upward pressure in rents at all levels. If your real estate has the elements or amenities it needs to qualify for the higher rents and you should have no problem getting them. Here’s a real life example of an apartment complex that is being remodeled one unit at a time. Let’s look at just one unit and see if these numbers and percentages make sense.

Cost to gut and rebuild 575 square-foot apartment $12,000.00.

Rent increase $100.00 per month or $1,200 per year. (Percentage annual yield on investment amount: 10%.)

Value increase based on 7% cap rate using the $1,200 new revenue: $17,143

So here’s the question, would you invest $12,000 to have an immediate increase in the real value of a property of $17,143 (That’s a 43% increase on your $12G) and then continue to earn a 10% cash-on-cash ongoing yield on the original invested amount? If your answer is “No”, you might want to consider seeking work elsewhere. (Tell me where else you can turn $12,000 into $17,000 this quickly, this securely or this simply and still have a great ongoing cash return.) If your answer is “Yes”, you should look at your current holdings to see if this type of possibility exists in upgrading (appliances, HVAC, amenities, lighting, landscaping, etc. etc. etc.) Remember, if the debt service on money borrowed to make improvements is less than the increased revenue, you have a positive spread, an increased NOI and a higher market value. This is true creation of wealth.

As with anything in this business, treat your decisions like a business and let the numbers lead the way. It is always a great time to be in real estate if you understand how to approach the differing marketplaces and conditions. At Middle Class Millionaires we’d be happy to help any way we can. The “Improvement Analysis” online software (in the member’s section) will give you the answer to the question “Is this improvement a smart investment? Check it out, you’ll love it. Good luck and the best of success in your real estate career.

2008 01 17 Roger Beattie Uncategorized Comments (2) Permalink

Less Work can mean More Money


One of the most time consuming parts of property management is the coordination of rent collections and increases. What for many people is a nightmare can be made quick and easy by taking a very few simple steps. In order to simplify your property management for greater profitability, focus on the following three items first:

1. Have all rent due on the first day of the month. Some people collect rent based on when during the first month a resident or tenant moved into the space. This is a recipe for disaster. Experienced property managers will tell you to always pro-rate the first month’s rent and then collect all future rents on the first of the month. Imagine the headache of trying to coordinate rent collections, statements, and billings if each space required its own timing.

2. Increase rent on all (no exceptions) leases at renewal. When a lease is first signed, it should be understood that rents will go up at the end of the lease period, whether it is six months a year, or whatever term you use. The best way is to have the resident or tenant agree to the rent increase in their original lease. They are excited to get in and will typically think; “Fine, in a year from now you can raise the rent by $50 a month and if we like it here we’ll stay, otherwise we’ll move.”

3. Increase all month-to-month rents at the same time. If you use a firm lease period with the resident having an option of extending on a month to month basis, then schedule all increases at the same time. This way you can sent out a blanket letter to all residents that fit in the category. When a group receive the same letter they are less likely to feel that they have been singled out for the increase and that others are getting a better deal. In addition, it is easier to change your accounting/billing program one time per year for this purpose than multiple times. In addition, if you choose wisely what time of year to implement these increases you will have less people leave due to the additional rent because they will be too busy to look for another place, it will be too hot or too cold, or they will want to be stable through the holidays. The make-up of your residents will tell you what the best time of year will be. If you want more specific help with your exact area, MCM members can go online to our forums and ask for some input specific to your area from other readers and our home office staff. www.middleclassmillionaires.com.

If you evolve your business to take advantage of this type of management process in a systematic manner, you will find that property management is not as difficult or time consuming as you may have once thought. The Middle Class Millionaires course on property management can step you through the process of building an effective system to handle all of your property management operational challenges while accessing all of the income opportunities available. Property Management can be a wonderful and profitable part of the business. Good luck and let us know how we can help.

2008 01 02 Roger Beattie Uncategorized Comments (0) Permalink

Using Real Estate So Uncle Sam Will Help Pay This Year’s Taxes


One of the great benefits of active involvement in real estate is the ability for properties to produce tax shelter. In this way, owners can reduce their personal income tax liability because of tax losses produced by investment properties. When real estate is operated wisely, this tax shelter almost always occurs during at least the first five years of ownership. If you are a Middle Class Millionaires member and don’t understand why this is so, review the MCM course two on real estate investment analysis. If you are not a member, you really might want to consider affiliation.

Before it gets too late for this year, you should maximize your tax position by paying all expenses possible by year end. If possible you can even prepay items for next year. By so doing you will reduce this year’s tax liability, if any, or increase this year’s tax savings. In either case its worth doing. The net effect will could well be equal to 30% to 35% of the amount you pay that you would not have paid without this reminder.

Tax shelter provides not only for an improved cash flow position, but it allows you to reinvest the monies saved for compounding returns, or for the reduction of debt by jumping down the amortization schedule. Depending on the amount involved, this may save you years and years of interest payments. This tactic provides for more rapid payoff of underlying mortgages and then the investment of what would have been debt service into other areas for portfolio development.

There is a lot than can be done over time with a little effort on your part right now. Make good decisions and your real estate will provide you with the financial freedom we all desire. Let us know how we can help. Happy New Year.

2007 12 28 Roger Beattie Financial Planning
General Real Esate
Management Comments (0) Permalink

Real Estate Rollercoaster


I’ve been watching the papers. For the last three weeks there has been a minimum of 4 business section front page articles, per week, about the suffering real estate or mortgage industry. You’ve seen them too. “Home prices dropping.” “Mortgage companies going bankrupt.” “Major Banks and Savings and Loans cutting staff and closing offices.” All the press is feeding fear and causing even more bad decisions. Don’t let it affect you negatively. Rather than respond to fears about dropping prices, mortgage market shakeups and inflation outpacing growth, just sit tight. Yes there are some problems in the industry right now. They were caused by bad decisions and the price of that poor judgment is now being paid. However, these problems relate almost exclusively to the single-family detached market. That’s where property prices have been pushed by greed and stupidity and fueled by too-aggressive real estate agents, appraisers and lenders loaning over 100% of already inflated values to homeowners with mediocre or poof credit ratings. Come on. With this nonsense going on what did you expect to happen?

This market correction was overdue and will disappear with a very few months. In the mean time the single family market will take its lumps, but nothing you can’t survive.

Simultaneously however, the multifamily rental market is thriving. So if you were wise enough to buy multifamily properties, good for you. Sit tight and let the market push up your equity and profits. If on the other hand you own single family homes, sit tight and let this shake up stabilize. It will be a soft landing. Getting out in a down market now will only eat up your profits and long term potential. I hope this doesn’t sound rude, but you bought the ticket, now take the ride. It may be scary but it will be over soon.

Let us know how we can help.

2007 12 14 Roger Beattie General Real Esate
Investment
Real Estate Bubble Comments (1) Permalink

Keep The Home Fires Burning


Most of us love the idea; a cold winter’s night, a cup of steaming hot chocolate, a crackling fire and someone to share it with. It is a beautiful dream, but without the proper care can turn into a nightmare. A nice warm fire is great as long as it is in the fireplace and not in the attic, walls or adjacent room. As winter tightens its icy grip more and more of us will be putting the old fireplace to work. To insure that we build memories and not regrets, here are six simple tips to help you enjoy your fireplace and keep your property safe at the same time.

1. Test your flue. Make sure it opens and closes properly. This is simple enough to check. First pull the cord/chain or move the lever that opens and closes the flue. You should be able to tell from the feel and sound whether it is in working order. The second step would be to lay on your back, wearing safety goggles, and watch the flue open and close. It should be secure in both positions and not prone to opening or closing by itself. If it seems to have a mind of its own, get an expert and get it fixed.

2. Make sure the chimney is clear of debris, bird’s nests and raccoons. You’ll need a good flashlight and those safety goggles again. With the flue open look up into the chimney. Hopefully it will be clear and open all the way. If there are any blockages or any kind, make sure they get cleaned out prior to use.

3. Hire a chimney sweep to clean out any blockages or buildup along the chimney walls. If you’ve got any kind of buildup or blockage, save yourself the mess, headache and hassle of trying to do it yourself and get a chimney sweep. You’ll be glad you did. I speak from experience.

4. Burn good hard wood and don’t over fill the firebox. Soft woods produce more smoke, soot and leave more deposits in your chimney. Soft wood also burns faster and takes more time tending. Unfortunately most of us only have access to pine so that’s what we use. It does smell great, but it also requires more care for your fireplace over time.

5. Warm up the flue by burning some rolled up newspaper before you start the fire. Smoke won’t draft up a cold chimney. If you’ve ever filled your room with smoke, chances are that this is why. Remember the flue must be opened and if you’ll warm the chimney first, your fire will start easier and burn better.

6. Don’t trust the fire. If an accident occurs, a small fire is controllable and can be extinguished easily, a large one cannot. So never leave a burning fire to go shopping, for a walk or out to dinner. The best and safest fires are those most closely watched.
Regardless of the size, location or age of a property, proper care and use of a fireplace should be one of your top concerns. If it’s in your home, you need to make sure it is taken care of. If an investment property has a fireplace you should notify the residents of these simple guidelines and follow up to make sure they understand. I know it sounds simple, but it is often the little things like this that get ignored with tragic consequences.

Do your check up first, then start a fire and snuggle up with someone you love. Good luck with your real estate. We’re happy to help.

2007 11 28 Roger Beattie General Real Esate
Management
Risk Reduction Comments (0) Permalink