Austin Real Estate Secrets

2022-04-04T10:14:00.002-05:00

This came across my desk this week. If it takes you more than 2 minutes on your calculator to figure out how and why this is a very bad wholesale deal, you should be asking for more help with your real estate investments. The numbers on this deal are upside down on the surface and will only get worse with time.

<Address withheld>

Multifamily Residence

7 beds/5 baths

3,008 sqft

On records 4 Legal Units

Working as more units

Built: 1925

Lot Size: 7,500 sqft

Has a Laundry Machine Facility

Has T5-O Zoning (Permits for mixed-use re-development)

DO NOT DISTURB TENANTS!

Breakdown:

• Unit #1 - Month to Month - $825.00

• Unit #2 - Month to Month - $750.00

• Unit #3A - Month to Month - $525.00

• Unit #3B - Month to Month - $525.00

• Unit #3C - Month to Month - $525.00

• Unit #3D - Month to Month - $525.00

• Unit #4 - Month to Month - $1,075.00

• Unit #5 - Month to Month - $600.00

• Unit #6 - Month to Month - $600.00

• Unit #7 - Month to Month - $700.00

• Unit #8 - Month to Month - $550.00

• Unit #9 - Month to Month - $600.00

• Unit #10 - Month to Month - $700.00

• Total Rents $8,500.00

• Annual Rents $102,000

All month to month

No Parking

Monthly Expenses Owner Pays for:

Electricity $450.00 - Average

Water $650.00 - Average

Insurance $430.16 - Average

Waste $216.39 - Average

Gas $65.00 Average

Taxes $1,035.06 ( Estimate)

Total Expenses $2,847.60

Asking: $999,000

Austin Real Estate Secrets

2022-02-02T11:40:00.001-06:00

Is Your Company Missing Something?

2021-12-27T16:31:00.001-06:00

Something that I have learned over the years that there are really only a few things that a business can offer to the public and the two most common are: Products and Services. Behind both of these offerings has to be stellar Customer Service. Unfortunately, many businesses today do not understand that the most basic foundation of business is built on great customer service. You have witnessed it, probably as recent as this week. Weak or poor customer service is all around us. And in fact when we get good customer service, it is almost a surprise.

Many companies believe that a one-hour training that teaches phone operators to repeat the phrase "I'm sorry for the inconvenience" is the foundation of great customer service. I am here to tell you just the opposite. In fact, I believe this is the epitome of a customer support and a support training program that does not understand the customer or does not care. That's right--they really don't care. Check the box and move on. Yet, this hallmark phrase that you have heard hundreds of times is probably the most spoken phrase in the business of "Customer Support" today. And these words have no value and no positive impact on your customers. They do have an impact, but they are not helping your company to grow or create return business.

There are a handful of companies that I can name off of the top of my head that I have written about many times over the years who do not know this over-used phrase and have NEVER told a customer "I'm sorry for your inconvenience". Discount Tires corporation is the gold standard in this regard and their entire business is based on finding ways to delight the customer. Not because bonuses are tied to good reviews (which they may be--I don't know), but because they have a company ideal and a training program that backs up that ideal that teaching employees that there are always better answers to difficult problems. When one person does not know the answer to a problem, they find someone on the team who does. In fact, no one person at Discount Tires seems to be working in isolation. They work as one big team and the customer's satisfaction is always top-of-mind to everything they are doing. They seem to be very driven to getting the job done to the satisfaction of the client. That is the real goal of customer service and they get it.

These nasty little words "I'm sorry for the inconvenience" should be the grounds for termination to any reputable company--not the foundation of the first and last training module to have a job in Customer Service. These words mean nothing and those who use this phrase do not solve customer problems. Their jobs could be eliminated and the company would probably be better off. Better for the customer to suspect that you don't know how to help them than to answer the phone and repeat those words and confirm to the customer that you really don't care at all about their problems.

Let's add a couple of other phrases that CS Reps and managers learn in year two of their work: "It’s beyond my pay grade." This means, "I know this is a problem, because I have heard it over and over again and I have seen it, but there is no way I am going to tell my manager or VP that we could be doing things differently and we could do things better. It is beyond my pay grade--and there is no way in hell I'm going to challenge this policy or try to address this problem!" This is a fear of failure approach to business. Management 101. Don't get involved with a problem; you may be asked to solve it.

And related to "It's beyond my paygrade" are the collection of phrases "That's just the way the company is set up" or "It's not my job." I get it. There are some things that we don't directly influence, but when the client is having problems and you are the person on the front line with the customer, do you think it is helpful to tell your client that you are not responsible or would it be more helpful to think of this as an opportunity to grow and find solutions to the customer problems? If you are not responsible, and this is a problem, maybe you need to try to figure out who can help. Customers know that we don't always have an answer, but our jobs depend on our ability to solve problems. Sometimes the problems are hard and have not been solved yet. This is why we have jobs, to solve problems--not just to sell products or services.

Is there ever a time when it is okay to say one of these things? Maybe, but I would suggest that if you are starting out the conversation with "I'm sorry that happened to you, Mr & Mrs Customer...", it better be followed by the phrase "I don't have an answer for you immediately, but let me make some calls inside the company, talk to my supervisor and our Director and let me get back to you <in a very specific amount of time> and let you know what we can do." Customers depend on us for answers and while not all problems have answers today, if we expect to remain in business and expect clients to trust us to solve their business problems, then we need to understand that our businesses depend on us solving the problems of our customers and helping them run their businesses or make their lives a little better. The words "I'm sorry for the inconvenience" NEVER solved a customer problem and should never be used except in the exit interview with an employee or training manager who thought this was a good tool for working with customers.

Oct 2021 Market Update & Halloween Special.

2021-10-21T16:42:00.003-05:00

This is the first market update I have created in a while. Sorry about that. Sometimes life just gets in the way of itself. I hope you enjoy this fun little market update and Halloween ditty.

Raising My Credit Score 10 points with Little Effort

2020-06-07T11:50:00.004-05:00

If you are a person who uses credit cards to pay for most things and you pay off your credit cards every month, you will want to read this. So, first of all, before you think you already know what I am about to say, read for a few minutes--you may learn something like I did recently. First of all:

We charge most everything on credit cards every month.
We have chosen not to have really high credit limits on our credit cards.
We pay our credit card bills 100% every month.
So, we should have perfect credit--right?
Wrong. Here is what I did not know.

Credit card companies look at more than just on time payments. The fact that we pay our credit card off each month is important, but the credit card also looks at how much balance is on the account at the time the credit card company reports your payments. Here comes the part that I did not know--Credit card companies send out your bill for how much you owe each month at the same time that they report your balance to the credit agencies! So, they are not reporting that you paid 100% of your bill for the month, they are reporting that you have spent a lot of money on your credit card and that you have a new balance that could be thousands of dollars. And if you just bought a bunch or new stuff, bought gifts for a holiday or just went on vacation--guess what? While you are watching to make sure you don't over spend your limit, the credit agencies are looking at what percentage of your credit you are using. Most of us are not looking at our credit that same way the credit agencies are looking at our credit.

So, what does this mean to you? It means that when we exceed 50% of our available credit for any given card or cards, we start taking a hit on our credit. Even though we are paying it off on time and not making late payments, we are still taking a hit to our credit, especially in those times when we max out or spend closer to our credit limit.

What can you and I do to get ahead of this without paying more money? Well, the answer is very easy. Set a reminder on your calendar 8-10 days before the end of the month to start making the first payment on your credit card before the bill is due and before the creditor reports your balance to the credit agencies. If you reduce your bills below 25% of your credit limit, you should start to see an immediate change in your credit score. I did. This does NOT mean that you don't have to pay the remainder of your balance when the bill comes out! Yes, you will have to make that payment too, but it will be a smaller amount because you have already paid down the bill from the first 2/3's of the month's credit card expenses.

I am not a financial genius and I will tell you that this is something that I have just recently come to understand. I hope this helps you tweak your credit scores and put you in a position to do all the things you would like to do as a result.

2204 Alta Vista Avenue Austin, TX | ColdwellBankerHomes.com

2020-04-21T16:31:00.001-05:00

Home Under Pending Contract 4/21/2020.

Homeward Bound. I love this song.

2020-04-17T11:17:00.001-05:00

Listing Concierge Program Details -- Tim Thornton

2019-12-14T12:06:00.001-06:00

Passion For Investing and Investors

2019-09-20T09:18:00.000-05:00

For those of us who have lived in Austin for many years or our whole lives, you will recognize this iconic site from along Loop 360. For those who have only been in Austin for a few years, you are probably more familiar with the F1 race track and high-rises downtown, than you are with some of the iconic history that is no longer with us--like this changing landscape of flamingos that used to entertain us with the changes of the seasons, holidays and football games. Well, Austin is changing--rapidly! And just like the changes in our "weird" history and iconic landmarks, so also are the changes in our real estate landscape.

New companies and new developments are coming to Austin virtually every quarter. Many major high-tech companies are expanding in ways that 10 years ago no one could have imagined--not even many of our land developers. On the other hand, some of the cities and counties have seen the mistakes of the past and have made plans and built roadways to accommodate growth. And now that growth is filling in the space in abundance.

When it comes to investing in Austin area real estate, the landscape is changing--almost daily. But driving through a community or looking at a bunch of houses can be challenging to sort through. Just like this picture, very often one community may look a lot like another community and one house look and feel similar or equal to another. Well, I don't believe they are equal or the same. When it comes to real estate investing, I believe there are winners and there are losers. And there are houses and properties that are neutral--neither great or horrible. Like putting your money in a shoe box--it is not going to go away, but if it is not working for you, you are probably not doing the greatest good or getting the best leverage for your money.

If you have been online looking, reading and trying to figure out where you should invest, after days of searching online or in person you may find that the decision process becomes very confusing and you may lack the confidence that you are making a strong decision for your investing. Remember this--Investing and Investors is my passion! I am a landlord and investor and REALTOR(R). I love working with my renter clients who are in turn my friends. And I love working with my investor clients who are in turn my friends as well. With investors quickly becoming a large percentage of my business and client base, I find myself everyday talking to new investors and looking at the changing landscape of our investment opportunities. There is so much going on that it would be easy to overlook some of the opportunities or to just randomly pick one house and community over another without really understanding what kind of trade-offs you have just made.

If you are considering investing in Austin area real estate and you are reading this article to find out where I am going to recommend that you look and consider--I have good news for you--I can help you. You won't find the answer in this blog, but I can help you find the answers your are searching for in person.

Investing in Austin area real estate is my passion. I have looked at other areas, other cities and even other states and I keep coming back to Austin. If you would like to sit down and talk about why and how and when and where...give me a call this week.

kindly, your friend--tTim.

Can You Please Define Cash-Flow?

2019-04-04T10:09:00.002-05:00

Wow. I don't know if Cash Flow is one of the most widely misunderstood terms in Real Estate or some people will just say anything to sell a house. I can't tell you why a property that is advertised as "great cash flow" is marketed as such, but I can tell you when a person who wrote such a thing just simply does not know what they are talking about.

First of all, let's define the term "Cash Flow". This is a very simple term, but figuring out whether a house meets the thresh-hold of a good cash-flow property and how well a particular property will "cash flows" is a different matter. Cash Flow (positive) is when the money coming in to the investor for a particular property on an annual basis (rent income) is greater than the money going out on that same property on an annual basis (total expenses). So, I am going to assume that everyone can figure out the income side of this pretty quickly, but I caution you to not assume that any given property will produce income every month of every year. If you own a property that turns over to a new tenant every year, it will normally only have renters for maybe 11 months out of the year, and in some cases--less than that. So, if your business analysis is based on a 12 month income stream--you may be starting out with soft numbers on day one. So, know your market and your product before you estimate your income stream.

Expenses.

Your first expense is your monthly mortgage payment. If you are not paying cash for the house, then you have a mortgage. PITI. Principal. Interest. Taxes. Insurance. Add HOA fees to that. If it is a duplex, condo, townhouse or multi-family home, the HOA fees may be substantial. Leaving these out of the analysis would be a big mistake.

Secondly, you have the down-payment. No conversation about cash flow can be understood until you know how much money is going to be put down and at what interest rate the loan will be locked. Cash Flow is a cost vs income equation. If you don't have these two very important variables understood or estimated upfront, you can't even begin to talk about cash-flow analysis. Only an idiot or liar would tell you that a property will cash flow without first asking you how much money you plan to put down on the property. Sadly, it happens every day.

Now, here is where a lot of smart people miss their ride home. If you don't realize that an averagely maintained house built in 1984 is going to cost more to maintain than a house with a new roof and new HVAC system, you might be kidding yourself. While there are ways to minimize your maintenance cost exposure (hint--these do not involve hiring a property manager), older houses are going to cost you more in time and money than newer homes or homes with "newer stuff". So, the cost to maintain a home is a factor in your cost analysis.

Turn-over costs. You have to list or market a house to find a tenant. Marketing costs money and you have to turn on the utilities and keep the grass cut while you get it ready to rent, also. Expenses that you have to bare.

Property Maintenance. Here is another expense that some investors incur. Personally, I teach my investors how they can avoid using property managers by doing this themselves--yes, even my out of state investors have mostly followed my advice and saved thousands by not using property managers (sorry, property managers!). There are more cost effective ways to do this and more in keeping with today's technology and today's investor.

So, once you have a good estimate of how much your costs are going to be for a home and how much your income is going to be for a home and how long a tenant may be willing to rent your property--you can ESTIMATE its cash flow potential. Sounds like a lot of work? Well, if you have never done it before, it can be a new skill to learn. If you do it every day, well, it's not so hard.

Cash Flow: Point in Case. I just looked at an example of a property that claimed great cash flow, but it did not justify the claim, say how much down payment was required or spell out any of the variables. Yes, if you pay cash for a property, and if it can be rented--almost ANY property can be a cash flow property. But I ran the numbers on this house quickly and at 35% down it was break-even before the HOA was paid or any maintenance costs were taken into consideration. This was an old house with some renovations, but cosmetic renovations don't reduce the maintenance costs of an old house--they just make it look newer. On a Pinocchio Meter, I would say that this advertisement is very misleading. At very least, I will say that I could show you 10 houses with much better cash flow numbers and why my property picks have better potential and better cash flow opportunity.

So, the lesson to the story--Buyer Beware! When someone says "this property has great cash flow"--ask them to show you the cash flow analysis and all the assumptions that went into it. I am willing to bet you will get an answer about how great the house is and why people would want to live there--not a cash flow analysis. Don't be confused. Cash Flow Analysis is a business precept and it is about the math, not about emotions or cosmetic appeal. If you want to invest in real estate--do the math or hire a Realtor who can help you do the math.

Thanks for all of your referrals and kind things you say to others about our friendship. I always enjoy hearing from you!

New Book: "The Smarter & Richer Landlord"

2019-02-26T09:13:00.000-06:00

Prologue

Becoming a rental property investor and then starting down the path of becoming a successful landlord may very well begin with the feeling of not knowing what to do first or how to get things started. And finding the right partners and mentors to coach you in your aspiration to be a great landlord may prove challenging as well. While there are lots of “free seminars” with great promises of wealth and riches, you have to consider the possibility that a free seminar may be worth exactly what you are paying for it—virtually nothing. If the real estate coach is that good at all things real estate—why are they making their money teaching seminars. When I was a boy, we had a phrase for this kind of seminar: “Those who can't do—teach.”

I guess the same can be said about authors of books—this author and this book included. In my defense, I will say that this book originally wrote itself over a period of 2-3 weeks at the end of the year when real estate tends to be quieter. This book originated out of a growing client need to learn how to become an investor and landlord. The book is not my business. If it were my business, I would have edited it and published it at the end of 2017, when it was mostly written. This book was written for my real estate clients. One investor teaching new investors how to replicate and imitate what I have learned to do with my investments.

While there are lots of places that offer tid-bits of information on how to get started in real estate and lots of articles pointing new investors in different directions, the biggest issue I have with seminars, video’s, clubs and much of what is available today is that it is either written about investing in properties that don’t apply to me (Apartments and multi-family properties) or it is a short article that is a re-hash of something that has been written over and over again that did not tell me anything the first time I read it, much less this last time. I recently discovered why that is happening and as it turns out much of what has been written lately about investing is being written by professional writers, not by professional investors. New writers who will write about anything to get their name out there in this changing world of publication. I had the CEO of a significant real estate services website tell me recently that the reason they choose to publish articles written by professional writers that have never owned an investment property and have ZERO first had experience at being an investor or landlord is because most investors can’t write. That’s right. Writers can write about a subject that they have no experience and make it sound intelligent and they can fill a much-needed space on a web site. How do they pull this off? By reading other articles written by non-investors and putting together pieces of what they believe are the steps toward investing. Investors and Landlords may understand the business, but if they cannot write a coherent thought or sew a series of thought together into an article—this CEO felt like it was better to have something that was not very accurate or was a rehash of old thoughts, than to have someone who has helpful information to share—but does not have the capacity to communicate it. Funny thing is, if you are not an investor and landlord, you may not even realize you are reading the “expert opinion” from someone who never was an expert and probably never will be an expert at Real Estate. When you consider the implications of this idea it is scary. We take information that is mostly unhelpful and possibly untrue and replicate it using a different voice over and over again until more people believe it and even the writers begin to think that they are experts in a field where they have no experience. It is an outcome of this age where information is available to anyone, anytime and anywhere—but the quantity of the words far exceeds the quality and value of the information and making a determination of whose information is helpful and whose information is not helpful is impossible to figure out. It is an exciting day and age and a scary one—all at the same time. Information is everywhere, but not all information is helpful or true.

I recognized this trend of information replication some time ago from the amount of the “same old stuff” showing up in every article online. At first it appeared that I was the one out in the dark and did not understand my own business. But the more I read, the more obvious it was becoming to me—these were the same people who have been sending me emails and calling me for years asking me to write articles for me on my real estate blog. After I read their articles, I knew immediately they were good writers, and ill-prepared future investors.

Everyone was saying the same things and it just didn’t hold together for me, did not reflect what I know from my experience and was not helpful. At some point the lights came on for me (I am not that smart, so it took a while) and I realized I was not reading about experiences of landlords and investors. I was reading words that were duct-taped together from a number of online sources and presented under a new name each time. In fact, the name was the only thing that seemed to be changing. From the adamant language and clear direction that some of these articles were written, you would think that they were talking about things they had learned over many years of trial and error. But no, you were much more likely to be reading the opinions of someone whose expertise was just obtained hours before they wrote the article—through internet “research”. Today these writers are experts in investments and tomorrow they will be travel experts or marriage counselors. Between you and me, I don’t put a lot of stock in professional writers for advice in how to invest my money or live my life. I don’t see the wisdom of such counsel. If I need an editor to edit my book, then maybe their experience will be helpful. As for investing—I spend my time talking to other investors, not professional writers.

In the beginning, we all begin with a lot of questions. Where do I start? Who can I trust to help me? How much do I need to know before I buy my first property? Who is going to help me when there is a problem? How do I get the most out of my investments? How do I leverage my time so that this does not become my full-time job? What about property managers? Market timing. Location. Price. Cash flow. Equity. Appreciation. Finding a tenant. Property maintenance. Exit strategies. Like any new learning venture, at first it feels a bit over-whelming. But in time, you will have to make a leap of faith to get the ball rolling. Sound familiar? It should, because this is probably exactly how you have managed any significant business venture in your life. Look around. Learn as much as you can. Buckle-up your seat belt and hit the race track.

When you first start out, information will feel like it is coming at you from every direction. You have your eye on a property. Or maybe you are considering one particular community where many of the things that peak your investment sensibilities are present. The hesitation is—you still don't know what you don't know, so the thought of jumping in with both feet is filled with anxiety. Or maybe you have already bought your first house, however, things just aren’t going as swimmingly as you thought they should be going at this point and you don't know what to do next or where to turn. Either way, you are starting to doubt you have what it takes to be a great landlord. Well, I have good news for you--this book was written for you. If you have what it takes to get you to this point in your life that you are considering this path, I will venture a bet to say you have what it takes to get to the next stage in your investments.

Now, step away from the ledge and stop beating yourself up for not knowing all the answers. This book may not answer every question you have, but hopefully the stories and coaching here will help you develop a process and mindset for figuring out how to get from where you are to where you want to go.

This book is meant to be a practical guide and a compass that points you toward a path to become the most effective and profitable landlord that you can possibly be. Easy to visualize concepts and stories for anyone who has not figured everything out about being a landlord and maybe some ideas for the landlord looking for a little strategic advantage over the competition. Concepts that span the scope from planning, to buying, to managing your real estate rental portfolio and planning your exit strategy. Whether you use this guide as an investor's reference or an investor's compass, the intent is to help you figure out which way you may want to go and ideas about how to get there as quickly and effectively as possible. Clear and simple ideas on how to get from where you are to where you want to be. Set your goals and then figure out how to get there.

Born out of my own experience as a landlord, investor and REALTOR®, to investors—I teach these principles daily to my clients and tell these same stories to my clients. The end-game-goal in this book is to teach you how to start teaching yourself the ends-and-outs of real estate investments so that no matter what comes your way, you should be prepared to think through the challenges and the opportunities in front of you—and end-up in a more profitable and peaceful place in your real estate investment decisions.

Good journey to you. I hope this book helps you in some small way to reach your financial goals as they relate to your real estate portfolio.

__________________________________________________________________________________

Table of Contents:

Chapter 1: Why the Rich become Richer—The Accumulation of Wealth

Chapter 2: Choosing a house by its' target rental price

Chapter 3: Creating The Wow Effect! TM

Chapter 4: Finding the right Tenant—Your new Client

Chapter 5: The Argument for being your own management company

Chapter 6: EXIT Strategies and Options

Chapter 7: General Contractors and Sub-contractors

Chapter 8: Smarter Homes

Chapter 9: After the Move-In—a.k.a., Being the Landlord

Chapter 10: The Math

_____________________________________________________________

Why the Rich become Richer—The Accumulation of Wealth

Chapter 1

As we look around us and throughout history, we can see that the creation of wealth is something that occurs in many different ways and originates from many different types of businesses. And as we study history and learn about the portfolios of prominent American families, we find one thing in common among many of these individuals and families—both now and dating back to the foundations of our nation, the accumulation of wealth and the accumulation of real property are closely related.

Identify a family who has significant financial wealth and you will likely also discover a portfolio of real estate. Look at the names of streets, buildings, parks, communities—and you will find the families over time who have owned and do own real property across time in every large and small city in our nation. Show me a prominent business person from any field and from any point in our history who has no real estate holdings and I bet you will find a person who found themselves starting over, again and again to amass new wealth. Real Estate is not the only vehicle to wealth, but it appears to be the most common thread among families who have developed new business markets and grown our nation and a common portfolio for those who have been able to hold on to their wealth over time.

A recent client of mine said to me: “There was once a saying that our fathers and grandfathers knew, that went something like this: 'There is only one thing in this world that you cannot create more of—land. When it is gone, it is gone.'” As I ponder what has happened to the price of land surrounding the edges of our city during considerable growth over the past ten years, I have seen the price of land doubling and in some areas, prices increasing by as much as three to four times over the past decade—for the dirt. The land. Four times in value over 10 years! Of course, this land started at a very meager price before anyone realized that the city would be moving in that direction. Once the writing was on the walls as to what was happening, the price of the land was already on its way up.

But just investing in land alone is a tricky proposition and requires more resources and planning than most people have and more time than most are willing to wait. In fact, many people who invest in raw dirt with the idea that the price of the dirt is going up as fast or faster than the prices of houses in other parts of the city, often are surprised to learn that after buying, holding and paying taxes on the land for 3 or 4 years, the value of some land does not change and can even result in a loss in such a short horizon. And then when the price of that dirt starts going up, it may go up in a violent vertical line on the financial chart. One day it is worth no more than what you paid for it and the next year people are fighting over it. Investing in dirt is challenging and maybe something better left to those who can afford to sit quietly for a long time and those who have plans and means well beyond merely buying, holding and selling. That group of investors we call developers. They are not playing the same investment “game” that I am suggesting here and they are not our competition or our target goal.

Today we are talking about how you and I can write a page of history with our names on it. A place for our children to play and maybe even real estate holdings that one day we can pass on to our families—with a little luck and a lot of diligence.

Passive Income & The Accumulation of Wealth

These are terms that analysts and writers like to banter around, maybe because the words make them sound smart, but the question on the back of the elephant in the room is—do these terms and concepts have meaning for you and me? Can the everyday Joe & Jane take part in such lofty ideas as accumulating wealth? Well, first things first—let's define what we are talking about and why real estate may be the very definition of wealth and prosperity.

The accumulation of wealth in real estate comes from a number of areas that are very straight forward—even by someone like me. Here are some of the potential engines of wealth that are inherently associated with real estate:

1. Rental Cash Flow. This one is obvious—right? As long as you are bringing in more money than you are paying out every year, we can say that you have “positive cash flow” for your investment property. In other words, you are making money. No matter how big or how small your cash flow position, positive cash flow is a good thing and the first objective of your investment portfolio. Not all real estate has a short-term cash flow objective, but without positive cash-flow the numbers quickly become more complicated and a higher risk for future problems is inherent. Like driving a car that is always almost out of gas, without positive cash flow—you are always running the risk of running out of gas. But there is far more to making money in real estate than just monthly cash flow.

2. Equity from monthly mortgage payments. This is not a complicated concept either. Your tenant is paying you rent so you can pay down the balance on your loan and thus adding equity to the net value of your real property (i.e., you real estate investment). Let’s take an example. If you have a $100,000 loan at a 5% interest rate, you have a monthly payment of $537 a month. $120 of that payment goes toward paying down the loan balance (principle) on the very first payment and the balance goes toward paying interest on the loan. By the end of the 5^th year into your ownership of the property, if you have not paid any additional money toward your loan balance and maintained a strict 30-year loan payment schedule, $154 of your $537 will now go toward paying down the principal of your loan each month, and your tenants will have (indirectly) paid $8,171 toward your equity position in this property. That should be money in the bank for you. This amount that goes toward equity goes up a little each month as the value of principal loan is reduced. This $8,171 is potential equity upon selling your property in a positive growth market. The tenant is indirectly paying off your loan, principle and interest, taxes and insurance on any cash flow positive or cash flow neutral property in your portfolio, so you should be making more than just cash flow over time. This is the second goal of rental property. Equity from rental payments. And as you can see, the longer you follow this model, the bigger the monthly contribution of payments goes toward the principal of the loan, until the loan is paid off in its entirety.

3. Equity over time. In a growth market, where value of real property is increasing over time, the value of your real estate purchase should be going up as well. Now, not all boats rise equally, so when, where and how you purchase can be a determining factor on how much your investments go up, but over time, hopefully you will see an increased value of of real estate holdings. As the value goes up over what you paid for it, you could realize most of that increased value upon selling in a good market. If you plan to sell at a future date, equity acquired over time is an important goal of many investors.

4. Possible tax benefits. Although this is one that could change with new laws passed by local and federal governments, after consulting your CPA you may find that there are tax advantages and depreciation of some description in store for you tied to your rental property portfolio. With changes in tax code(s) and financial differences that will apply to each of us, this is something that may be harder to quantify or be sure of when purchasing a property on day one. My advice here is to be sure to hire a great CPA and consult that person concerning how you might best be able to take advantage of tax laws in these matters.

It does not take an MBA grad to figure out why so many wealthy people on planet earth own real estate. It is not without some effort on your part, but the more you learn, and the more time you spend learning how to make money by owning real estate, the easier it becomes.

Your Real Estate Goals

· Create an investment plan.

· Start investing in real property.

· Practice being a good landlord.

· Project manage your portfolio.

· Continue your learning.

· Focus on the Customer.

· Aspire to be the best landlord and investor possible.

Getting Started

One of the many things that has drawn me deeper and deeper into the business of real estate is the investment side of the business. Over a period of many years my personal experience with real estate has included our property investments, and has increasingly included a long list of first-time and serial real estate investors. These clients were not first-time home buyers, but many of my real estate clients had never invested in rental property—so they were first time investors when they came to me.

At first, I felt nominally qualified to help clients start buying real estate as rental investments, so I doubled my efforts to learn as much as I could about real estate as an investment vehicle. What I discovered is that much of the reading available about real estate investments only touched the surface of the practical dimensions of the business. The practice of being a landlord and how to more fully inflate a complete real estate portfolio did not seem to be something that was taught as much as it was something that had to be learned from firsthand experience.

Real estate investing is a business. The income model is largely seen as “passive”, but the business is dynamic and from time to time—very active. Like any investment, the more you know about the business and the more strategic your business decisions, the easier it becomes to manage the investment and the more leverage you seem to have over your investments. Smart people are not born smart—smart is a learned state. It is not a piece of paper that has been elegantly framed on your wall or the results of an aptitude test. When I talk about being smart, I am talking about a discipline and series of behaviors. Being a smart investor and a smart landlord is not something you were born with; it is an achievement that has to measured often. It is a place where you start becoming comfortable with your budget, your portfolio cash flow, your strategies, your decision-making capabilities, and your general disposition when it comes to managing your real estate holdings. Smart does not mean you have arrived with supreme knowledge or you will be named MVP of the business world, but it does mean that you can reach a place where you start to become comfortable in the decisions that you make and the outcome of those decisions. This is where you begin to find yourself in the company of smarter and richer landlords.

Sometimes You Must Take A Leap of Faith

One of the most common mistakes that I have seen among first time investors is the fear of making a decision. I get it. I have struggled at times when standing on the edge of these same cliffs—afraid to make the jump. The plethora of doubts and questions that arise after the window shopping is over are many and I think I have heard all the reasons and some of the excuses for not making the jump:

· “I have heard that the market is going down.”

· “What if the market crashes?”

· “I am just not sure we can find a renter.”

· “Who is going to take care of problems?”

· “I just need to think about this for a few more days.”

· “What if prices go down as a result of interest rates going up?”

· “What if interest rates go down?”

· “What if we move or change jobs?”

Well, I am not going to tell you that every question here is invalid or unimportant, but I am going to tell you that every investor has to struggle with these same questions and come to grips with the fact that you are probably not going to have every answer to every question or every challenge until you get to that point in your life. After you make the jump. Like having children, investing has challenges—that’s why it is investing and not free money. You will have to learn some new skills and cross some new bridges. Some of them may be easy and some of them will surely be more difficult, but if you never start investing—you will never reap the benefits of the business.

I would say that about 50% of the people who call me to talk to me about investing in real estate never follow through on the actual purchase. That’s a big number, because all of the people that call me seem to really want to invest. And I also would say that about 50% of the people who do start investing in real estate don’t stop with one property. They continue to invest more of their wealth into this portfolio for all that it has to offer. I think this is a very important distinction to make. One group of people who can’t get over the hill where shopping, looking and dreaming of being real estate investors is the goal. Many of these same people look back a few years later and regret that they did not buy real estate when the prices were lower and interest rates were lower. The other group seems to keep coming back and telling me that they are ready for their next investment opportunity. The difference between the two groups? Their willingness to take that leap of faith. It is not an intelligence factor (though I think investing in real estate is a smart thing to do). You don’t have to be the smartest kid on the block to be the riches kid. In fact, I would wager a bet to say that many of the people who I have spent time with to explain real estate investments and see property who later fail to follow through on those investments—are probably “smarter” than I am. Better grades in college. More advanced degrees. Maybe they make more money in their jobs than I do—many of my clients do. Yet the fact remains that the difference between those who make the leap of faith and those who don’t is not one of intelligence or even one of knowing more about where this will ultimately lead. The ones who invest simply believe that this is a time-proven historically documented path to greater long-term prosperity and accumulation of wealth. It is just that simple. I can understand these concepts, and I don’t have a PhD in Finance and I am probably not as smart as most of you reading this book. I get it. And so can you.

The following quote has been spoken or revised using similar words by many great people, personalities, inventors, politicians, business people and industry leaders throughout the past 100 years. Although the words differ slightly from person to person, the idea comes out the same:

“The fellow who never fails, never succeeds.”

My dear mother had her version of this saying: ” Don’t be afraid to try something new and don't be afraid to fail.” From these sage words, here are some of my own lessons learned. The first thing that I learned in real estate is that the first investment is the hardest one, mostly because it is the scariest one. Like jumping off of a cliff into a deep pool. You can watch others do it. You can be encouraged or even pressured to jump, but until you gather your courage and resolve to make the leap of faith, you may find yourself standing on the cliff for a long time watching others jump and wondering—what would happen if you did that, too. “Would my life be better if could make the leap of faith—if I could do what I want to do here and now?” So it is often in our lives, that when we come to one of these pivotal places where all roads merge and we find our goals, our ambitions, our ideas and our passionate desires all seem to bring us to the edge of the mountain, only our determination can get us to take the first big step into an unknown space.

Because of the seeming magnitude of this investment, many people often lack the confidence to make the jump into real estate investments. Yes, even REALTORS. This cliff feels taller and the pool of water below appears smaller than maybe writing a check for the same amount of money to buy a new car or invest in the stock market over a few years’ time. Funny thing, many of us will go out every 4 or 5 years and buy a very expensive car with very little trepidation, knowing full-well that in 4-5 years that car will have very little value, and we will invest money in stock market accounts year after year, even after slowly losing big sums of what we invest in market corrections, but we continue to invest. And then we look at an investment in real estate as somehow different. More intimidating. I wonder why that is? We all seem to have to create a mental block when our investment attention turns to real estate. For some reason, the numbers feel so much bigger when we are focused on the value of the home, not the fundamentals of the math. The truth is, the money that you are investing is not the final price of the house, it is the money that you are spending today on that house, which is most likely 10-30% of the final price of the house. When you are buying stock, you look at what you are investing today and this year. When you buy real property, focus on what you are investing this year on real estate, not on the price of the house. Consider your investment return based on what you are spending, not how much you are paying over 30 years.

Is Real Estate All That? Maybe. If I am correct about my fundamental beliefs and my personal conclusions surrounding accumulated wealth, then real estate may be one of the most fundamental and foundational investment vehicles for virtually every family of wealth across time and geography. Now, that's a pretty big assertion with possibly very little exhibited proof put forward here in my book, but history is full of thousands of historical and anecdotal notes, stories and biographies that tell us clearly that real property is a cornerstone of the wealth of our nation and possibly the world. Wealth and real property seem to occupy the same social circles.

But the accumulation of wealth is not reserved for those who are already wealthy. And wealth is not held in trust for the smartest graduates or our nation's highest regarded institutions. In fact, it has no such hurdles or fundamental requirements. To be a member of this exclusive club, you simply have to have enough confidence to make a leap of faith and then start learning what it means to be a great landlord and investor. And you must muster the confidence to make the second, and the third leap. Hopefully your self-education will keep up with your confidence, such that you learn as you go until you reach and exceed your goals.

Who is Expanding in Austin?

2019-02-08T10:58:00.001-06:00

With yet another year of great real estate numbers, tremendous press reviews about the Austin area and very strong job growth, the question that I hear most often is: "Will this continue?" My answer to the question: "With everything that we are seeing and everything that we know, there is no reason at this point to believe that the Austin area is going to slow down or take a pause in 2019 or anytime soon." In fact, just the opposite is more likely to be happening.

With the Amazon decision to expand on the East Coast, Austin area companies were quick on the heals of the announcement with their own announcements and decisions to build or expand campuses in the Greater Austin area. While we don't know all the companies that are moving to Central Texas or expanding, we do have some very significant press that will most likely fuel the need for more than 50,000 new employees here. That's a lot of new houses and a lot of new rental property need, as well.

Over the course of the next 1-5 years, we expect to see...

Apple expand their massive campus with a new 133-acre, 1 million sq.ft. campus in North Austin adding up to 15,000 jobs. This is even more significant since Apple has just finished its last campus expansion which reported to have added over 6,000 new jobs.
Oracle announced that they would be doubling the size of their Austin operation to just under 1 million sq.ft. and again, Oracle has just opened its new downtown campus no more than a year ago and they are already expanding!
Google is reported to be building a new 35-story 750K sq.ft. building downtown (by Q4 of 2020). A building of this size would support several thousand employees.
Samsung, who already has the largest foreign investment on US soil here in Austin, is reportedly adding an additional 237M on their massive 2.5M sq.ft. facility in Northeast Austin. I don't think anyone knew how extensive this company was going to be to the Austin area, but now we all know friends and neighbors who work at Samsung.
U.S. Army Futures Command is moving into three Austin locations totaling just under 100K sq.ft.
HEB has announced new technology centers in the Austin area for continued development and expansion of the HEB product, brand and presence.
Other recent expansions include Facebook and Indeed Corporation. Giants in their own respects and fields.
Support industries, suppliers and related companies serving these companies and industries could increase the known job count easily by 50%, not to mention that for every new 25 people who move to our area, comes the need for more housing, more schools, more medical care, new restaurants, and more.

So, you ask me, "Austin Austin in a bubble? Will this last?" Ask Apple. or Samsung, or HEB. Heck, ask your neighbor who just moved here what people in Silicon Valley are saying every day about Austin. They know. So do we.

Looking Forward to 2019 in Austin Real Estate

2019-01-24T23:26:00.000-06:00

Austin Real Estate Review 2018

2019-01-24T08:50:00.000-06:00

This is the first of my 2019 series videos--starting with what happened in 2018 that brings us to that all important question "What should we expect in 2019?" The second video will discuss 2019 projections and reflections.

2018 - Early Review & How To Prepare for 2019 -- ATX

2018-12-17T16:48:00.000-06:00

Okay Austin, it is roughly that time of year again when we begin to reflect on what happened in our market during 2018 and if you are like me, you start planning and deciding what you are going to do in 2019 now. To be honest, I am constantly looking at our next phase of investments, where to be, and where I can give my investors the greatest leverage. This is an ongoing and continual process with me, but for many, the passing of the calendar year may be your time when you spend more time focused on what to do next.

I get a lot of questions this time of year about how I feel about what is happening in the economy, the market, investments, etc. as we approach the new year. I love those conversations and I am happy to have them with you about your specific questions and interests in 2019. Let's start with a quote from this blog that I wrote in Jan. 2018:

"While I still do not have a reliable crystal ball into the future of our market, I can tell you that since Christmas Eve, I have written 4 contracts. 2018 does not feel to me like it is heading toward a down year or that we are going to have anything short of another record year in Real Estate. I may be wrong, but there is nothing happening locally or nationally that make me believe that Austin is heading toward a correction or shift in the fundamentals that have rocked our area for the past 5 years."

These words held true for me in 2018 and have held true for Austin as well. I have just run a quick and VERY early summary of where 2018's numbers are heading and it appears as though we will be well in excess of the 2017 revenue numbers. Without even having most of December's closings recorded yet, 2018 appears to have already passed last year in total revenue.

Q: Will there be a recession in 2019?
A: Boy, if I knew the answer to that question, I would be a genius! Analysts love this kind of question, because they have a 50/50 shot of getting it right, and in the numbers game, it does not get any easier than that. In fact, even when they get it wrong, they are still going to claim some sense of getting something right. So, my advice to you--don't pay a lot of attention to the experts. Look at history.

The last big national recession centered around 2007-2008. The national real estate market took a beating and there were many bad actors and bad areas of the country that had run-away speculative markets that cratered. What happened in Austin? Our market became very flat. On the upside, we had less than half the national average for foreclosures, and our job market was one of the best in the nation. By 2011 we were leading the nation in growth and by 2012 we were booming.

Q: If 2019 is bad for the nation, what will that mean for Austin?
A: Austin's business and real estate market has been thriving for the past decade because our fundamentals have been and continue to be strong. Bubbles occur out of market speculation and frenzy's. A market frenzy is a crowd driven behavior that assumes that everyone knows something that you don't know and if you don't get on the bus quickly, you will miss out. Don't ask questions, just do what everyone else is doing. The more people who jump on the bus and the faster the bus is moving, the bigger the accident that is about to occur. This accident is when the bubble pops and everyone wakes up and says "Well, we knew it was too good to be true, but everyone said they were making so much money, so fast that we didn't feel like we could afford to understand it for ourselves--we just jumped on the bus. Now we wish we had understood what we were doing." Too good to be true is always too good to be true.

Q: Do I need to be an expert to invest in real estate?
A: Yes, and No. Only a fool-hearted person invests without some understanding of the fundamentals of the market and the business, but the person who waits until they understand everything there is to know--will never make an investment in real estate and possibly not in any other financial vehicle where there is any real risk and reward structure. To think that anyone of us could know all the possible ramifications of a single investment or future market is to assume that with enough information that is no risk. That is just not true. With any investment there is potential risk and there is a potenial reward.

Q: What is happening to interest rates?
A: On December 21, 2018 the Federal Reserve will announce whether or not they will inflect the rates for banks. This announcement has had daily predictions that 45 days ago were almost all saying there was 90-100% chance that interest rates will go up. Today, the certainty among those same analysts who are looking into their crystal balls is probably closer to 20-25% likelihood that the Fed will recommend a rate increase. While the basic economic fundamentals have remained very strong this quarter, there have been many imploding factors that have caused the stock market to drop to a level on par with where we started 2018. Uncertainties and negotiations over tariffs with China and Europe have filled the news on a daily basis and the only thing that seems to be certain right now is that no one knows what to expect next. Conventional wisdom says that interest rates have to return to a state of equilibrium and natural market factors, but when that will resume again is unclear. I have my crystal ball and money on March 2019, but we shall see.

Q: How can I time the market? How can I buy at the lowest, and sell at the highest?
A: Maybe the better question here would be "Is it possible to time the market so that I am always buying low and selling high?" My answer to this question is a qualified and resounding "Maybe". It really depends on what your exit strategy looks like more than anything else. Buying real estate is about planning, making good decision, being consistent in your investments, making good solid investments in good areas with good financial fundamentals. Consistency. Getting in and doing it. Buying, renting, holding and selling. Occasionally you may make a "fast return" on paper, but more often, you will will invest and make a solid return over time when you buy, rent, hold, and sell according to your plan. Rather than trying to beat the market, leverage the strength of the market and expect the unexpected. Be tenacious. Plan. Buy. Rent. Sell. Surround yourself with smart professionals. Learn all you can learn, and don't be afraid to act.

Q: As we approach the end of 2018, was 2018 a good year for Austin area Real Estate?
A: I feel like 2018 is turning out to be another very strong year. Yes, our market does feel like it has become more hardened. That is to say, prices are not changing on a monthly basis. We don't seem to be seeing runaway prices like we were a few years ago, but at the same time, prices are not going down. They just aren't going up as fast as they were 2-3 years ago. The market seems to be getting more predictable and stable. That is a good thing.

Q: What do the numbers look like over the past year?
A: The numbers can be rolled up in many, many different ways and what happened over-all may have nothing to do with your city, your community or your specific home. However, we can look at generalized numbers and make generalized assumptions about your area. I like to look at school districts, as schools often have a big influence on numbers.

Looking at some of the Central Texas Independent School Districts, we can see these trends from the latest 90 days of data, compared to the same 90 days of data in 2017 (Sept, Oct., & Nov of 2018 vs 2017) by ISD by Median statistics:

Austin ISD median statistic QoQ, Sept/Oct/Nov. 2017 to 2018:
2017                        2018
$211 psf    $223 psf
$375k                      $390k

Eanes ISD median statistic QoQ, Sept/Oct/Nov. 2017 to 2018:
2017                        2018
$285 psf    $293 psf
$845k                      $939k

Leander ISD median statistic QoQ, Sept/Oct/Nov. 2017 to 2018:
2017                        2018
$135 psf    $141 psf
$300k                      $318k

Round Rock ISD median statistic QoQ, Sept/Oct/Nov. 2017 to 2018:
2017                        2018
$138 psf    $141 psf
$295k                      $310k

Pflugerville ISD median statistic QoQ, Sept/Oct/Nov. 2017 to 2018:
2017                        2018
$124 psf    $130 psf
$252k                      $270k

The days on market in all of these areas has varied from year over year by as little as 2 days and as much as 10 days. In my opinion, this reinforces the idea that the market is hardening. If sellers price too high in the onset, it is going to hold listings in limbo until the market price is in line. This will push the DOM days up slightly, depending upon the area and price point. Until the DOM indicator gets to 60-90 days, I don't think a few days difference means anything.

So, stay tuned. We will know this week what is happening at the Federal Reserve and how that will affect interest rates for the coming days and possibly into Q1 2019. After that, since every one's crystal ball seems to be equally broken, I recommend staying focused on business fundamentals. Forget the analysts--unless you are much smarter than I am, you will find that for every opinion there are three opinions that disagree. Not every person with an opinion is an expert and the financial experts have been wrong more than they have been right over the past 10 years. I trust my own understanding of business more I trust someone that I don't know who claims they are smarter than history.

As always, if I can do anything for you, please do let me know. I look forward to hearing from you!

tTim

It May be Time to CLEAN your Dryer Vents

2018-12-12T10:13:00.000-06:00

If you are having problems with your dryer not heating up, if you have a dryer/utility room in the middle of your home, or if you simply have not cleaned your dryer vent ducts that exhaust air from your dryer to the outside of your house recently, you may want to watch this video. tt

Should I Invest in Austin Area Real Estate?

2018-05-03T15:06:00.003-05:00

First of all, I want to tell you that I am no financial advisor, but I have been investing money most of my adult life (longer than many "advisors have been alive"). I have seen what investments do, how they behave, and I have seen pictures painted by financial advisors that could only be true if they have a secret crystal ball. I have been fooled by more than one during my life. I hope your story is a completely different.

I don't have a crystal ball, but I do know what has been happening in both the stock market and our local real estate markets over the past 10 years. Certain parts of the stock market have had strong run-ups during the past 1 year--and I think that is great. However, I have also seen what the real estate market has done over the past 10 years. In Central Texas, we had 3-4 years of a very flat market when the national real estate market started tanking nationally and we have had about 7 years of great growth since then. Will that continue? No one really knows. Things could go bad for us at a national level and cause our local market to flatten out again for a while, or everything we see and know about Austin and high tech could come crashing down for some mysterious reason that no one is expecting and no one could predict, causing things to look very different here in Austin in 2019 or beyond, but I challenge you to find one credible person in the financial or business world in Austin to tell you that is on our horizon. Just one. I think you will be hard pressed to find any person who would put 1/10 of their reputation behind such a statement. The odds for such seem very remote.

So what do we know?

Interest rates have been going up and are forecasted to continue to go up.
Affordability is getting further and further out of reach of both first time home buyers, and first stage investors. The price point for investments is going up.
The turning point for cash flow is getting higher--meaning, if you want to cash flow a property, you are going to have to put more money down today, than you did just a couple of years ago to get back to the same place in your cash flow model.
The price of a 1500-1700 sf house is going up every year and no one is predicting that this trend will reverse itself.
Real Estate is local, but national factors can play a role in local markets, especially when it comes to interest rates and consumer confidence.
The stock market is tied to a lot a national and world economic variables; inflections on the stock market can only be "predicted" after they happen, at which time everyone is a genius. Or so they tell us. The stock market has been at at ceiling of resistance of around 24,400 points for several months with big inter-week swings, up one week, and down the next. Back and forth. Will it break out? Well, it depends on about 25 different things that could happen this week, this month, this year and during this presidency. No one knows. I certainly do not know.

When and where you invest your money is a very personal thing. You should be in charge of that decision and you should feel comfortable with where you invest your money. If I can help along the way, I am more than happy to do so.

Austin 2017 Real Estate Market Review

2018-01-20T10:58:00.000-06:00

One question that I have heard a lot lately is this: "Is the market starting to slow down?". This is usually followed by the commentary that the feeling is that it must be slowing down. Well, I hate to be the one who disrupts this fun little rumor, but 2017 was another record year in Austin area Real Estate. The numbers were big and the growth was even bigger.

My video gives you the summary, and below the video are the numbers--data-set provided by my friends at Independence Title. Enjoy the video and I will recap the numbers below.

2017 was a record year in Greater Austin area Real Estate:

$13.009 Billion in sales revenue (includes all categories of MLS related real estate)
35,820 total homes sold
Median home value: $291,000
Highest volume bracket of sales was $200-300,000
Inventory was a low 2.5 months, making 2017 another seller's market year

2017 Over 2016:

$1.2B more revenue in 2017
1,355 more homes sold in 2017
Roughly a 5.4% increase in value

Looking back over the past decade:

2007-2010 the market declined some and then became flat
2010 was when the market starting recovering
In 2010 revenues were $4.92B, or $8B less than 2017
Homes sold in 2010 were 15,761 fewer homes than were sold in 2017

While I still do not have a reliable crystal ball into the future of our market, I can tell you that since Christmas Eve, I have written 4 contracts. 2018 does not feel to me like it is heading toward a down year or that we are going to have anything short of another record year in Real Estate. I may be wrong, but there is nothing happening locally or nationally that make me believe that Austin is heading toward a correction or shift in the fundamentals that have rocked our area for the past 5 years.

Could Amazon HQ2 be North of Austin?

2017-11-30T10:58:00.000-06:00

On Oct 20th, I published the post below "Is Amazon HQ2 Moving to Austin, Texas?". I am read this week that in addition to Austin City making a proposal to host the new Head Quarters-2 for Amazon, the Greater Austin area cities of Cedar Park and Leander have also put in their bid for the new HQ2. Here are my revised comments and thoughts on this competitive bid:

As a Realtor who spends a great deal of time in all of Central Texas (Greater Austin), when I talk about "Austin", I am generally speaking of "The Greater Austin Area" that includes all the surrounding cities, especially those in Williamson County where the growth curve is among the fastest growing in the nation. At the top of the growth list in Williamson County is Leander and Cedar Park.
I can also tell you that a significant part of my business portfolio is in Williamson County and Leander Independent School District. Now, LISD transcends Williamson County and Williamson County is more than just Leander ISD, but these two areas are a very large part of my business portfolio.
Communities from Steiner Ranch, to Avery Ranch (both of which are in Austin, but parts of LISD and Round Rock ISD which is largely in Williamson County) are easy to access in North Austin and in the Cedar Park/Leander area. The Brushy Creek communities, and new communities along Ronald Reagan/North Parmer are all very attractive target communities for a Amazon campus in North Austin or in the Leander area.
With great schools in the Leander ISD (over-all much better than Austin ISD schools), wonderful communities with more affordable price points and higher demographics, lower overall crime scores, more available and more affordable land, and a lot more available homes and communities with easy access to potential site locations, I would put Leander at the top of the list for the candidate for Amazon HQ2.
Leander gives better access to 130 tollway and the airport, I35, 183 and MoPac. It gives better access to healthcare, new variety of communities, shopping, entertainment and all the things below that Greater Austin is known for!
Oh, did I mention that Williamson County has a lot less traffic than Austin does?
I would tell you that if I was invited to sit at the table and had a voice in this decision, this is certainly the conversation I would be having. There are no easy decisions when it comes to these matters, but I think Leander has so much to offer that Amazon would do well to serious consider this among its top consideration cities.

Hey Amazon--invite me to the table and let me help you with your executive relocation needs. I have lived and worked around the world as a Director of one of the nation's largest high-tech companies. I would be happy to help your people who are relocating to the area, just as I have done many times with my own family and with clients here over the past 11 years. Cheers. tT

EARLIER POST FROM OCT 20, 2017:

The mayors of approximately 50 cities are sitting on the edge of their chairs waiting for news concerning which city Amazon will select to be the next Head Quarters for their booming business. HQ2. Austin Texas, ATX is among the cities who are chasing this opportunity and while this must drive the old geezers on Austin Talk Radio crazy, this would be a great thing if Amazon were to choose Central Texas for this inflection in their business. Yes, it would mean that Central Texas would continue its growth curve, and that ship has sailed; you are either among those who are celebrating the growth of our area, or you are on the sidelines wishing for a day when Austin was weird and no one knew about how great a place this is to live.

Amazon is holding its cards close to its chest right now and like any good poker player, I am sure they are counting cards to see where they can get the biggest bang for their dollars spent. Of course, they already know they are holding the winning hand, but the question that they will have to struggle with is--how to win the biggest pot possible.

There are a number of spoken elements that Amazon has put on the table for consideration, but there are other factors that Amazon has to consider that are harder to talk about with a business that is trying to attract the best talent from all over the nation. The fundamentals of air transportation, good schools, mass transit, population, are all important to the competition among the cities. I believe Austin has been weighed and measured and some analysts believe that Austin may be at or near the top of the list for these fundamentals. But facilitating a massive business like Amazon in a host city has got to be the second biggest challenge that they face today. Setting up shop, hiring people and getting seasoned industry talent to move from other major cities in the country to the new host city has got to be Amazon's number one focus and priority when they look at where the Amazon HQ2 will set up shop. Without the right talent, all the tax credits and the fastest bullet trains won't matter. Job one for Amazon will be about people.

So, why is Austin the right place to attract the best talent for the new Amazon HQ2?

Austin, Texas is where high tech is moving! Austin is Silicon Valley 2.0. The new SVHQ2. Look around--everyone else has been moving here for the past 5 years and every year we look more and more like what Silicon Valley looked like 20 years ago.
Austin has a very low cost of living compared to most comparable cities in this race. I am not saying that Austin is free, or there are not cheaper places to live, but compare Austin to most of the major players where high tech dominates the business landscape today and Austin comes out on top.
Austin is a place where people already want to move. Look at our international entertainment and you find SXSW and Formula One--each of which has international reach and renown. Then add in Austin City Limits, which is no small national event. Throw in the lakes, the hill country, and our seasonal events downtown and around Central Texas and you can see why people want to live in Austin today.
Austin has high tech people resources. High Tech is a dynamic industry that thrives on competition and the more high tech there is, the more room there is for growth and innovation. Unlike car dealers and hardware stores, in high tech--more is better. Every major player in high tech today, hardware, software and all things internet have a major presence in our area today. Everyone, including the ASIC/chip companies. You name a company and they are here in a BIG way and many of them have their first or second HQ here: Intel. AMD. Motorola. ARM. Samsung. IBM. Dell/EMC. HP. Apple. 3M. Facebook. Google. LegalZoom. Cisco. National Instruments. PayPay. CA Technologies. Uber. RetailMeNot. Bazaarvoice. Yodle. Electronic Arts. Silicon Labs. Rackspace. VMware. HomeAway. And the list goes on and on and on.
Austin has a constant feed of talent from our local universities that want to stay in Austin as well. The University of Texas. St. Edwards University. Texas A&M is not far, and neither is Dallas. So, the facet of talent is wide open and Amazon knows it.

So, what do you think? Will Amazon choose Austin as its' latest and greater corporate HQ2? I hope so. I think it will be a good fit and will be the next big thing to add to Austin's portfolio. I love high tech. It is the place where I learned business and the industry that I owe my formative years of business enterprising, travel and even meeting my wife when I lived in Hong Kong. So, my message to Amazon--Welcome to Central Texas! We have been saving a place for you.

Mergers--They All Seem To Be Doing It

2017-11-02T11:09:00.000-05:00

Today, we are getting news of the latest merger announcement in a long string of announcements in recent years of big home builders who are merging, consolidating or going out of business. CalAtlantic is announcing a merger with Lennar Homes. This will not only be the new largest merger among USA home builders but will be the second merger for CalAtlantic in as many years (Standard Pacific recently merged with Ryland Homes). How does this affect you? Why should you care? And how is it that in an industry that is growing so fast, those companies are having to merge with competitors in order to make money?

Well, the simple answer is, they can't keep up with the pace of business growth and the cost of the labor shortages, land costs, and building material costs. And how does this affect you, as an Investor and Home Buyer?

Builders are stretched and can't watch everything going on
Builders are letting things fall through the cracks
Builders are not following up on questionable warranty issues
In general--Buyers are struggling to hold builder's feet to the fire

During the past few years, as a new home construction specialist, I can tell you that I have seen things that will make your hair curl. Mistakes. Problems. Mold. Unwanted features added. Appliances breaking within months of installation. AC systems designed such that they can not cool the house. Roofs installed in a way that they will begin to leak in a few short years. Granite that had cracks in it. Yards that drain into other yards. Doors put in the wrong place. Plumbing in the wrong places. Missing anchor bolts along the outside walls. Missing insulation. Hollow tile and wood floor installations. And the problems that I was seeing with just a couple of builders, has spread to a whole host of builders now. I don't know of any builders today that I can honestly say is 100% on top of their game. That is to say--Builders have allowed themselves to get too busy and their crew leaders in the communities to get so busy that they don't have time to fully do their jobs. And I am not talking about one builder. Sadly, I can not exclude any builder that I know today from this conversation.

So, Buyer Beware! Does this mean you should not be buying new construction or a home that was built during the past 5 years? No, but it does mean, if you don't have a Realtor who knows how to build a home from the foundation to the roof, and you choose to buy a home without a Realtor under the assumption that the builder will give you a better deal, let me tell you that first of all, that simply is not true. I don't know of any buyers who have gotten a better deal out of a new home builder who did not use me as their Realtor. Secondly, if you have built less than 5 homes in your life and did not walk those homes with specialist every week while they were being built so that you could learn construction the way I know construction and you think you are going to get a high-quality home and be able to help the builder keep things straight during the building process--you should probably consider if I said the same thing to you about your job. Do you think I could hold my own with your boss or your team after sitting in on a few of your meetings or reading a few weeks on the internet about your business? I doubt seriously your job and your business is that easy. Well, if you think home construction is easy, you have probably never really built a home before.

Mergers. Consolidation. Material shortages. Labor shortages. Increases in land costs. Times are changing in Central Texas real estate and our national real estate markets. Buyers and Investors--be aware of what is happening in this market and how these things affect you.

Is Amazon HQ2 Moving to Austin Texas?

2017-10-20T16:08:00.001-05:00

Austin, Texas is where high tech is moving! Austin is Silicon Valley 2.0. The new SVHQ2. Look around--everyone else has been moving here for the past 5 years and every year we look more and more like what Silicon Valley looked like 20 years ago.
Austin has a very low cost of living compared to most comparable cities in this race. I am not saying that Austin is free, or there are not cheaper places to live, but compare Austin to most of the major players where high tech dominates the business landscape today and Austin comes out on top.
Austin is a place where people already want to move. Look at our international entertainment and you find SXSW and Formula One--each of which has international reach and renown. Then add in Austin City Limits, which is no small national event. Throw in the lakes, the hill country, and our seasonal events downtown and around Central Texas and you can see why people want to live in Austin today.
Austin has high tech people resources. High Tech is a dynamic industry that thrives on competition and the more high tech there is, the more room there is for growth and innovation. Unlike car dealers and hardware stores, in high tech--more is better. Every major player in high tech today, hardware, software and all things internet have a major presence in our area today. Everyone, including the ASIC/chip companies. You name a company and they are here in a BIG way and many of them have their first or second HQ here: Intel. AMD. Motorola. ARM. Samsung. IBM. Dell/EMC. HP. Apple. 3M. Facebook. Google. LegalZoom. Cisco. National Instruments. PayPay. CA Technologies. Uber. RetailMeNot. Bazaarvoice. Yodle. Electronic Arts. Silicon Labs. Rackspace. VMware. HomeAway. And the list goes on and on and on.
Austin has a constant feed of talent from our local universities that want to stay in Austin as well. The University of Texas. St. Edwards University. Texas A&M is not far, and neither is Dallas. So, the facet of talent is wide open and Amazon knows it.

More Eyes on New Home Construction in Austin Texas

2017-10-10T19:01:00.000-05:00

One of my favorite lines that I hear builder sales people say to buyers who are considering building a new home in their community is this: "Don't worry. The house goes through multiple city inspections and they don't miss anything." Well, yes, the city or county inspectors are looking at some things in the house, but what is important to the city inspector may not be the things that you are concerned about and not everything in your home is on his list of things to inspect. So, no, the city inspector is not tuned into your concerns and is probably not going to even look at the same things that an inspector you hire is going to be looking at and certainly not looking at everything that I might look at when I walk a house with a buyer. They quite simply have different priorities and different check lists. And at the end of the day, the more experienced professionals you have on your team, who are walking your home with you--the better.

Find a good builder. Hire a great REALTOR who knows how to build a house. Hire a new home construction inspector--as many as three times during construction and during the first year. And invest time and energy into making sure your new home is built right.

Remodeling: Much More than Lipstick on a Pig

2017-09-07T21:36:00.001-05:00

STARTING WITH WHAT COULD ONLY POLITELY BE DESCRIBED AS A LANDLORD'S NIGHTMARE...

NIGHTMARE CIRCA 1982.

LIGHTING FIXTURES THAT MY MOTHER WOULD HAVE CONSIDERED OLD.

CARPET THAT YOU COULD SMELL IN NEW ORLEANS.

AND ALMOST EVERYTHING SEEMED TO BE BROKEN OR HAD TO BE REPLACED. MUCH OF THE INTERIOR NEEDED TO BE RIPPED OUT TO START OVER.

HOLES IN THE WALLS AND DOORS.
PILES OF FURNITURE AND STUFF TO CLEAN OUT.

AS THE OLD SAYING GOES..."OUT WITH THE OLD..."

"AND IN WITH THE NEW."
NEW CEILINGS. NEW KITCHEN. NEW LIGHTING. NEW FLOORING. NEW DESIGNS. NEW IDEAS.

DETAILS. DETAILS. DETAILS. DETAILS. AND MORE DETAILS.

WHEN A PROJECT STARTS WITH A ROBUST

PLAN AND a COMMITMENT TO THE PLAN...

THE END RESULTS CAN BE TRULY AMAZING!

The Most Useless of Real Estate Statistics

2017-07-13T06:00:00.000-05:00

Real Estate analysts and statisticians love to publish numbers, but the questions you have to ask is, How helpful are the numbers? What did they really tell you? Are there better numbers that could be reported that tell us more?

The most frequently published number is a Year Over Year (YoY) number that show last month's performance compared to the same month one year earlier. On the surface, this seems like a number that might be helpful benchmark and tell us how the market is doing. And if we were in a market that had a daily observable variation of data, 30 days of information would be a significant amount of data and might tell us something about a trend or coming trend. However, real estate is not something that is measurable or affected by daily sales. In fact, I would argue that many products and many industries can not look at daily sales data and determine a trend line from 30 days of sales data--most certainly not with real estate.

There are some seasonal businesses that have exceptions to this data rule and I will guess that the first analysts who started running real estate trends came from this business background--but it makes no sense for real estate. Take retail sales as an example. Certain times of the year show retail sales spikes that are measured during specific retail events, like the weeks leading up to Christmas and the days surrounding Black Friday. December sales are a well known benchmark on retail sales and a quantifiable data point that can be understood and measured. Same is true of Black Friday (weekend) and other holidays to a lesser degree for certain products--like appliance sales during a few select national holidays. These seasonal events can be defined, measured and compared to previous years with some reasonable predictive quality. By looking at these trends, analysts can often see which way the wind is blowing and take a temperature of consumer confidence and have a better idea of things to follow.

Now to compare this to our business. Real Estate has some "traditional" cycles with low periods during the holidays (the opposite of retail sales) and one high season cycles during the summer, but what we see most often reported in real estate statistics is ONE MONTH this year compared to ONE MONTH last year. This is a completely misleading, and devoid of useful information. One month of data in real estate tells us almost NOTHING without know what happened during the preceding two months or the following months. The value of a Real Estate statistic depends on a bigger picture than 30 days of sales data (1) because real estate is not a one day purchase--a transaction typically takes at least 30 days (2) because the number of confounding factors that affect real estate business are much bigger than a single event, and include a whole host of geographical factors, economic factors, local momentum and basic business factors such as supply and demand which can be dependent upon many factors beyond the control of Real Estate business people. And like all businesses, there is an expected ebb and flow that has to be smoothed out when looking at the numbers, else the only trend you will find is that there are no dependable trends to forecast the future. With a little smoothing out of the months, trend lines can emerge in a local market to better see what may be happening while it is happening.

Real Estate does have some traditional peaks, but even when we look at the peak summer season (during school vacation), there are two different data humps that have to be examined in most markets and these two stand-alone points are a minimum of 60 days in length (x 2), not 30 days. We have the first spike in sales that occurs in the May/June block and the second spike in sales that occurs in July/August. One, as school lets out and parents are trying to move before the July 4th holiday, and one, as school is preparing to open--for families who missed the first of the summer rush. Again, preparing data-sets for one month during any part of the summer will be a misleading roller coaster and not helpful in understanding the trend in the Year Over Year analysis.

When analyst compare one month to the same month one year prior, inevitably what you see and read are reports of a lumpy and inconsistent market. Inconsistencies are not trends. They are confusion. Confusion created by persons who don't understand the value or the harm of statistics. However, if analysts took the time to provide rolling averages over a 90 or 120 days look at the market, your can begin to see the trend lines very quickly and much more reliably. The variations of market influences are quickly mitigated and real market analysis is available to even the casual observer.

I am not statistician, but I look at the kind of information that is reported today for real estate and can easily take them apart. When one month the numbers are up, the next month the numbers are down and the next month the numbers are up again, this is not a report on the health of the market, it is a report on the lack of sophistication in our understanding of our tools to measure the market and report on that data. It is time that we, as an industry, demand better reporting of data and information from those who would claim to be industry analysts and reporters of data. The data is there; now is the time to learn how to report that data in a responsible and helpful manner to investors and home buyers alike.

When Realtors Play "The Stupid Card"

2017-06-30T09:36:00.000-05:00

Sometimes I feel like I am writing the chronicles for real estate practitioners--a guide for what not to do in this business. I will be the first to admit that this kind of post does not make me proud of my profession and sometimes makes me want to qualify my role when I tell someone that I am a Realtor. And yet, here we go again. I would argue that this kind of thing sometimes just needs to be said, to not only inform each other that there are better ways, but to inform our buyers and sellers that there are people in the real estate profession who take great pride in their clients, their business and their understanding of the business model that we present to our clients.

When Realtors get in a bind or don't know how to negotiate a fair settlement over issues that arise from a horrible inspection, the fall-back position and statement too often seems to be this phrase: "I am not a ________ expert--are you?" You fill in the blank:

I am not a master plumber...
I am not an electrician...
I am not a General Contractor...
I am not a foundation expert...
I am not a roofer...
I am not a builder...are you?

I don't know if this is something that is taught in cheap negotiations courses that tell Realtors how to take advantage of people or just something that comes naturally after being in this business for too long and become too lazy to do their job, but here is my answer to the question:

I am not an electrician, but I know how electricity works and how houses are wired and I know enough about the practical fundamentals of residential electricity to know when I am being told something that is just not remotely true.
I am not a plumber, but I know how a house is plumbed for water, for gas, for HVAC and sewer water. And I know when a plumber is quoting me more per hour than my attorney charges that I am probably being taken for a fool and I am talking to the wrong person.
I am not a foundation expert, but I can see the red flags of a foundation problem and know when to call in an expert and I know what to ask him when he gets there.
I am not a roofer, but I have seen more roofs and been on top of enough roofs to know that rotting wood, broken vent hood seals, raised nails, tree abrasion, and pockets that catch rain may not be causing visible leaks today, but a hidden leak or future leak is not a possibility--it is a high probability future event. Been there. Seen that.
I am not a General Contractor, but I have studied every aspect of home construction and I have worked hands-on in many of the various fields since I was young; my understanding of real estate goes well beyond the confines of the classroom and well beyond being able to fill out a legal contract and then making an excuses for not knowing more about the various tradesmen who surround our profession.
I am not an attorney, but a big part of what I do for a living is negotiate legal contracts. If I don't understand the law and the legalities of the contracts, how valuable can I be to my clients?
I am not a mortgage broker, but I understand the various types of mortgage vehicles, interest rates, the role of the federal reserve, how to calculate a monthly PITI payment on a financial calculator. PMI. APR. The difference between mortgage Brokers and mortgage Bankers. How appraisals work and the impact on the transaction. Taxes in Texas. I know a lot about banking and mortgages--because because my clients expect me to know about mortgage banking so I can help them.

When I was growing up, my father built and remodeled houses and churches as a bit of a hobby. I learned the fundamentals of construction growing up. I have roofed houses, framed houses, put in flooring and siding. I have done wiring and electrical work (and no, you don't have to be a master electrician to wire a house or plumb a house--the "master" signs off on the work done by the grunts, and almost NEVER do the work themselves). I grew up as a "worker" building houses, so when I hear of a reported "professional" saying something that is just not true, I am usually the first person to call balderdash. I can explain it to him and I can back up what I say, but my professional perspective is that this is not just because I grew up in construction and love building houses, but because I believe in the calling that my current job is to represent the client's best interests. I am a REALTOR. Representing the best interests of my client is my fiduciary and legal responsibility.

Realtors are licensed to uphold this code of ethics and make sure the client's interest are always put first. But for me to represent my client in Real Estate, means I have to understand construction and know more about real estate than anyone else in the room. I have to understand how a house is built. I should be walking EVERY house that I sell with my buyer and our inspectors to learn everything that I don't know today about that house and how it is put together. And I need to understand why the inspector says one thing and the HVAC tech or the Electrician says something different. I should know why code that was written in the 60's or 80's is different from today's building code. I should understand the differences between R22 and 410A HVAC gas in my HVAC system. I should know the difference between Masonite and Concrete Fiber Siding. I should be able to recognize (by sight) the difference between a tab shingle roof and an architectural shingle roof and which one is better. I should know the difference between cheap laminate, high grade laminate and engineered hardwood. And glue-down vs floating floors. I should know when houses stopped using iron pipes and aluminum wiring and started using PVC and grounded copper wiring. Do I need to be an inspector or a licensed contractor to do that? I don't think so. Not if I am paying attention and learning my job anew every day. There are a ton of things I should know, BECAUSE I AM A REALTOR AND THIS IS MY JOB. I say these things with pride, not with anger.

I am not an electrician, but I understand hot, neutral, ground and control wires. I understand the difference between GFCI and AFCI. I know how to wire fans and lights and GFCI switches. I know the difference between a GFCI outlet that is in-line on the circuit vs a stand-alone GFCI outlet or a GFCI breaker. I did not learn most of this from my father, but I did learn it from walking hundreds of houses with inspectors. By listening. By asking questions. By looking up the answers. By reading about loads and power coming into the house and how that has changed over the years. I learned these things so that I could be the expert that my clients expect me to be.

I am not a foundation expert, but I know how to tell if a foundation is significantly un-level or broken. How did I learn this? By talking to foundation experts about this differences between a problem and normal deviations. By learning what do they look for and what simple tools they use to make quick judgements about what is most likely a problem and what is not? I asked questions like: How common is "corner pop"? When is a crack in the masonry a red flag and when is it a sign of something much more significant? What should I look for and why are those things red flags?

I am not an expert on mold, but I know when you are framing a house and a hard bundle of wood sits in the rain for a week before it is used to frame the house, you may start seeing mold inside the house. This situation left UN-addressed, can be a BIG problem down the road for your NEW HOME construction. (Yes, this has happened to one of my clients recently and had I not found it while the house was being built and stepped in to represent my buyer, the builder would have missed it or ignored it and this builder was ready to cover up the mold in the framing with sheet-rock and we would not have known for many months, or even years why the residents of the home were getting sick; hell, we may have never known why they were getting sick and we may have never thought to tear open the walls to look at what may be causing this problem and we certainly would not have been able to get the builder to take responsibility for the remediation. Because I was fortunately enough to find it, and ask the right questions, call the builder VP of construction and let him know about the proble--we were able to get the mold remediation and tested before the sheetrock and insulation went up. I could have plead ignorance and not gotten involved, but that is not my job. My job is to look for problems and help my clients get to solutions. My job is not based in the foundation of not being an expert. My job is to get an expert. One who knows more than my clients and often as much as the industry experts who get paid to be subject matter experts in their field.

I am not a plumber, but I know how plumbing works. I have plumbed sinks, facets, water filters, and I have fixed problems in my property. Do I do all of my own plumbing--no. Do I try to understand a problem before I contract a plumber to fix a major problem--absolutely. What kind of Realtor would I be if I did not know the fundamentals of the business?

I an not an licensed HVAC tech, but I know enough about the fundamental of the technology, zoning, SEER rating, gases, changes in federal law, costs and technology to help my clients sort through the pro's and cons of each.

My latest inspection story is one that defies (my) imagination. A plumber who thinks he can hear a leak though the walls and through ceilings and can look at a toilet and tell that it is seated correctly (even though it was missing one of its plastic bolts and was literally spinning on the one remaining bolt). Do you have to be a "master plumber" to know how to replace a $12 wax seal on a toilet and replace a broken bolt or to know that once the was seal is disturbed the toilet will start to leak--whether it is leaking today or not? I don't think so. Do you have to be a plumbing genius to realize that unless your plumbing is leaking at a rate of 1 gallon per minute, the likelihood of being able to "hear a leak through the walls of ceiling" has a smaller chance of success than winning the Texas Lottery? I think not. I don't think you have to be a master plumber to figure out the logic in this scenario and I think any Realtor who can not come to a similar conclusion is either not trying very hard, or simply does not care.

Am I an expert? I better be. I better know more than my client on every aspect of home buying and selling and new home construction. That is exactly why my clients hire me--because I take my business and my clients seriously. Can I learn more? You bet! I better be learning every day and during every inspection and from every builder, every lender, every title professional and attorney I meet each day. If I am not learning, I am making excuses for not knowing something that I should have probably seen, known or read. I strive to always be the smartest person in the room when it comes to my business, as I hope you do as well.

NOTE: This post if filled with disclaimers! You don't have to scroll to the bottom to see what I am not and what certifications I do not possess.