Property Secrets

Credit Crunch-What Next?

noreply@blogger.com (Unknown) — Tue, 01 Apr 2008 13:54:00 +0000

My previous blog posting on December 20th 2007 correctly predicted the credit crunch would cause a spiral of redemptions.

Since then Bear Stearns lost most of its value partly due to its clients pulling $25B worth of assets.

UBS today announced a write down of $19B worth of assets. Deutsche Bank AG, Germany's biggest bank announced today that it will write down 2.5 billion euros ($3.9 billion) of loans. In fact the total value of write downs from European Banks along up to 1st April 2008 now tops $68Billion.

I was in the City today at a meeting with a major Fund. The value of this property fund has been written down significantly, by around 30% since last October. The real reason was because it, along with most of all the banks property asset values, have been over valued. Pressure from investors has meant that the property funds value has been pushed up bit by bit over the past five or so years and their value simply did not reflect the true long term market value of the asset considering all factors. In the same way the low rates of interest charged by banks to private individuals for mortgage loans did not reflect the true long term risk of that lending.

The Funds are now desperate for cash. They would never publicly state just how desperate they are, but believe me they are really desperate. They have dropped the value of their funds to attract new investors. They have also been quietly trying to sell off the family silver to free up the cash but guess what? There are no buyers. Well at least at the prices they are quoting for property assets. What does this mean?

It means that there are significant opportunities out there for people or organizations with cash. The banks want this cash and will pay higher rates of interest on deposits to get it. Clearly good news for the cash rich!

Banks will continue to increase the cost of borrowing to all customers across the board. They will also "cherry pick" customers by increasing their lending requirements preferring to do business with clients who have perfect credit ratings and large bank balances. Bad news for Joe Public trying to get a good mortgage deal.

It also means that there are opportunities for cash rich individuals or firms to buy property assests from these "struggling" funds at a discounted rate. The most likely result is an increase in the number of Opportunity Funds set up to take advantage of "fire sale" property assets being offloaded by the banks. Good for the private investor with cash to invest in the new opportunity funds. Bad for most of us i.e. the private investor with his investments currently tied up with a larger property fund or in a pension.

To date the banks and funds have resisted a "fire sale" but they will have to do exactly that very shortly. I believe that it will only be after the effects of the credit crunch are fully played out will we see the true extent of it from our pockets.

Unfortunately I can't see any relief this year for Banks. Mainly because the lack of liquidity has yet to completely filter down the chain to the retailers and manufacturers and small to medium sized companies. Staff at Banks are starting to get laid off but how many in your office? not many yet, I guess, but they will not escape the effects of this market adjustment.

Once it starts to filter down to companies their employees and customers they won't be able to pay their loans rent/mortgage,exacibating the Banks' and individual homeowners current problems and forcing sales of both residential and commercial property.

What can you do? Look for opportunities to purchase residential or commercial property either directly or indirectly (through opportunity funds) in the coming months but only at a significantly discounted rate from current comparables.

Only once the inflated property valuations from last year are assigned to history and true long term market valuations are established on commercial and residential property will we be able to say the crunch is over.

Please remember Steelbee just tells it how he sees it and the blog has no vested interest in any organisation.By the way check out these cheap ebooks

10 Reasons To Hire a Property Manager

noreply@blogger.com (Unknown) — Thu, 20 Dec 2007 22:41:00 +0000

1) The Property Manager can be the bad cop when it comes to chasing the rent. This allows the Landlord to ensure swift rent collection while hiding behind the Property Manager. Cash is King in this tight credit market, good cash flow for a landlord can mean the difference between success and failure. If you don't believe me just take a look at the major real estate funds. As at December 20th 2007 they are facing lots of redemptions (people withdrawing their cash from the funds). This is a vicious circle that I predict will continue in a downward spiral over the next 6 months. These funds will have to offload property to free up cash to pay these redemptions. They will in my opinion have to continue to devalue the funds (until confidence is restored) to ensure they do not pay out at the higher price and to discourage people from cashing in. The property manager can assist with your cash flow requirements and you should set the PM tight rent collection benchmarks.You should also incentivize the PM to maximize "additional income generating activities". both of these activities can be undertaken without the landlord spoiling their relationship with the tenants.

2) The experienced professional property manager will have managed dozens of similar properties to those contained in your portfolio. He may be an expert in a particular aspect of property management (such as Health and Safety compliance) and if not he will have access to these experts. These may be colleagues the PM can draw on or individuals he has used before from other firms.

3)The PM will have excellent property law knowledge and could save you $000's by advising you how he (or another clients solicitor) has dealt with historic legal issues that you currently have a problem with. This could be enough comfort for you to resolve your problem without the need for you to pay your solicitor for advice.

4) The PM will have access to the best real estate professionals, leasing agents, solicitors, architects structural engineers to name just a few in his geographic location for your property type and will be able to give you an impartial and independent opinion on who he thinks can solve your problem or shift your vacant space the fastest.

5) The PM's firm will have professional liability Insurance. There may be times when a claim will be referred to his insurer instead or yours thus keeping your Insurance costs down.

6) Let the PM's firm pay for the paper,photocopier,fax,phone envelopes postage,stationery etc etc for invoicing and dealing with tenants instead of you paying for it. On a large portfolio this can be a significant cost saving.

7) Make the PM's firm responsible for vetting your vendors/ suppliers. Failure to properly vet vendors can be a costly mistake. Many Landlords overlook this duty because either they do not know how to do it or because it is a time consuming and laborious process. One service charge firm which is hot on this is www.mcneilcommercial.co.uk

8) A PM should only be charging around $1500 per tenancy per year.Consider your legal costs and compare and contrast the value for money!

9) Make the PM responsible for preparing frequent written inspection reports for each property. Faults in property that are found quickly can be resolved before they become expensive items of disrepair.

10) Free up your time for doing deals that make money..I mean serious money. Read more at www.pricemole.com

Top 3 Ways to Purchase Commercial Property With None of You Own Money!

noreply@blogger.com (Unknown) — Sun, 09 Sep 2007 20:57:00 +0000

Commercial real estate investment is an industry of abundance. There is literally an unlimited amount of money available to people who want to borrow it. So much, in fact, that you can literally purchase millions of dollars worth of commercial property without using one dollar of your own money!

Unless you already have millions of dollars at your personal disposal to invest, or are fortunate enough to have come from a family of wealth, borrowing money is the only way to become a commercial real estate investor. It is a great way to purchase commercial property, even if you have your own millions already, because you don't have to worry about losing your personal money. In fact, that is how many multi-millionaire commercial real estate investors make their money- by not using their own! If you don't use it, then you never lose it.

One of the reasons you can borrow money to purchase property is because of something called leverage. You simply borrow money against the property, as it is the property that actually holds the value. This will play a major role in our discussion of purchasing property without using any of your own money.

The first way to purchase property with none of your own money is subordination. Many people consider this way of purchasing property as creative financing. In this situation, the current owner actually takes out a second mortgage on the property to cover the difference of what the purchaser (you, the investor) can get loaned from a bank or private lender. If you are lucky enough to have an owner who will sell the property with no money down, and he or she subordinates a second mortgage for the difference you owe, then you just purchased a property with none of your own money!

When using this tool, it is a good idea to have the owner only subordinate for a short amount of time, like one to two years, just until you can take the money generated from the commercial property and pay off the second mortgage, leaving the owner free of the property. At this point, payment for the property can take place because you will have generated cash through the commercial property. The owner will actually wait to get paid his money for the property! It happens all the time, and everyone comes out happy in the end. You purchase your money generating property with none of your own money, and the owner gets paid for the property. This situation may seem backwards at first, but it works rather well, if you find an owner who is very motivated to sell, and he or she understands this way of investing.

You must always be sure that the property can support the debt, as you do not want the owner getting into financial trouble with the second mortgage. Some owners are weary of this type of investing, as some purchasers do not do as they say, and problems occur. You want to be an investor of integrity and have a reputation of making things happen in the way in which you and the seller agreed.

Another way to purchase property with none of your own money is through the owner releasing some acreage that is free and clear which you, in turn, use to borrow enough money to cover a down payment on the entire piece. This strategy works especially well with raw land. You are basically using a piece of the property to purchase the entire property. Owners may not even be aware of this option, so be sure to mention it or address it in a letter of intent, especially when dealing with many acres of land!

A third way to purchase commercial property without using your own money is using partners. There are experienced investors, builders and developers who will find the financing for you, and basically get the deal ready to go, if you are willing to do the work. The agreements can greatly differ, but the partner(s) will basically finance the deal and take a piece of the return that you create through, either turning a distressed property around, or overseeing the development or building of a specific type of property and making it profitable. Partners can offer great experience and insight so that you can learn more about a specific type of property or the actual industry itself.

When it comes to commercial real estate, there are so many options; don't ever limit yourself! Be creative and find resources. There is a wealth of information and money available to anyone who is willing to take some time and make some contacts. This industry is not one of limitations, but one of abundance.

Tony Seruga, Yolanda Seruga and Yolanda Bishop of http://www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.

Article Source: http://EzineArticles.com/?expert=Yolanda_Bishop

Dirty Tricks- Top Ten Quick DIY Improvements To Sell Your Flat or Apartment

noreply@blogger.com (Unknown) — Wed, 15 Aug 2007 21:43:00 +0000

Sell your flat or apartment by spending a little bit of money on key areas. Ten improvements are listed below. Clearly some are more expensive than others. Do not do them all. Obtain blunt feedback from your estate agent from viewings he has arranged. Do not take it personally if he says your kitchen stinks or your blood red living room walls are offensive. Only complete those works that are deemed to be problems or disliked by prospective purchasers. The key point to remember here is the prospective purchasers will only visit your flat once or twice for a viewing. First appearances matter. They are more likely to be put off by a "personalised" or dirty property than a boring clean blank canvass.

1) Fit new kitchen worktops and/or cupboard doors. People genuinely buy a property on the cosmetic appearance of the kitchen! I know it is hard to believe but if the kitchen looks good it will sell.

2) Repaint bathroom walls clean or cover dirty fixtures and re-grout tiles. Dirty old bathrooms are a turn off. Clean or replace that old stained sink, toilet bowl and re-grout or replace tiles and the bathroom is sorted.

3) Plaster or paper over cracks. Where structural repairs and too expensive cover them up long enough to sell. Do not lie however about problems if asked. It is not illegal however to be economical with the truth.

4) Add shower to separate WC room. Nice bonus that sets your apartment above the rest of the market. Make sure you put in sufficient ventilation.

5) Replace carpet with modern wooden or laminate flooring. Sticky, dirty, pet hair ridden carpets are not an added bonus. Prospective purchasers love clean wooden flooring. This is not cheap but a major winner.

6) Replace plastic sockets and light switches with modern brushed metal finished ones. Simple touch that make your apartment seem expensive.

7) Replace/repair damaged or ill fitting doors. Buy cheap doors apply a lick of paint. A door that does not close properly or has a fist hole in it does not leave a good impression. Spend £100 and remove a negative image a prospective purchaser may otherwise have had.

8) Remove unfashionable ceiling hung lights. Replace with a modern fitting. If you are unsure what is fashionable ask someone "is this trendy" if the answer is no then get rid of it.

9) Refurbish wooden window frames by sanding down and painting.Show the view through your best window. Put a table in front of problem windows.

10) Repaint in neutral colors. Front door is the most important and should be to first to be repainted if necessary. Ceilings should always be painted with a white Matt paint to give the impression of space.

UK- Landlords How To Collect Rent On Time (2/10)

noreply@blogger.com (Unknown) — Mon, 13 Aug 2007 20:09:00 +0000

At least 21 days before the rent is due send out an invoice to the tenant.

The invoice should clearly state the following;

1) The total rent due and show the split on the invoice between the Net,Tax and Gross.

2) The due date.

3) Tax registration number should be on the invoice (if applicable).

4) The billing name should be exactly the same as the name of the tenant on the lease or as varied by associated documentation.

5) The dates the invoice relate to (i.e Rent due for period 25.12.2006-24.03.2007). The billing address should be the address where the tenant wants it to be sent (unless the lease states otherwise). Speak to the principal and establish this in advance of raising the invoice. Tenants can want the invoice sent to a third pary not limited to one of the following, Managing Agent, Accountant, Head office, Leased premises,Home address, PO BOX. This is not a problem as long as they confirm change of address in writing and as long as the invoice is billed to the name of the tenant on the lease c/o XYZ Managing Agent,ABC Town,FR8 2FC.

6) "Issued by" details which show the billing entity and explaining (where applicable) the relationship to the landlord or stating that the invoice was raised by the landlord.

7) Unique Invoice number.

8) Where to send payment.

9) How to pay (by Cheque, BACS, TT).

10) Remittance advice or tenant reference code should be enclosed so that the tenant can send this with his payment so that you can ensure that when the money is received by you you are able to allocate to the correct tenant account.

Getting one of the above wrong can cost you in numerous ways and will likely result in a delay meaning you not getting paid on time.

14 days before the due date make a courtesy phone call to your tenant and confirm with them that they have received the invoice. Confirm with them that the invoice is in the payment run and that they anticipate no problems paying the rent by the due date. Make a detailed file note of what date and time you called and the full name of who you spoke to, their position, along with their telephone number and office location. Now is the time to eliminate now any potential payment delay at the tenants end. This is proactive management of your property Investment.

UK Landlords-How To Collect Rent On Time (1/10)

noreply@blogger.com (Unknown) — Sun, 12 Aug 2007 21:42:00 +0000

Whether you own Residential or Commercial property it does not matter. Getting the rent on time from your tenant(s) is the most important aspect of property investment management. This is the first post of ten (1/10) on this crucial subject.

It all starts in the drafting of a lease. Use a property lawyer. Do not use a template bought in a book store for £5. Do not re-write an old lease. Spend the extra money on a property lawyer.

Ensure any lease that you grant spells out clearly when the rent is due, how it is to be paid and what the penalties are for late and non payment. In a commercial lease in the the rents are normally due in advance on the usual english quarter days (25 March, 24 June, 29 September and 25 December) although there is currently pressure from various tenant groups on landlords to accept monthly in advance payments. Residential tenants usually pay monthly under the terms of their lease, ensure that the date is written into the lease.

Get your lawyer to draft a clause in the lease which requires your tenant to set up a Direct Debit facility to pay you. This prevents missing cheques and a whole host of other tenant excuses for not paying on time. Do you really want your tenant turning up to your office with a bag full of cash at 5pm or even worse a bag full of coins!

Set a high level of penalty interest (LPI) for late payment, 4% above base is fine. If during lease negotiations the prospective tenant questions this level of penalty interest proposed in the lease ask them if they intend paying the rent late every time it is due! If the answer is yes then you may want to consider whether you want them as a tenant or whether they will likely end up costing you money in bad debt write offs.

The lease should state that the "rent is to be paid on the due date whether formally demanded or not" and detail your remedies for non payment. These include (among many other things) on a commercial property, forfeiture and distress.

Get a rent deposit for residential tenants and possibly a third party to guarantee the lease.

Enforce the agreed lease terms from day one. Be consistent, hard but fair. Remember that the lease is a contract, the terms of which are freely entered into by both parties. Your tenant has signed this contract to say he/she agrees to pay the rent on the dates specified within the lease. Leave your emotions at home and remember this is business. Your rent collection performance has a direct influence on the success of your investment and your collection statistics are a direct reflection on how well you are managing your property investment.

New Lease -Top 10 Tenant Mistakes

noreply@blogger.com (Unknown) — Wed, 25 Jul 2007 07:52:00 +0000

Working in the commercial property field advising commercial landlords has opened my eyes to some horrific mistakes made by commercial organisations and individuals when taking a lease of commercial property. In my experience the Top Ten biggest mistakes made by Tenants when taking a lease of a commercial property are as follows:

1) Not employing a solicitor who specialises in commercial property. Let Divorce Lawyers deal with divorce. Let a residential specialist deal with residential property. Pay the extra money and get the best advice from a commercial property specialist.

2) Not taking full control and personal responsibility of the lease negotiations and progress. Never leave it entirely to an Agent or Solicitor. But do take their advice and chase them every day for a progress report.

3) Not preparing a schedule of condition and applying for Tenant fit out prior to lease signing. At best this results in duplication of legal fees and landlords costs. At worst the business cannot operate as envisaged if works planned do not receive landlords consent.

4) Not asking a Landlord to undertake repairs/contribute towards Tenant works prior to signing lease. Landlords are often willing to pay for capital expenditure to facilitate a letting. This is an easy win for a Tenant

5) Not understanding dilapidations obligations. Quite straightforward when taking a lease of a new property however many Tenants unknowingly take these obligations on when taking an assignment of a lease or when taking a lease of a second hand property that is in disrepair already.

6) Not understanding potential service charge liabilities and not capping them. When a tenant gets an invoice for his share of major works it could be too late to do anything about it.

7) Providing a personal guarantee to the lease or taking the lease in own name. I have seen in excess of a dozen individuals lose everything including their homes as a result of them signing a lease in their own name and being personally liable following default of a lease term.

8) Contracting out of s24-28 of 1954 Landlord and Tenant Act (UK only). A tenant that spend 000's of pounds fitting out an office was forced to vacate on expiry of his lease which was only three years long.

9) Accepting key clauses as being Time of the essence. I have witnessed several Tenants miss an option to break a lease. In one case resulting in them remaining liable for another Ten years on a surplus property. The employee responsible for exercising the break was not aware of the specified timetable within the lease for serving a valid notice.

10) Unknowingly taking on environmental liability. Common with property located on industrial estates. The Landlord goes bust leaving the tenant to pick up the cost of environmental clean up even where the mess was caused by a previous occupier!

Examine the full detail and examples of these common mistakes later this year on steelbee.com.

Article Source: http://EzineArticles.com/?expert=Campbell_James

Dirty Tricks- Gazundering

noreply@blogger.com (Unknown) — Mon, 02 Jul 2007 19:28:00 +0000

Definition: Last minute cut in offer price by prospective purchaser.

When does it apply?- Sale of residential or commercial property.

Why do it?- Either to save money on acquisition of property or (less frequently) to scupper a competing sale by a competing owner of a rival property.

When does it happen?- Usually close to exchange of legal contracts and usually when the buyer is in a stronger "position" than the vendor.

How to do it- (Example) Make an offer on a house. The house is removed from the market by the vendor or their Agent and solicitors are instructed to progress towards exchange of contracts. Just before contracts are exchanged you raise an "issue" with the house. For example you state that a belief that the wiring needs to be replaced or that there are concerns with the drainage or whatever weakness is specifically plausible and could be applicable to the condition of the house. Ideally this is something that is based partially on a fact. It may have been picked up during your due diligence procedures or by your surveyor but you exaggerate the importance to gain the position of strength that you need to use as leverage. Phone the vendor (preferably direct) and tell them that due to your recent findings that you have no alternative than to deduct £X000's from the purchase price to cover the cost of the "defect". Preferably you have in hand some quotations from a "friendly contractor" to substantiate your figures. Just as long as the vendor does not know that the quotation is from you brother in law/cousin/godfather/long term family friend!

Why do vendors fall for it?- They don't always. But whether they believe you or not they are left with this decision- Agree to your reduced offer and proceed with the sale or re-start marketing the property. They have often incurred legal costs or may even have exchanged contracts for their new house pending the sale of their current home.

GOLDEN RULES fOR GAZUNDERING - STEELBEE.COM

1) You must have a fall back position and be prepared to lose the deal. Ideal if you like three houses but can't decide which to go for. Gazunder all three and see what happens. Just make sure that all three are using different agents! Do not worry about offending agents by pulling out of deals, they just want their commission.

2) Stronger position of Buyer = More money off (whether market related, or personal circumstances).

3) Try and establish by hook or crook from the vendor of their agent the lowest price acceptable to them. Do not ask directly as first but try and work it out.

4) Maintain good relations at all time with the vendor and their agent.If they like you they are more likely to believe you.

5) Apologise for your change of offer but explain that due to your recent findings you have no choice.

How do I avoid gazundering?- Difficult in a free market environment which allows it to happen. At a minimum extensively pre-qualify your prospects and make it clear from the very start that you will not reduce the price any lower than the advertised asking price. Have back up purchasers and keep them sweet while you move towards exchange. Leave the For Sale sign up but show the property is under offer. Your agent has a duty to tell you about offers received. You never know you may even get a chance to gazump a gazunderer. What a result that would be. Read More at www.steelbee.com