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Jimmy Dorsey, Principal Broker M-Realty, Residential Specialist, Accredited Buyers Representative and native Oregonian. Loan Calculator
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America’s Loss Leader… Our Housing Market
Just a personal comment on the administrations incentive programs through the stimulus. So if you bought a house as a first time home buyer in 2008 you get $7500 as a tax credit for your 2008 taxes but this a loan. Here are the terms: 0% interest for 15 years payable $500 per year. But you get up to $8000 for those who buy between Jan 1st and November 31st 2009 and it is not a loan it is like a cash back incentive. Why does our government of the United States of America sounding more and more like a car manufacturer out of Detroit? When are they going to start doing commercials with that guy with the deep voice? “This year you are going to get 8000 cash back on a mid sized new or used house. msrp 22258331 may not be available in all countries, subject to worldwide inflation…
I think most of us agree this is a joke. But you know what the key to telling a joke is right? Timing, and I can’t tell if this is funny or not.
Buy a house in Portland Oregon for a Free $8000
If you are a first time homebuyer between Jan 1st and November 31st 2009, Uncle Sam is giving up to $8000 no strings attached FREE tax credit. You do not have to pay it back, this is not a loan. Bottom line, if you don’t own, this is your year. Prices in Portland Oregon are low, interest rates are super low and the after tax, before expense and debt service return on your investment is at least $8000 in your first year. Want to understand the stimulus a little better? Stay tuned for my next blog…
Another ripper, Calvin Wrigglesworth
First time homebuyers: follow the pain
Wow we are seeing some astoundingly bad numbers for sold homes in Portland in the last four weeks. Most homes selling are bank short sales and troubled sellers. So following the pain is necessary to getting a good deal. What is a good deal? No one really knows as this point but I guarantee there are similar properties selling for vastly different prices out there. As I have written in my previous blog, “The Glass is Half Full,” you must look at holding period and cash flow OR holding period and exit strategy for those buying owner occupied residential.
It is so hard for us to throw appreciation out of our way of thinking but it must be done. The housing stimulus is not going to help housing. It helps our economy. We will see a slower period of depreciation due to the government interference but not a stop to the cycle. We are on a downward trend which will continue and then stay relatively flat for a long period of time. So even if we were at bottom it is not time to snatch up properties for the short term gain, there won’t be one.
If a property makes sense today and if it looks good for your financial situation and meets your housing needs or if you can see a return on investment despite appreciation then this is the time to act. If not let the banks know you will keep renting! Tell them you would rather spend the extra money on stimulating the economy than propping up home prices. Housing has been largely unaffordable for a few years now especially on the west coast and I as a Realtor would like to see homes cheaper.
I may be in the minority but I believe that home prices falling is good for my business. I am a fan of spending the bulk of our incomes on more worthy pursuits than just home ownership, perhaps buying rental properties or better yet funding missionaries. It is not the end all be all to be a homeowner and it is still patriotic to rent. Have this attitude as we negotiate your home purchase and you will fare far better.
The glass is half full…There is still money in Real Estate
I was watching a fascinating program on NBC the other night about the housing crisis. “I saw pizza delivery drivers making $20,000 a month selling home loans,” said one Bank CEO. OK I saw everyone making money in real estate and you didn’t even need to buy a Carlton Sheets program to do it. Whether you had a subprime credit score, used your home as an ATM or were a responsible homeowner buying a vacation home or first rental everyone was making money. And Newsflash *** There is still money to be made in Real Estate but you need a major paradigm shift to do it. You must get the idea of appreciation out of your head and see if the investment makes sense NOW.
Holding period and cash flow are two concepts you must wrap your mind around. We are not going to be out of the woods when it comes to appreciation anytime soon. Many scholars and financial experts agree that this crisis is going to take some time to sort out. So when looking at a property you need to figure out whether it can be rented out NOW for more than you will pay on the current mortgage. Vacancy rates (the percentage of unrented homes in a given market) are on the rise in many areas including the Portland area. We were enjoying a 3.3% vacancy rate for the last year and now it is climbing to 3.7%. With the current unemployment we can expect those rates to keep moving up in the next few quarters. It is important to find out what rents are going for and pricing your units competitively. Housingmaps.com is a great tool for finding out what is currently being offered in your area. This website takes all the rentals available on craigslist and maps them.
Portland Oregon has an extremely high livability rating. I watched the movie Coraline the other day with my Daughter. It was about a family who relocated to Portland. Many people still are moving here and we are seeing the relocation sector of the market as very fruitful. We have a fantastic quality of living and we are still the best priced city on the left coast. We have a history of trailing the country by a couple of years as far as financial trends but we are still one of the areas that is holding value better than most.
Email me for a spreadsheet on what a comprehensive study looks like for evaluating an investment property. You must compare apples with apples. Where is your money currently sitting? How much is it making you? After all expenses and vacancy shortfalls where will you likely end up for a return on investment in two years? four years? and can you hold it eight years? When should you sell? In every investment their is a bell curve on when the best time it is to let the property go. Because of capital tax gains and depreciation of your assets this can be quite scientific and exact barring a few variables such as appreciation. It is safe to say that the old rule of thumb in commercial real estate applies. You never bank on appreciation. Just set that number to 0.
Multifamily units are some of the most solid investments anywhere. I own a few and so can you… all you need is a good broker… and now a good credit score and some down payment money but there is still money to be made here. You just need to figure out where the open doors are.
Private Lessons
Wow. This girl is a fast learner. 1st day on a snowboard and she was ripping after 3 hours with me. What is her secret? I think it is the many years of softball instruction. Can you say “COACHABLE”
Pacific University Lessons Friday Night
Pacific University Lessons at Meadows Friday February 7th, 2009
It was nice to ride with you guys… this month of lessons should be a lot of fun. Now, twist that board ladies! See you on Friday.
Windows 7 understands me and my real estate business
The all new HP tx2z touchscreen tablet pc just came out and I bought it at Costco for around $997, well that is the base price anyway. Then I downloaded the Beta Windows 7 on it which works seamlessly with this machine! Imagine showing property with your tablet accessible for your client to browse the listings as you drive down the street with touch screen applications like idxblogger! Imagine having all of your buyers documents individually separated in your taskpane easily signable on your tablet and emailable by a few simple touches to your broker, the coop broker, your buyer client and the lender through pdxhomequest.com
The toolbar is very touch friendly with large icons that have a preview pane that you can actually “pre-view” before launching. Everything works fast…super fast. Boot and shutdown is 1/8 of the time of vista. The screen saves energy like a cell phone by dimming when you are not working on it, turning it off when you are not using it but coming back on with just a simple touch to the screen.
Intuitive Microsoft, isn’t that a anomaly? Even when you put a DVD in it just plays without any annoying windows, it just starts to spin and plays. Windows 7 actually knows me. It has learned my extremely poor handwriting and deciphers it whenever I am in tablet mode. How can I go back to any other operating system, vista doesn’t know me?
Now brokers don’t run out and download this Beta onto your computer as their is no tecnical support, no applications and no devices that are available for Windows 7 yet, but take my word for it this is a exciting platform for what we do as an industry. The future is almost here to see all of your time saving programs completely supported by the operating system.
1/10/2009 10:00 Snowboard Lessons at Mt. Hood Meadows
TIA STUART
STEVE DECARTERET
JOSIE
CONOR MCCARTY
CLAIRE CHRIS
AUTUMN COX
ALEX AURSLAND
What is my real estate brokerage worth?
Just like sellers of property, the inquiry of what something is valued at doesn’t mean the owner wants to sell. And as with property there are different ways of determining value as in all transactions the bottom line always comes down to, “what a buyer is willing to buy for and a seller…” you know the script.
So I will shape this blog from a brokerage standpoint that we would be purchasing your business. As with all business acquisitions the starting point would start with a NDA or non-disclosure addendum or confidentiality agreement. This protects both parties from confidentiality breaches and keeps the discussion between parties. Businesses on the move do not want others to know their plays. There needs to be an effective and enforceable contract to prevent leakage of information.
Next thing the seller needs to have to determine value is the financials. Profit and Loss statements but more importantly in Real Estate businesses a core tiling of independent brokers with their production over the last three years.
What would a buyer want to see from those financials? Of course a profit is preferable but there are other factors that are at play. Market share, web presence, key players, location and relationships can be determining factors. In the last year I have met with over thirty broker managers to find out what their motivation is for selling. In most cases it is amazing to me that they do not have basic accounting for their real estate brokerages. Maybe the numbers get lost in the fact that a lot of broker managers use their real estate business as a market presence tool more than a money maker. That is the truth with a lot of Realtors that experience some success with a team and it seems to grow into a brokerage with the smooth talking from the corporate rep. from their current real estate company. I was also astounded to find out how many had been suckered into management and really were disappointed with the results and deflated with their expectations despite all the promises of support they would receive running a franchise.
Speaking of franchises, read the contract carefully sellers, you may not be able to sell or if you are able to sell you may have to offer it back to the parent company first. Many franchise agreements have termination and sale clauses to prevent mergers and acquisitions by other franchises. That is one reason M-Realty continues to be an independent and does not franchise at this point.
The best numbers you can provide a suitor would be your Company Dollar as a potential buyer may have avenues that can improve the bottom line like different locations, office equipment, systems and personnel already on payroll. Overhead plays a huge part in the ultimate worth of a company. The end of a lease or the trimming of employees before a sale can greatly effect your return on investment.
Selling your business can be a change of culture or the new parent company could decide that they do not want to mess with the current management which ultimately decides the culture for a company.
OK, so what are we talking here? Brass tax, companies are worth a certain dollar amount per agent. What that amounts to is effected by the number of transactions each agent completes. Take an office of 20 employees. You have 5 top producing, multimillion dollar platinum million gold club overachievers, 6 balanced good producers, 3 part timers at the national average of 2 deals a year and 6 license hangers who have not done a deal in the last six months. First we core tile into these four sections. Put a simple equation in place for what the production of each agent is in the next three years. You would expect that a company is going to be worth 2 ½ times the median Actual Net Operating Income and the projected Net Operating Income. 10-25% could be paid up front with the rest on an Earn Out basis. The earn out depends completely on the ability of the broker manager/previous owner to keep those employees on that were there when the business was sold.
I have found that the number per agent in this declining market is close to $2500-$3500 per agent on average. This is a low number considering many companies spend $1000 on the average recruit. The difference here is that the acquired agents historically will outperform your recruited agents. So hence… they cost more.
So you want to sell your business? You need to know your numbers and figure out who will stay. They usually will only stay if you stay as their owner and manager. You are what ultimately either attracted them or retained them to the company in the first place. You absence may cut them loose. So plan on staying with the new company for the next few years until you collect all your dough.
So when is the best time to sell? If you are planning your retirement start talking with a company you see a future in five years from your retirement date. This is not an easy business to exit. BEWARE: some never do.
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