Mowing Lawns, Cash, and Syndicates

Before I had all my right ankle problems I used to like to mow my lawn. Goal driven guys like me like things like mowing lawns. It has something to do being able to track progress. Every time you get to the end of a row, you turn around and you can see the wonderful progress you just made. You can also see pretty clearly how much more you have to do and how well you have done. Most things we do every day we have to wait a while to see results. Not so with lawn mowing, the results are immediate. There is also pride involved, a certain amount of skill, and sometimes mowing a lawn can cater to the creative side of you; you mow at an angle, or in a circle. (I don’t like things like fertilizing a lawn, by the way. I can’t tell where I just fertilized. I get to the end of a row, turn around and I have to concentrate on the task at hand. I also have to wait a week or so for my skipped spots to show up).

What I really liked about lawn mowing my own lawn is that it really didn’t take concentration and the weekly task gave me time to think and to plan about other things; like real estate investing or what to write in a weekly email. The noise of the mower drowned out the rest of the world and I could absorb myself in a particular problem.

Yesterday I took a three hour kayak trip. I just discovered my new “lawn mowing”.

I can take my removable ankle cast off, sit down at water level and start paddling. Paddling does not take any concentration so I have time to think and plan. But instead or the immediate rewards of a job done well, I get to bask in the beauty of South West Florida. I discovered a small wildlife paradise directly across the river from my house. Manatees, dolphins, sting rays, all sort sorts of birds, and the beauty, the peace and the calm that come with the natural beauty was inspiring.

I kayaked across the river from Gail and I to a park just down river from where Paradise Preserve will be located. I don’t know if whoever named Paradise preserve ever took a kayak into the mangroves like I did yesterday, but I am betting he did.

I get asked some version of this question often, "Where should I put my money now", this is often followed by, "This is a good time to have cash".

Yes, indeed this is a good time to have cash. But not if you just sit on it… By the way, last time I heard the comment that this is a good time to have cash I heard someone else say (who probably never had any cash) say heck, it's always a good time to have cash. That indeed is not true. If real estate is going up 45% a year and the stock market is racing upwards in value every month and you have cash invested at 5% you’d feel like the only one without a date at the prom – left out!

It's a good time to have cash to buy property now for several reasons. Having cash allows you to BE a buyer in this buyers market and this is a wonderful thing because here are so many opportunites. Cash gives you a stronger bargaining position in this buyers market. In the residential market there are bargains. No, prices are not dropping precipitously – at least not in new construction, but there are some opportunities to get extra incentives.

One of the incetives that may be available is LEASEBACKS. I suggest that you look at leasebacks again. We can negotiate for you to buy the condo of your dreams and then get the developer to pay your mortgage payments for a year by leasing the condo back from you. By the way, these lease backs are income property and qualify for Starker 1031 exchanges. All the basic rules still apply to leasebacks like they do to a normal purchase, you must buy the right condo in the right location and at the right prices, but the lease back will give you a year for the market to settle down and give you time to sell your existing home. A lease back purchase will also give you the opportunity to take investment profit from other income property and shelter it from taxes E mail me if you are looking for leaseback opportunities or just want to chat about them (By the way – in many cases the developer or seller has no intention of actually USING the leaseback. You can get immediate use yourself).

It is also a good time to have cash because there some superb long term investments locally in underperforming income properties that highly leveraged buyers cannot capitalize on. In fact I have been thinking about getting a few folks together and buying some of these properties. In today's market, a performing income property is one that has long term leases, and the net income will pay a capitalization rate above, say, 8%. This gives the bank the comfort to lend you the funds you need to buy the property; you will have cash to pay off the debt service, and the security that the cash will be coming for at least the next five years.

There are properties out there, however, that are being sold at well below replacement costs, but the rents are below market, and the leases are short term. Banks are funny about wanting to know how you are going to pay back the money you borrow. They will not loan on these properties. In order to buy them you would have to demonstrate the ability to pay back the debt and in fact probably put 40 to 50% down.

But if you are able to buy that property, and at well below replacement cost and hold for the balance of the leases that are below market and then release the building at market rates – this will be a superior investment. There are some investors doing that through syndicates of some sort. A group of wealthy and smart investors get a knowledgeable sponsor and combine cash to get into investment property through a TIC (Tenancy in Common) fund, an LLC, or some other entity.

Keep in mind I do not have a specific income property in mind, and I am not soliciting investors at this time. I would like however to gauge the interest of my subscribers and current clients. If you are interested in learning more about this I would have to get a questionnaire to you and we would have to discuss this in person. I may put a group together or may know of another group we can get into in the future. EMAIL ME with your contact information and I will contact you privately.

I “ran the traps” this week and visited some of the new developments in town. I am preparing for Windsor Lake Estates the 126 half acre lot project on Burnt Store Road we are handling with Endeavor and reviewing the competition. We have not finalized the three preferred builders yet but are reserving lake front lots now for end users.

I went to Verandah and River Hall. Both projects are very quiet now and seem to be kind of out of the way. I was, however, impressed with some of the pricing that is available at River Hall on their town home projects. They have not lowered their pricing, by the way, but you can now buy with just ten percent down in stead of twenty. To review some of the new communities in town CLICK HERE.

Incidentally, I do not see a general lowering of prices in new construction. I do see some incentives like upgrades, lower down payments, and removal of investor restrictions. I do sense that this is the time to ignore ask prices and make offers.

My favorite projects are doing well so must be priced right and be in the right locations. We have sold a few Grand Isle Condos in the last month and three more at The Citadel. More than ten homes have closed at The Paramount recently and there may be some leasebacks in this premium waterfront property. I have not sold my home on Gasparilla but was made a rental offer. ( Virtual Tour here ) My personal preference was not to rent but to keep it in showing shape. Some of you with vacant condos may be thinking of renting. This is a personal preference. If you are going to rent I would plan on doing it for three years, not just short term. We can help you with rentals as well. Email Kathy@ma-realty.com