What’s really going on in Fort Myers Real Estate?
On Friday night Gail and I met my brother Bill and his wife Dot for cocktails and same snacks at one of Fort Myers newest hot spots; Char. Steven Hyde has done a wonderful job with the old Denny’s attached to the Holiday Inn on route 41 near downtown Fort Myers. There was an interesting mix of young and old, from Fort Old Times like architect Wiley Parker and his wife Betty, and restaurateur Gary Gyarmathy, to a bevy of young professionals and new comers.
Speaking of newcomers, relative newcomer Phil Hugh, who has taken over that Holiday Inn and has just broken ground for the new Hotel Indigo, has his pulse on the downtown market. To quote Phil, “If you are not betting on Downtown Fort Myers, what are you betting on?” Yes, we all know that many of the new condos at High Point and Beau Rivage are “dark” (bought by long distance owners/investors), but make no mistake, they will get filled, and when they do, downtown will be ready for their occupants. After leaving Char we headed to The Bar Association on Hendry and then over to H2 on Bay. All three of the places we visited Friday night are welcome additions to a downtown scene that is certain to improve as the approximately 3000 condos get built and inhabited.
Bill and I chatted about the local real estate market and he commented to me, “There will never be a better time to buy real estate locally than today.” Implying that all this growth, streetscaping and improvements herald great things. I agree. Today we have a unique combination of low interest rates, high inventory, and a down climate that is making sellers very willing to deal. Denny Grimes wrote a good article in today’s Fort Myers News Press (Click here). In it, he states that the market does not “read” what the pundits write, it just reacts. (It does not matter what we say – good or bad) He predicts that we have a long recovery time ahead; but he is talking about the recovery of a market in general – the return of lower inventories, shorter “Days On Market” (DOM) for resale homes, etc. But I am sure Denny would agree with me that this market is great now – if only for the buyers.
There is a statistic that is commonly bantered about – and generally it refers to how much inventory we have in unsold homes. Make no mistake, we have an over supply of homes for sale, I agree; but I submit that is very difficult to quantify this inventory or even say how long this inventory will last. Furthermore it is misleading to think that any estimates are accurate or even indicative of when things will turn around.
It is wrong for us to take the listings that are sold in one month and divide that into the total number of homes on the MLS and say there are so many months of inventory.
Here are my problems with doing that:
1. We cannot get an accurate count of the homes on the market. Which MLS do we use? Are all homes on the MLS? Are they on more that one MLS at the same time? Are developers units counted?
2. Home many vacant homes are on the market? The number of occupied homes versus the vacant “investor” homes is a critical number. When an occupied home is sold there is a good chance there will be a chain reaction that will translate into a series of sales. When a vacant home is sold that is the end of the chain (perhaps).
3. There is “normal” number of homes, in any market and at any given time, that are up for resale. The number today is three times what it was a year ago; does that mean that if there are 12,000 homes up for sale now that a “normal market” has 4000 re-sales on the market? If so than our time to absorb the inventory is cut by one third. (Our “over inventory” situation is less than reported)
4. We are, arguably, in a seasonal market. The number of sales changes from season. This makes any absorption taking difficult at best.
You, dear reader, are not “THE MARKET”. You are looking for one home, one investment, one opportunity. Forget “THE MARKET” and look for the best opportunity you can find, with the best location, and the best price. Make a decision that ignores “THE MARKET” and do what is right for your plan.
Sales are slow in Fort Myers, there is no doubt. There is consensus among the agents and developers that buyers have no sense of urgency. The buyers figure they can come back next year and the worst case is that the home they wanted will still be available even at a lower price. But I am reminded of the pricing strategy I used to see at Goodwill. Goodwill prices an item the day it hits the shelf and then lowers the price every week until it is sold. When you see an item at Goodwill you might consider purchasing, you have a choice: buy it at today’s price or gamble that no one else will buy the item and you can come back next week and try to buy it at a lower price.
Today’s real estate buyers have an overabundance of choices. They can gamble and wait until next year and hope their first choice is still available. OR they can get their first choice now. Today you CAN get the best location at the best price. It just may not be there tomorrow.
On a Commercial Note: Anecdotal reports from Las Vegas at the Shopping Center show were all very positive. The large retailers and retail developers are betting on the rooftops being filled near their new developments and the retailers are filling up the new malls. Locally, The Pine Island Road corridor is seeing the same phenomenon. Our commercial teams are busy with new malls, new development opportunities and requests for retail space. This is a good sign. While there appears to be overbuilding in the North Naples/Estero/Bonita market, these retail slots are filling as well – so the pundits may be wrong about the overbuilding.
In the commercial office and industrial lease market we are seeing lease renewals coming up at greatly increased prices. This is because the new insurance and tax bills for the buildings are forcing landlords to raise rates to keep up with these higher costs. But landlords also see that new building that are being offered that they compete with are as much as 30% higher in rental rates than existing buildings. This spells opportunity for investors who are willing to wait out the lower lease rates on existing buildings. They can buy at a low cap rate and turn the property into a higher cap rate investment as leases come up. This is a strategy that we support in today’s market. Let me give you an example. (Explanation of Cap Rates) We have available now a two tenant industrial property. Rents are below market. It is being offered at a 7% cap rate today, but this building has great upside, and since the rents are low any vacancy will bode well for an increased cap rate once the tenant is replaced. It is also a true triple net which means all repairs and increases in taxes and insurance costs are borne by the tenants. Furthermore this property has leases terms that banks will loan on. (Not too short)
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Monday, June 18, 2007
Real Estate Auctions, Short Sales, High Point, North Star
Real Estate Auctions, Short Sales, Highpoint, Northstar....
Sometimes I wake up about 4:30 on the morning I am going to write my e-letter and I lay in bed about for about an hour - brain dead. I can’t come up with a thought worth sharing. This morning I had the opposite problem – so many thoughts and not enough order to them. This normally happens when I get excited about the market.
I am excited about the market.
There are opportunities all around me. Sometime I feel like a kid in a candy store.
First let me tell those of you with homes that you can’t sell, or condos that you must close on; that I understand you do not feel my enthusiasm. I understand why, and I have been there. My advice to you is this: look at the big, long term picture. Don’t continue to kid yourself or your friends. Strip the problem down and examine the alternatives.
You are not in an exclusive club. There are many members of the “I bought too late, or too high, or too much - club” Assess your situation, look at the worst case scenarios, and then make an exit plan. Look forward and not back. Okay, now you have to recover.
I keep saying this is the time to buy – buy YOU have to sell, and then once you sell, you have to recover financially. You, like this market, will recover.
No one alternative is good for everyone. Let me talk about two – The short sale and the auction.
THE SHORT SALE
A short sale happens when a seller sells below his cost. The term in our industry has gown to describe a sale that is indeed below what is owed to the bank. The existing lender agrees to accept a lesser amount due on their secured lien in order to release the collateral from the note. In essence, it allows the seller to establish an asking price at less than what they owe their lender.
A class that was given by Fidelity National Title recently provided us with a typical process for a short sale, as follows:
Step 1: Hook up with a competent and trustworthy real estate brokerage that can help you identify if you are a candidate for a short sales request. Market America Realty and Investments, Inc. can order listing packets from our title company that will provide information on a specific property, which includes the deed, copies of the current mortgages, lien information.
Step 2: Order a payoff statement from existing lender and determine if there is a pre-payment penalty.
Step 3: Work with your agent and title company in determining preliminary closing figures.
Step 4: Contact existing lender’s loss mitigation department to determine their requirements to formally request a short sale.
Step 5: Owner, Title Company, and real estate agent work with lender on satisfying lender’s requirements which could include a Broker Price opinion, copy of full appraisal, copy of estimated HUD, etc.
Step 6: Await lender’s approval or denial of short sale request.
Step 7: Inform all parties of approval or denial and any special requirements made by existing lender, such as renegotiating sales price, removal of contingencies, and any time specific limits.
Step 8: List and sell the property. (A typical listing may have the clause after the price “Bank approval required”)
If you want more details on short sales, please call us.
If you are looking to buy, we know of short sale opportunities. . They CAN BE wonderful opportunities and are typically great values. If you’re looking for a great deal, call us. We know of short sale properties in our area
AUCTIONS
Auctions are not for everyone, and they have been more common lately. The sad news is, for the seller anyway, they work better in a good market. The frenzy that some of the auctions create can actually achieve higher price points that a normal advertised deal. Auctioneers work closely with real estate brokers such as Market America to make sure that highest possible price is achieved and the pre-marketing is done properly. There are good auctions and bad. The best are well organized, well promoted, and offer absolute bids. (No reserves)
Last week out team went to an auction by one of the best. Fisher Auctions had a sale at San Simeon. If you missed it you missed a show.
There was no elevator music playing during this well orchestrated auction. Upbeat, anxiety causing, and high energy music rocked out during the Levitt and Sons developer close out with tunes ranging from Lynyrd Skynyrd, Starship, AC/DC, B-52’s, Fergy, and Jimmy Buffet at the Crowne Plaza Hotel. A crowd gathered outside as end users, investors, fools, and nosy folks tried to watch. Learn and buy.. Bidders made their way to an open seat with their bidder packet or to the beverage cart to cash in their free coupons for an adult beverage to loosen up a bit.
The community is called The Townhomes of San Simeon. The auction was well engineered and professionally executed by Fisher Auction Co. Inc. and they came in with a full team from Pompano Beach.
The Auctioneer, after reviewing the bidding rules, asked Rusty (the DJ) to lower the music. “Do I hear”… “The time to buy is now”… “Don’t let this one go”… the auctioneer got the crowd going as 7 people from Fisher Auction panned the room, pointing, screaming out, pressuring some, or asking for back up bidders.
The Market America team represented clients at this auction – on the buying side. This type of buying needs experience in bidding, and many bidders require the guidance that only preparation and experience can afford., experienced bidders know what condos would go first and then how many more would be released after the first set were gone, what to bid, and what condos to bid on. Our team will do a survey of the project – which homes have the upgrades, the good locations, etc. To do well as a bidder in auction, preparation is everything..
Current prices at San Simeon range from the $240’s to mid $300’s. Floor Plans range from 2 bedrooom – 2.5 baths and 3 bedrooms 2.5 baths all with two-car garages and square footages (under air) from 1,395-1,779.
There were 50+/- Luxury Townhomes, 20 offered at absolute, which means 20 condos would sell to the highest bidder, regardless of price.
The Maintenance Fees are $310 a month and includes hazard insurance, entry gated community, basic cable TV, monitoring of security alarm system, lawn and shrub care and automatic sprinkler system. Maintenance of all common areas, recreations facilities, pool, spa and tot lot. There are also builder warranties. Examples of the nights bidding can be found at the end of this newsletter.
What’s the catch? Yes, there are some. A Buyer’s Premium of 10% is added to the “Successful Bid” or the highest bid. Also, you had to bring $5,000 deposit in the form of cash, money order, a certified or cashier’s check at the time and place of the Auction and then that amount had to be brought up to 10% of the purchase price the day of the auction if you had bid on a town home.
What do you do if you want to SELL at an auction? You note these prices were well below the original ask price. There are quite a few auction companies that we have been working with that will work with us to put your home in an auction venue. We would first prefer to sit down and examine all of your options. An auction with a reserve is not as well attended as an absolute auction, and there are costs incurred that must be borne by you if the home does not sell when you put it out with a reserve. Different auction companies have different requirements.
I do not believe that an auction “sets a lower bar” for the market and drags it down. These buyers were, for the most part, end users. Auctions create interest, excitement, and, at the end of the day, cash for the seller.
I am receiving calls from buyers at Northstar, Oasis, and other waterfront condo communities about their alternatives. Some want to list with us once they close, some want to examine their hold/sell/rent. Others want to sell condos they have already closed on or are looking for tenants to help defray their carrying costs.
We are anxious to help and are interested in hearing from you if you have condos you want us to sell. We want your listings. Good condos, priced right, are selling. Our project at Parkside is a good example.
Many of the early buyers at Highpoint, Oasis, and Northstar bought at prices that just cannot be duplicated today. I know we could not build Parkside for what we are selling those condos for either. If you choose to hold long term you eventually will do well, but you will have to examine your carrying costs.
When ever you can buy below replacement costs – as long as the location is good – like waterfront – you will not lose; it is just a matter of time and market absorption.
Sellers may not be able to sell at the price they paid, because of the sheer number that will be available, but it does mean that condos coming out of the ground from now on will have to be sold at much higher prices. The big unanswered question is timing.
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Current Asking Price
Auction Price
(*add 10% Buyer’s Premium for FINAL price)
Townhome
Notes
Base: $282,400
Lot Premium: $ 30,000
Upgrades: $34,315
Total $346,715
$248,000
Casa Grande –
3/2.5 Lot – 151
1,779 SF under air
1st bidding– these were considered the fools.
Base: $282,400
Lot Premium: $ 7,000
Upgrades: $27,860
Total $317,260
$195,000
Casa Grande –
3/2.5 Lot – 084
1,779 SF under air
2nd bidding – prices lowered.
Three sold for $180k
Two for $150k
One for $145k
Base: $258,400
Lot Premium: $ 25,000
Upgrades: $10,015
Total $293,415
$132,500
Casa del Sol -
3/2.5 Lot -149
1,614 SF under air
On lake
Our client and the lowest price for the 3 bedrooms! About 4 sold for $135,000, Others sold for $155k, $140k
Base: $236,900
Lot Premium: $ 20,000
Upgrades: $ 26,815
Total $283,715
$127,500
Casa del Mar –
2/2.5 Lot 162
1,395 SF under air
About 7 sold for this price
Sometimes I wake up about 4:30 on the morning I am going to write my e-letter and I lay in bed about for about an hour - brain dead. I can’t come up with a thought worth sharing. This morning I had the opposite problem – so many thoughts and not enough order to them. This normally happens when I get excited about the market.
I am excited about the market.
There are opportunities all around me. Sometime I feel like a kid in a candy store.
First let me tell those of you with homes that you can’t sell, or condos that you must close on; that I understand you do not feel my enthusiasm. I understand why, and I have been there. My advice to you is this: look at the big, long term picture. Don’t continue to kid yourself or your friends. Strip the problem down and examine the alternatives.
You are not in an exclusive club. There are many members of the “I bought too late, or too high, or too much - club” Assess your situation, look at the worst case scenarios, and then make an exit plan. Look forward and not back. Okay, now you have to recover.
I keep saying this is the time to buy – buy YOU have to sell, and then once you sell, you have to recover financially. You, like this market, will recover.
No one alternative is good for everyone. Let me talk about two – The short sale and the auction.
THE SHORT SALE
A short sale happens when a seller sells below his cost. The term in our industry has gown to describe a sale that is indeed below what is owed to the bank. The existing lender agrees to accept a lesser amount due on their secured lien in order to release the collateral from the note. In essence, it allows the seller to establish an asking price at less than what they owe their lender.
A class that was given by Fidelity National Title recently provided us with a typical process for a short sale, as follows:
Step 1: Hook up with a competent and trustworthy real estate brokerage that can help you identify if you are a candidate for a short sales request. Market America Realty and Investments, Inc. can order listing packets from our title company that will provide information on a specific property, which includes the deed, copies of the current mortgages, lien information.
Step 2: Order a payoff statement from existing lender and determine if there is a pre-payment penalty.
Step 3: Work with your agent and title company in determining preliminary closing figures.
Step 4: Contact existing lender’s loss mitigation department to determine their requirements to formally request a short sale.
Step 5: Owner, Title Company, and real estate agent work with lender on satisfying lender’s requirements which could include a Broker Price opinion, copy of full appraisal, copy of estimated HUD, etc.
Step 6: Await lender’s approval or denial of short sale request.
Step 7: Inform all parties of approval or denial and any special requirements made by existing lender, such as renegotiating sales price, removal of contingencies, and any time specific limits.
Step 8: List and sell the property. (A typical listing may have the clause after the price “Bank approval required”)
If you want more details on short sales, please call us.
If you are looking to buy, we know of short sale opportunities. . They CAN BE wonderful opportunities and are typically great values. If you’re looking for a great deal, call us. We know of short sale properties in our area
AUCTIONS
Auctions are not for everyone, and they have been more common lately. The sad news is, for the seller anyway, they work better in a good market. The frenzy that some of the auctions create can actually achieve higher price points that a normal advertised deal. Auctioneers work closely with real estate brokers such as Market America to make sure that highest possible price is achieved and the pre-marketing is done properly. There are good auctions and bad. The best are well organized, well promoted, and offer absolute bids. (No reserves)
Last week out team went to an auction by one of the best. Fisher Auctions had a sale at San Simeon. If you missed it you missed a show.
There was no elevator music playing during this well orchestrated auction. Upbeat, anxiety causing, and high energy music rocked out during the Levitt and Sons developer close out with tunes ranging from Lynyrd Skynyrd, Starship, AC/DC, B-52’s, Fergy, and Jimmy Buffet at the Crowne Plaza Hotel. A crowd gathered outside as end users, investors, fools, and nosy folks tried to watch. Learn and buy.. Bidders made their way to an open seat with their bidder packet or to the beverage cart to cash in their free coupons for an adult beverage to loosen up a bit.
The community is called The Townhomes of San Simeon. The auction was well engineered and professionally executed by Fisher Auction Co. Inc. and they came in with a full team from Pompano Beach.
The Auctioneer, after reviewing the bidding rules, asked Rusty (the DJ) to lower the music. “Do I hear”… “The time to buy is now”… “Don’t let this one go”… the auctioneer got the crowd going as 7 people from Fisher Auction panned the room, pointing, screaming out, pressuring some, or asking for back up bidders.
The Market America team represented clients at this auction – on the buying side. This type of buying needs experience in bidding, and many bidders require the guidance that only preparation and experience can afford., experienced bidders know what condos would go first and then how many more would be released after the first set were gone, what to bid, and what condos to bid on. Our team will do a survey of the project – which homes have the upgrades, the good locations, etc. To do well as a bidder in auction, preparation is everything..
Current prices at San Simeon range from the $240’s to mid $300’s. Floor Plans range from 2 bedrooom – 2.5 baths and 3 bedrooms 2.5 baths all with two-car garages and square footages (under air) from 1,395-1,779.
There were 50+/- Luxury Townhomes, 20 offered at absolute, which means 20 condos would sell to the highest bidder, regardless of price.
The Maintenance Fees are $310 a month and includes hazard insurance, entry gated community, basic cable TV, monitoring of security alarm system, lawn and shrub care and automatic sprinkler system. Maintenance of all common areas, recreations facilities, pool, spa and tot lot. There are also builder warranties. Examples of the nights bidding can be found at the end of this newsletter.
What’s the catch? Yes, there are some. A Buyer’s Premium of 10% is added to the “Successful Bid” or the highest bid. Also, you had to bring $5,000 deposit in the form of cash, money order, a certified or cashier’s check at the time and place of the Auction and then that amount had to be brought up to 10% of the purchase price the day of the auction if you had bid on a town home.
What do you do if you want to SELL at an auction? You note these prices were well below the original ask price. There are quite a few auction companies that we have been working with that will work with us to put your home in an auction venue. We would first prefer to sit down and examine all of your options. An auction with a reserve is not as well attended as an absolute auction, and there are costs incurred that must be borne by you if the home does not sell when you put it out with a reserve. Different auction companies have different requirements.
I do not believe that an auction “sets a lower bar” for the market and drags it down. These buyers were, for the most part, end users. Auctions create interest, excitement, and, at the end of the day, cash for the seller.
I am receiving calls from buyers at Northstar, Oasis, and other waterfront condo communities about their alternatives. Some want to list with us once they close, some want to examine their hold/sell/rent. Others want to sell condos they have already closed on or are looking for tenants to help defray their carrying costs.
We are anxious to help and are interested in hearing from you if you have condos you want us to sell. We want your listings. Good condos, priced right, are selling. Our project at Parkside is a good example.
Many of the early buyers at Highpoint, Oasis, and Northstar bought at prices that just cannot be duplicated today. I know we could not build Parkside for what we are selling those condos for either. If you choose to hold long term you eventually will do well, but you will have to examine your carrying costs.
When ever you can buy below replacement costs – as long as the location is good – like waterfront – you will not lose; it is just a matter of time and market absorption.
Sellers may not be able to sell at the price they paid, because of the sheer number that will be available, but it does mean that condos coming out of the ground from now on will have to be sold at much higher prices. The big unanswered question is timing.
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Current Asking Price
Auction Price
(*add 10% Buyer’s Premium for FINAL price)
Townhome
Notes
Base: $282,400
Lot Premium: $ 30,000
Upgrades: $34,315
Total $346,715
$248,000
Casa Grande –
3/2.5 Lot – 151
1,779 SF under air
1st bidding– these were considered the fools.
Base: $282,400
Lot Premium: $ 7,000
Upgrades: $27,860
Total $317,260
$195,000
Casa Grande –
3/2.5 Lot – 084
1,779 SF under air
2nd bidding – prices lowered.
Three sold for $180k
Two for $150k
One for $145k
Base: $258,400
Lot Premium: $ 25,000
Upgrades: $10,015
Total $293,415
$132,500
Casa del Sol -
3/2.5 Lot -149
1,614 SF under air
On lake
Our client and the lowest price for the 3 bedrooms! About 4 sold for $135,000, Others sold for $155k, $140k
Base: $236,900
Lot Premium: $ 20,000
Upgrades: $ 26,815
Total $283,715
$127,500
Casa del Mar –
2/2.5 Lot 162
1,395 SF under air
About 7 sold for this price
Yield Curves, European Buyers, Commercial Growth
Latest Newsletter Volume 5 Number 19 - June 17, 2007
Yield Curves, European Buyers, Commercial Growth
The yield curve has been inverted since late 2004. (For a detailed explanation of yield curves CLICK HERE ) Simply put, an inverted yield curve means that most investors think the economy will be softer in the future. An inverted yield curve occurs when long-term yields fall below short-term yields. Under this abnormal and contradictory situation (that we have had here in the US for almost three years), long-term investors will settle for lower yields now if they think the economy will slow or even decline in the future. An inverted curve may indicate a worsening economic situation in the future. In addition to potentially signaling an economic decline, inverted yield curves also imply that the market believes inflation will remain low. This is because, even if there is a recession, a low bond yield will still be offset by low inflation. However, technical factors, such as a flight to quality or global economic or currency situations, may cause an increase in demand for bonds on the long end of the yield curve, causing long-term rates to fall. ( Current yields here )
“Okay, Gregg, now that the yield curve is no longer inverted, what does that mean to me?” It means that the economy has turned. Money will get more expensive, inflation will return, and most importantly, A SENSE OF URGENCY WILL RETURN TO THE REAL ESTATE MARKET.
To me, a return to a more traditional yield curve is great news for those of us in the real estate business that are accustomed to appreciation (remember that?) It is just one more sign that the market has reached bottom and is getting ready for a return – not to the high flying days, but to normalcy. Buyers will want to buy now – before interest rates rise and prices rise. Pretty simple.
This past week I closed the deal to buy a franchise for Engel and Voelkers and will soon open a residential real estate office on Hendry Street in downtown Fort Myers .
Engel and V ö elkers is one of the largest European based international residential real estate agencies. Their headquarters is in Hamburg Germany . We will be one of the first ten locations in the United States .
Folks, I can't guarantee you that we will be able to bring European buyers here to the United States just because of Engle and Vöelkers, but I can guarantee you that if you don't market internationally in this “Flat World” we live in, you will not get those buyers. Over the past year I have been examining alternative ways to structure the residential part of our business. I believe I have found a solution that will help us and our customers reach out globally and give us a blue print for growth. Right now twenty per cent of the second homes in Florida are sold to foreigners, the Euro and the Pound AND the Canadian currencies are very strong versus the dollar. If there was ever a time to market globally, it is now. Every property we list will get that listing translated into German and Spanish and be posted on E and V global website and promoted in local offices throughout the world. Next month Gail and I leave for Europe to visit brokers and real estate offices to help establish “bridges” to Europe for our properties here in Fort Myers . I also will be adding German and Spanish bilingual agents to the down town office. The transition will take a few months, so stay tuned.
Market America Real Estate and Investments, LLC continues to grow as well. Moving the residential business to downtown will give us more focus commercially and give us additional room for growth. We have just added another CCIM candidate, Cheryl Peppers , to our staff. Along with serving her existing client base and managing an impressive real estate portfolio, Cheryl will concentrate on expanding our Hospitality sector. She brings with her years of financial and institutional consulting experience. Cheryl will also be instrumental in more of our fee based research business so we can capitalize on her analytical and research background for our clients.
Market America Realty and Investments now has a number of hotel sites and a large number of restaurant and bank locations. We are handling the lease out on two shopping centers and are expanding our retail leasing operation under the guidance of Stephen Luta.
The restaurant business is aptly handled by Ron Campbell . Ron has been in the restaurant business for over ten years now and is doing site selection as well as the marketing of our six restaurant sites. Ron consults with a number of investment groups and places their funds into growth and income real estate.
Our office sector continues to grow as well. Eric Lahaie specializes in office sales and leasing and has done a remarkable job with our office projects in Lee County like Brantley, Metro Park , and College Parkway .
Cliff Wiersma is our most experienced CCIM with over twenty years of knowledge in the local market alone. Cliff handles many of our land deals and income property opportunities. Our own in house mentor, Cliff has guided many an investor to the property properties.
All of us emphasize long term relationships and objective based service. After all, we are in the real estate CUSTOMER business, not the real estate AGENT business.
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Yield Curves, European Buyers, Commercial Growth
The yield curve has been inverted since late 2004. (For a detailed explanation of yield curves CLICK HERE ) Simply put, an inverted yield curve means that most investors think the economy will be softer in the future. An inverted yield curve occurs when long-term yields fall below short-term yields. Under this abnormal and contradictory situation (that we have had here in the US for almost three years), long-term investors will settle for lower yields now if they think the economy will slow or even decline in the future. An inverted curve may indicate a worsening economic situation in the future. In addition to potentially signaling an economic decline, inverted yield curves also imply that the market believes inflation will remain low. This is because, even if there is a recession, a low bond yield will still be offset by low inflation. However, technical factors, such as a flight to quality or global economic or currency situations, may cause an increase in demand for bonds on the long end of the yield curve, causing long-term rates to fall. ( Current yields here )
“Okay, Gregg, now that the yield curve is no longer inverted, what does that mean to me?” It means that the economy has turned. Money will get more expensive, inflation will return, and most importantly, A SENSE OF URGENCY WILL RETURN TO THE REAL ESTATE MARKET.
To me, a return to a more traditional yield curve is great news for those of us in the real estate business that are accustomed to appreciation (remember that?) It is just one more sign that the market has reached bottom and is getting ready for a return – not to the high flying days, but to normalcy. Buyers will want to buy now – before interest rates rise and prices rise. Pretty simple.
This past week I closed the deal to buy a franchise for Engel and Voelkers and will soon open a residential real estate office on Hendry Street in downtown Fort Myers .
Engel and V ö elkers is one of the largest European based international residential real estate agencies. Their headquarters is in Hamburg Germany . We will be one of the first ten locations in the United States .
Folks, I can't guarantee you that we will be able to bring European buyers here to the United States just because of Engle and Vöelkers, but I can guarantee you that if you don't market internationally in this “Flat World” we live in, you will not get those buyers. Over the past year I have been examining alternative ways to structure the residential part of our business. I believe I have found a solution that will help us and our customers reach out globally and give us a blue print for growth. Right now twenty per cent of the second homes in Florida are sold to foreigners, the Euro and the Pound AND the Canadian currencies are very strong versus the dollar. If there was ever a time to market globally, it is now. Every property we list will get that listing translated into German and Spanish and be posted on E and V global website and promoted in local offices throughout the world. Next month Gail and I leave for Europe to visit brokers and real estate offices to help establish “bridges” to Europe for our properties here in Fort Myers . I also will be adding German and Spanish bilingual agents to the down town office. The transition will take a few months, so stay tuned.
Market America Real Estate and Investments, LLC continues to grow as well. Moving the residential business to downtown will give us more focus commercially and give us additional room for growth. We have just added another CCIM candidate, Cheryl Peppers , to our staff. Along with serving her existing client base and managing an impressive real estate portfolio, Cheryl will concentrate on expanding our Hospitality sector. She brings with her years of financial and institutional consulting experience. Cheryl will also be instrumental in more of our fee based research business so we can capitalize on her analytical and research background for our clients.
Market America Realty and Investments now has a number of hotel sites and a large number of restaurant and bank locations. We are handling the lease out on two shopping centers and are expanding our retail leasing operation under the guidance of Stephen Luta.
The restaurant business is aptly handled by Ron Campbell . Ron has been in the restaurant business for over ten years now and is doing site selection as well as the marketing of our six restaurant sites. Ron consults with a number of investment groups and places their funds into growth and income real estate.
Our office sector continues to grow as well. Eric Lahaie specializes in office sales and leasing and has done a remarkable job with our office projects in Lee County like Brantley, Metro Park , and College Parkway .
Cliff Wiersma is our most experienced CCIM with over twenty years of knowledge in the local market alone. Cliff handles many of our land deals and income property opportunities. Our own in house mentor, Cliff has guided many an investor to the property properties.
All of us emphasize long term relationships and objective based service. After all, we are in the real estate CUSTOMER business, not the real estate AGENT business.
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Sunday, June 03, 2007
What is the "Right Price" on Commercial Properties
Volume 5 Number 7 March 4, 2007
What is the “Right” Price on Commercial Properties? And other comments...
Last week one of my clients told me that he would like to raise some cash to pay his impending federal tax bill. He owns quite a few properties – most are income producing, some land, some warehouses, some offices - and all very marketable. This gentleman is a very logical seller (and logical buyer, for that matter). He knows what motivates him so he knows what motivates buyers. He keeps detailed records, copies of invoices, leases, and tax records, etc. When he tells me the net operating income, I know the number will be accurate.
We did a full analysis of his portfolio and put two of his commercial income properties on the market.
In the commercial real estate market savvy investors use a capitalization rate (Cap Rate) to do an acid test of a properties worth. Put simply, the cap rate is a measure of the return a property’s net operating income will generate as a percentage of its cost. A property that generates $100,000 worth of income from rents after paying for all expenses to own and manage the property, but before paying debt service would sell at a $1,000,000 price if the cap rate was 10%. ($100,000/10%=$1,000,000) Buyers prospecting for good properties are looking for cap rates of around 7 to 8% these days; some times less from properties with very long leases and with AAA tenants; and sometimes higher CAP rates from older properties with shorter leases. If a property has a net operating income of $100,000 and a buyer is willing to accept, say a 7% CAP rate he would pay $1,428,571 for the property. ($100,000/7%). If on the other hand he needed to get an 8% CAP rate he would pay only $1.250,00; at 9% the price would have to would be $1,111,111. ($100,000/9%)
When I started buying commercial income properties in Fort Myers, I remember telling the agent that I did not buy by cap rate. This was because that most cap rates advertised were bogus.(Unfortunately this is still often the case) The agents or sellers often fail to include many
expenses in their pro-formas (a pro-forma is a reconstructed Profit and Loss statement) that needed to be there – such as reserves for long term replacement items such as driveways and roofs; they may leave off vacancy and credit losses; and they may forget to include management fees. Because of these omissions in many pro-formas, as well as the difficulty and inaccuracy of getting accurate lease and expense information, many commercial buyers will make an offer at a given CAP rate. Then during the due diligence period will make every effort to discover what the true net operating income is. Most commercial offers are contingent on a 30 to 90 day due diligence period during which the buyer will have inspections and audits completed.
The two properties we put on the market can be viewed by clicking here or (www.ma-realty.com) and going to the commercial section.
One reason a buyer will pay a price that offers a lower CAP rate for a property is for it’s upside potential. If the price per square foot for example is well below replacement cost, or the rents are well below market, or major repairs have been made on key items like roofs and air-conditioning; the buyer may have reason to believe that he can soon lift the cap rate by increasing rents or lowering operating expenses. A good agent will take all this into consideration when advising a buyer client on how to make his offer and a seller client what price to ask
The price a seller asks is also guided a great deal by his motivation. In my client’s case for example, he needs to sell one of his properties at a CAP rate attractive to the buyer in order to effect a rapid closing to raise cash to pay his taxes. (He is also not bashful about letting the buyers know this either). In fact, I have been telling prospects that once one of the properties is under solid contract, the other properties from this client will see either a removal from market or a price increase. Why? Because his motivation has changed.
So what is the right price to pay for a commercial property? Today we just talked about CAP rates. The right price to pay is the price that will give you the return on your investment that will satisfy both your short terms objectives and long range goals. We must take into consideration your cost of money and your opportunity cost (What else you could do with that money)
If your cost of money is 9% would it make sense to buy a property with a 7% CAP rate? Yes, but only IF there was a good prospect for increasing the CAP rate in the short and long term, there is a good future property appreciation anticipated (CAP rates ignore appreciation), or the investment met other objectives. A good commercial agent will help you analyze the income, the appreciation, and the tax benefits of ownership, along with your attorney and tax advisors.
If you have what I call “very patient money” and are able to ride out cycles that are inevitable in our market, you may be willing to buy at a low cap rate because the investment simply beats out other things you could do with your money.
If you need a competent commercial property advisor, email me, I just might know one or two!
Let me talk a little about residential pricing. Last week I mentioned that, in general, we are at the bottom of our price cycle. I also said that real estate has low price elasticity of demand. I got many emails in agreement and a few in disagreement. (Article Here)
I have had an interesting experience since last week. As some of you may know we lowered a few or the Citadel Condo offerings (www.citadel-bonita.com) to as low as $178,000. Keep in mind our last sale was at $259,000. I received four phone calls on this just yesterday. Three of them were questions about “What was wrong with the property? Why so low?” (Some times you can’t win!)
Quite simply, there is nothing wrong with the property; and yes we have condos in Bonita as low as $178,000. (We are still shooting for an average sellout price well above this number.) But a lower price will not necessarily give you a quick sale. There is a perception that a $178,000 condo is, well, inferior to one that is priced at $230,000. (It’s the same condo) Price is just part of the package however, and we need to do some buyer education as well. Make comparisons, do a feature analysis, etc. There are condos today priced in a very wide range – some times for the same floor plan in the same building. Get your agent to actually look at all the condos you may be interested in, regardless of price. You never know your sellers motivation and how keen it may be.
Also remember, when savvy buyers see a price decrease, they wait for another one. When they see an increase, they buy.
I met with a developer for Breakfast on Saturday morning. We met to discuss a potential new project for 90 condominiums in Bonita. We talked about land cost per door, features of the project, and what we thought would be a realistic selling price. Kind of hard to answer that question isn’t it; when condos are not selling even at fire sale prices? This developer needs the presales in order to get his financing. For this reason alone, I don’t think the project will happen.
The canceling of projects is a good thing for the market, bad for the developer. Keep in mind that costs of construction are still high and the prices that sellers are seeking for their land are high. This means to me that condos that are built now will be a better deal than condos available in the future. Thinking of buying? Buy now. Prices will go up. I
Many buyers are waiting to see prices start going up. The trouble is, by then it may be too late. When buyers see a drop in price, they wait for another one. When they see an increase, they assume there will be another one and start buying. This may be a mistake. My suggestion is to go into the market with a professional agent and start making offers.
The more time I spend showing our new project Parkside at Rivers IV to end users, the more convinced I am that buyers today don’t want promises but want delivery all at once. They want the neighborhood, the water, the parks, the boat slips, and they want no construction around. They want it now, not, “Some Day”. I have asked Christopher at Devious to build the advertising campaign around that theme – “Buy where it is”; “Buy a Floor, Not a Floorplan, etc.) See www.deviouslycreative.com.
I am writing this while cruising along Continental Airlines to San Francisco Sunday afternoon. I will be attending a Fractional Ownership conference there. I have been investigating fractional ownership for Florida Real Estate for a few years now. I believe the time has come to bring these concepts to Lee and Collier Counties. Why buy a million dollar condo that you only use for two months a year if you could get the same thing for one fourth the price? More to follow on this from me, be sure.
I am going out there to learn the pros and cons – but I have done some research and I am certain you will see some additional fractional opportunities in town. I will be sitting down with Tom Goetschius, an expert in the field (See his article here) as well as the many of the pioneers in this business. Stay Tuned.
Market America is looking for experienced Residential and Commercial agents. If you are experienced and you believe, like I do, that long term relationship selling is the key to success, please contact me for a confidential interview.
We are also interviewing buyer and sellers. If you have a property you would like us to value, please contact us. We need quality commercial properties to offer and developer projects that need the kind of visionary selling Market America excels at.
We are target marketers, by the way. When we get a new listing it is presented to the entire team and then we determine who would be the best buyer for that property. We then go find him. Marketing real estate today, be it commercial or residential, takes hard work, experience, and a great deal of product knowledge. It also takes patience.
Whether you are buying or selling, please give us a try.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
What is the “Right” Price on Commercial Properties? And other comments...
Last week one of my clients told me that he would like to raise some cash to pay his impending federal tax bill. He owns quite a few properties – most are income producing, some land, some warehouses, some offices - and all very marketable. This gentleman is a very logical seller (and logical buyer, for that matter). He knows what motivates him so he knows what motivates buyers. He keeps detailed records, copies of invoices, leases, and tax records, etc. When he tells me the net operating income, I know the number will be accurate.
We did a full analysis of his portfolio and put two of his commercial income properties on the market.
In the commercial real estate market savvy investors use a capitalization rate (Cap Rate) to do an acid test of a properties worth. Put simply, the cap rate is a measure of the return a property’s net operating income will generate as a percentage of its cost. A property that generates $100,000 worth of income from rents after paying for all expenses to own and manage the property, but before paying debt service would sell at a $1,000,000 price if the cap rate was 10%. ($100,000/10%=$1,000,000) Buyers prospecting for good properties are looking for cap rates of around 7 to 8% these days; some times less from properties with very long leases and with AAA tenants; and sometimes higher CAP rates from older properties with shorter leases. If a property has a net operating income of $100,000 and a buyer is willing to accept, say a 7% CAP rate he would pay $1,428,571 for the property. ($100,000/7%). If on the other hand he needed to get an 8% CAP rate he would pay only $1.250,00; at 9% the price would have to would be $1,111,111. ($100,000/9%)
When I started buying commercial income properties in Fort Myers, I remember telling the agent that I did not buy by cap rate. This was because that most cap rates advertised were bogus.(Unfortunately this is still often the case) The agents or sellers often fail to include many
expenses in their pro-formas (a pro-forma is a reconstructed Profit and Loss statement) that needed to be there – such as reserves for long term replacement items such as driveways and roofs; they may leave off vacancy and credit losses; and they may forget to include management fees. Because of these omissions in many pro-formas, as well as the difficulty and inaccuracy of getting accurate lease and expense information, many commercial buyers will make an offer at a given CAP rate. Then during the due diligence period will make every effort to discover what the true net operating income is. Most commercial offers are contingent on a 30 to 90 day due diligence period during which the buyer will have inspections and audits completed.
The two properties we put on the market can be viewed by clicking here or (www.ma-realty.com) and going to the commercial section.
One reason a buyer will pay a price that offers a lower CAP rate for a property is for it’s upside potential. If the price per square foot for example is well below replacement cost, or the rents are well below market, or major repairs have been made on key items like roofs and air-conditioning; the buyer may have reason to believe that he can soon lift the cap rate by increasing rents or lowering operating expenses. A good agent will take all this into consideration when advising a buyer client on how to make his offer and a seller client what price to ask
The price a seller asks is also guided a great deal by his motivation. In my client’s case for example, he needs to sell one of his properties at a CAP rate attractive to the buyer in order to effect a rapid closing to raise cash to pay his taxes. (He is also not bashful about letting the buyers know this either). In fact, I have been telling prospects that once one of the properties is under solid contract, the other properties from this client will see either a removal from market or a price increase. Why? Because his motivation has changed.
So what is the right price to pay for a commercial property? Today we just talked about CAP rates. The right price to pay is the price that will give you the return on your investment that will satisfy both your short terms objectives and long range goals. We must take into consideration your cost of money and your opportunity cost (What else you could do with that money)
If your cost of money is 9% would it make sense to buy a property with a 7% CAP rate? Yes, but only IF there was a good prospect for increasing the CAP rate in the short and long term, there is a good future property appreciation anticipated (CAP rates ignore appreciation), or the investment met other objectives. A good commercial agent will help you analyze the income, the appreciation, and the tax benefits of ownership, along with your attorney and tax advisors.
If you have what I call “very patient money” and are able to ride out cycles that are inevitable in our market, you may be willing to buy at a low cap rate because the investment simply beats out other things you could do with your money.
If you need a competent commercial property advisor, email me, I just might know one or two!
Let me talk a little about residential pricing. Last week I mentioned that, in general, we are at the bottom of our price cycle. I also said that real estate has low price elasticity of demand. I got many emails in agreement and a few in disagreement. (Article Here)
I have had an interesting experience since last week. As some of you may know we lowered a few or the Citadel Condo offerings (www.citadel-bonita.com) to as low as $178,000. Keep in mind our last sale was at $259,000. I received four phone calls on this just yesterday. Three of them were questions about “What was wrong with the property? Why so low?” (Some times you can’t win!)
Quite simply, there is nothing wrong with the property; and yes we have condos in Bonita as low as $178,000. (We are still shooting for an average sellout price well above this number.) But a lower price will not necessarily give you a quick sale. There is a perception that a $178,000 condo is, well, inferior to one that is priced at $230,000. (It’s the same condo) Price is just part of the package however, and we need to do some buyer education as well. Make comparisons, do a feature analysis, etc. There are condos today priced in a very wide range – some times for the same floor plan in the same building. Get your agent to actually look at all the condos you may be interested in, regardless of price. You never know your sellers motivation and how keen it may be.
Also remember, when savvy buyers see a price decrease, they wait for another one. When they see an increase, they buy.
I met with a developer for Breakfast on Saturday morning. We met to discuss a potential new project for 90 condominiums in Bonita. We talked about land cost per door, features of the project, and what we thought would be a realistic selling price. Kind of hard to answer that question isn’t it; when condos are not selling even at fire sale prices? This developer needs the presales in order to get his financing. For this reason alone, I don’t think the project will happen.
The canceling of projects is a good thing for the market, bad for the developer. Keep in mind that costs of construction are still high and the prices that sellers are seeking for their land are high. This means to me that condos that are built now will be a better deal than condos available in the future. Thinking of buying? Buy now. Prices will go up. I
Many buyers are waiting to see prices start going up. The trouble is, by then it may be too late. When buyers see a drop in price, they wait for another one. When they see an increase, they assume there will be another one and start buying. This may be a mistake. My suggestion is to go into the market with a professional agent and start making offers.
The more time I spend showing our new project Parkside at Rivers IV to end users, the more convinced I am that buyers today don’t want promises but want delivery all at once. They want the neighborhood, the water, the parks, the boat slips, and they want no construction around. They want it now, not, “Some Day”. I have asked Christopher at Devious to build the advertising campaign around that theme – “Buy where it is”; “Buy a Floor, Not a Floorplan, etc.) See www.deviouslycreative.com.
I am writing this while cruising along Continental Airlines to San Francisco Sunday afternoon. I will be attending a Fractional Ownership conference there. I have been investigating fractional ownership for Florida Real Estate for a few years now. I believe the time has come to bring these concepts to Lee and Collier Counties. Why buy a million dollar condo that you only use for two months a year if you could get the same thing for one fourth the price? More to follow on this from me, be sure.
I am going out there to learn the pros and cons – but I have done some research and I am certain you will see some additional fractional opportunities in town. I will be sitting down with Tom Goetschius, an expert in the field (See his article here) as well as the many of the pioneers in this business. Stay Tuned.
Market America is looking for experienced Residential and Commercial agents. If you are experienced and you believe, like I do, that long term relationship selling is the key to success, please contact me for a confidential interview.
We are also interviewing buyer and sellers. If you have a property you would like us to value, please contact us. We need quality commercial properties to offer and developer projects that need the kind of visionary selling Market America excels at.
We are target marketers, by the way. When we get a new listing it is presented to the entire team and then we determine who would be the best buyer for that property. We then go find him. Marketing real estate today, be it commercial or residential, takes hard work, experience, and a great deal of product knowledge. It also takes patience.
Whether you are buying or selling, please give us a try.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Price Elasticity of Real Estate
Volume 5 Number 6 February 24, 2007
Price Elasticity of Real Estate
Last week I attended, along with a few thousand other folk, Market Watch (See the News Press coverage) . Frank D’Alessandro and Denny Grimes enticed us all with their take on the local market. The highlight of the evening for me was meeting the other people that were there to meet the other people that were there (In other words, the networking). I got to talk with pros like Kemp Demming (Northstar) Jim Puccio (Lennar), and other large developers, brokers, bankers, and brokers.
The presentations offered no surprises for most of us. Frank gave us all some anecdotal reviews of commercial transactions that happened last year and concluded that he does not think that the commercial market is over heated but is “worried” that too much may be in the pipeline. His advice is to go slowly with new commercial development projects. Going slowly is sound advice, but in a conversation with Gary Tasman of the new local Cushman Wakefield office later on, we both felt that there is lots of room for office growth and commercial development in many sectors. I took Frank’s presentation to be more self serving than informative.
Denny Grimes, on the other hand, gave a very impassioned appeal for everyone to lower their prices. (I almost felt privileged that we were hearing his private presentation to those customers who have given Denny Grimes and Company their listings) I never saw Denny more animated. He was “on” and fully immersed in his message. His message was, over and over again, “all real estate is priced too high”.
He also gave some time to talking about the problems with taxes, insurance, and maintenance costs. However, in his conclusion he actually said, “we know what the problem is – it’s price”.
I do not believe that this is what the problem is.
I agree that lowering the price of a given property, in a given market, at a given time will more often than not help move it in a slow market. I do not believe, however, that there is great elasticity of demand in the price of real estate; and this is NOT the plea to make of the entire market.
(If I remember back to Economics 101 – price elasticity of demand tells us that as we decrease price demand will increase) This simply is not generally the case in real estate. If we all decreased our prices, demand would not increase, we would all just have our properties on the market at a lower price. Buyers will not, for example buy more than one vacation home because there is a “two for one” sale. We are not selling something like, say, high priced sneakers.
You can help sell YOUR property with price, however. Put simply, if you have a property to sell, make sure it is priced lower that any other property in its class and neighborhood. If there are 40 condos for sale in your complex, make sure yours is the lowest price. When the buyers come back, your will be the first to sell, pretty simple.
When we took over Parkside at Rivers IV, I told John Sullivan of BBL Development we need to be the lowest price waterfront condos in our class. We also need to sell condos, not promises. Savvy buyers are tired of, “Someday this will be a great neighborhood”. Just look at downtown condos as an example of selling promises.
In the end, John agreed, and adjusted prices drastically RELATIVE TO THE MARKET AND OTHER LIKE KIND PRODUCT, and activity and sales will come (as they are).
My “condos versus promises” concept is covered pretty well in my last column (Click here).
There are only two times price matters. The day you buy and the day you sell. What happens in between those times is smoke, mirrors, and wishful thinking. Today too many sellers think their property went up 100% in value and then dropped 50%.. In fact it did neither, and until they sell it they will not know what the heck the value is. Denny made some “right on” comments about sellers and buyers expectations being out of whack. It’s true. For example, I know you may have told your spouse you were going to make, say $50,000 on your recent purchase. But deal with it. You are not going to do it. Have a professional evaluate your property. And get a professional that will not be afraid to tell you not to sell, and to hold. Get a pro who is not afraid to tell you what is in YOUR best interest and not his.
By the way, there is not only “one cause” for our slump and it is certainly not just price.. (Read the Snowflake that Caused the Avalanche)
By the way, my faith in the return in this market is powerful. I sit here in my bathing suit, by the pool, overlooking the river, sipping a Captain Morgan Private Stock on the rocks, while a light breeze keeps me cool. This is indeed what Southwest Florida is all about. The water. The View. The Weather. (Can you say 15 degrees below and 49 inches of snow?)
The fifteen to twenty couples a day we are touring though our new project know that. But these are smart buyers now, not just buying in a frenzy. They want value, location, and above all, they want to know that they are buying at the bottom of the price cycle.
I am doing my best to tell them, and you, that I believe, at least in some areas, we ARE AT THE BOTTOM. Now is indeed the time to buy. Yes, some prices need to come down. But just as assuredly, there are wonderful deals out there.
This morning before gong to Parkside, I went to my grandson Jacob’s basketball game. I sat next to Steve Beach. I as in my habit, I struck up a conversation about real estate (surprise, surprise). He told me he and his wife Betty are now buying everything they can get a mortgage on that makes sense. Steve and Betty are now adding to their rental inventory. Steve and Betty are true “insiders” by the way. Betty has been an agent in town for many years and Steve is a retired banker. They are not just operating from “their gut”. Their experience tells them, like it tells me, that we are at the bottom – or can be with the correct offers and the proper professional guidance.
Let me help you get back in to this market before you say to me, heck, I missed it.
By the way, we lowered the prices at four units at Citadel – another one of our favorite projects – by $45,000. (We are now as low as $178,000 – in BONITA!) Now Citadel is lowest in its class. These are wise buys now – even for the investor – and certainly for the end user. We will not sell many at that low of a price – I expect to be back in the 220’s after these four are gone.
Let me know your thoughts and concerns, and how our team of professionals can work for you.
As I always say: we are it the real estate customer business, not the real estate agent business.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Price Elasticity of Real Estate
Last week I attended, along with a few thousand other folk, Market Watch (See the News Press coverage) . Frank D’Alessandro and Denny Grimes enticed us all with their take on the local market. The highlight of the evening for me was meeting the other people that were there to meet the other people that were there (In other words, the networking). I got to talk with pros like Kemp Demming (Northstar) Jim Puccio (Lennar), and other large developers, brokers, bankers, and brokers.
The presentations offered no surprises for most of us. Frank gave us all some anecdotal reviews of commercial transactions that happened last year and concluded that he does not think that the commercial market is over heated but is “worried” that too much may be in the pipeline. His advice is to go slowly with new commercial development projects. Going slowly is sound advice, but in a conversation with Gary Tasman of the new local Cushman Wakefield office later on, we both felt that there is lots of room for office growth and commercial development in many sectors. I took Frank’s presentation to be more self serving than informative.
Denny Grimes, on the other hand, gave a very impassioned appeal for everyone to lower their prices. (I almost felt privileged that we were hearing his private presentation to those customers who have given Denny Grimes and Company their listings) I never saw Denny more animated. He was “on” and fully immersed in his message. His message was, over and over again, “all real estate is priced too high”.
He also gave some time to talking about the problems with taxes, insurance, and maintenance costs. However, in his conclusion he actually said, “we know what the problem is – it’s price”.
I do not believe that this is what the problem is.
I agree that lowering the price of a given property, in a given market, at a given time will more often than not help move it in a slow market. I do not believe, however, that there is great elasticity of demand in the price of real estate; and this is NOT the plea to make of the entire market.
(If I remember back to Economics 101 – price elasticity of demand tells us that as we decrease price demand will increase) This simply is not generally the case in real estate. If we all decreased our prices, demand would not increase, we would all just have our properties on the market at a lower price. Buyers will not, for example buy more than one vacation home because there is a “two for one” sale. We are not selling something like, say, high priced sneakers.
You can help sell YOUR property with price, however. Put simply, if you have a property to sell, make sure it is priced lower that any other property in its class and neighborhood. If there are 40 condos for sale in your complex, make sure yours is the lowest price. When the buyers come back, your will be the first to sell, pretty simple.
When we took over Parkside at Rivers IV, I told John Sullivan of BBL Development we need to be the lowest price waterfront condos in our class. We also need to sell condos, not promises. Savvy buyers are tired of, “Someday this will be a great neighborhood”. Just look at downtown condos as an example of selling promises.
In the end, John agreed, and adjusted prices drastically RELATIVE TO THE MARKET AND OTHER LIKE KIND PRODUCT, and activity and sales will come (as they are).
My “condos versus promises” concept is covered pretty well in my last column (Click here).
There are only two times price matters. The day you buy and the day you sell. What happens in between those times is smoke, mirrors, and wishful thinking. Today too many sellers think their property went up 100% in value and then dropped 50%.. In fact it did neither, and until they sell it they will not know what the heck the value is. Denny made some “right on” comments about sellers and buyers expectations being out of whack. It’s true. For example, I know you may have told your spouse you were going to make, say $50,000 on your recent purchase. But deal with it. You are not going to do it. Have a professional evaluate your property. And get a professional that will not be afraid to tell you not to sell, and to hold. Get a pro who is not afraid to tell you what is in YOUR best interest and not his.
By the way, there is not only “one cause” for our slump and it is certainly not just price.. (Read the Snowflake that Caused the Avalanche)
By the way, my faith in the return in this market is powerful. I sit here in my bathing suit, by the pool, overlooking the river, sipping a Captain Morgan Private Stock on the rocks, while a light breeze keeps me cool. This is indeed what Southwest Florida is all about. The water. The View. The Weather. (Can you say 15 degrees below and 49 inches of snow?)
The fifteen to twenty couples a day we are touring though our new project know that. But these are smart buyers now, not just buying in a frenzy. They want value, location, and above all, they want to know that they are buying at the bottom of the price cycle.
I am doing my best to tell them, and you, that I believe, at least in some areas, we ARE AT THE BOTTOM. Now is indeed the time to buy. Yes, some prices need to come down. But just as assuredly, there are wonderful deals out there.
This morning before gong to Parkside, I went to my grandson Jacob’s basketball game. I sat next to Steve Beach. I as in my habit, I struck up a conversation about real estate (surprise, surprise). He told me he and his wife Betty are now buying everything they can get a mortgage on that makes sense. Steve and Betty are now adding to their rental inventory. Steve and Betty are true “insiders” by the way. Betty has been an agent in town for many years and Steve is a retired banker. They are not just operating from “their gut”. Their experience tells them, like it tells me, that we are at the bottom – or can be with the correct offers and the proper professional guidance.
Let me help you get back in to this market before you say to me, heck, I missed it.
By the way, we lowered the prices at four units at Citadel – another one of our favorite projects – by $45,000. (We are now as low as $178,000 – in BONITA!) Now Citadel is lowest in its class. These are wise buys now – even for the investor – and certainly for the end user. We will not sell many at that low of a price – I expect to be back in the 220’s after these four are gone.
Let me know your thoughts and concerns, and how our team of professionals can work for you.
As I always say: we are it the real estate customer business, not the real estate agent business.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Tend to the Trend
Tend to the Trend
Most of us have people in our lives who have taught us something we will never forget. One of those people for me was a marketing professor I had in college. I believe his name was Fitsimmons.
“Fitz” as we called him, told the class, “Remember – it is much easier to speed up a trend than reverse one.” It was a pretty simple concept but one I have always tried to remember. I certainly did not remember it as well as some of my friends in the real estate business, however. Many of them folded up their tents and left the business for a year or so and went on vacation. While they were gone, there was nothing to do. In effect, they missed out on a whole bunch of work for very little return. I stayed in town and worked hard but spent more of my efforts on markets that were still strong like office and retail. The good news is I sold all my residential holdings by August of 2005.
Well, I am here to tell you that those guys that left have returned and so has the market activity. This is not just my opinion. I have some facts to give you; the first one is merely anecdotal: Market America Realty and Investments has presented more contracts and has the highest dollar volume of pending deals now than any other period since 2004.
The News Press reported a more concrete fact: Lee County home sales spiked in March – bucking a national trend (Article Here). There were 636 single family homes sold through Realtors in March, and that is a 50 increase from February AND the median price was up 5%. The areas that were hit the hardest (like here) will have the greatest margin of recovery.
Single family home permits and multifamily home permits are down. This is also a good thing. This will help slow inventory growth
If you want to buy a home at BELOW replacement cost, this is the time to do it. There is a ton of inventory and bargains are to be had. Heck, we are selling Parkside not only below preconstruction pricing, but certainly below replacement costs. This is true for Citadel, Grand Isle, and a host of other communities.
Our team has been watching the market carefully, and we have been waiting for a while to see the up ticks in the indicators that we see now. For the past few months the number of pending sales has increased, the number of closed sales has been up, and until now the number of foreclosures has been up. This months list of Lis Pendens (kind of a pre-foreclosure notice) show a down tick, however. This is critical because we believe the Lis Pendens to be a following indicator, not a leading indicator.
We are at bottom.
The commercial buyers have also returned in a big wave. This morning there were almost 70 professionals at our bi-weekly Commercial Investment Professional Meetings, many sales reported and properties are moving.
The industrial market and the retail market have responded favorably to the number of roof tops that are being filled. These companies are coming into town to set up shop.
Those buyers that are sitting on the fence waiting to buy only to see if prices will come down further may miss the market they are watching. I would say this to them; the worse case you may have if you buy now is that there is a further small down tick, and then you will see a gradual and pleasing rise in prices. If you do not buy now, you risk the chance of missing the opportunity altogether.
Last week I wrote about some negotiating techniques (Click Here) but only got to the first one on my list:
Sit on their side of the transaction. (My favorite)
Don’t negotiate with your self (A common mistake)
Remember: Price, Terms, Timing AND Product ( The fourth one here is often forgotten)
Give them the sleeves off of your vest
Ask for the sleeves off theirs
Red Herrings
Surprise
Nibble Nibble Nibble
It’s not over. Ever.
It’s all about price.
My favorite technique that I use all the time is to “sit on their side of the desk”. (Also good for any relationship, by the way, just ask my bride, Gail) To me the best outcome of any transaction is that everyone is happy and both sides feel like winners.
To sit on their side of the desk you need to know as much as possible about them. You need to know what their hot buttons are, what their wishes are, and what they can do without. If you can give them what they want, and you get what you want, you have a win-win situation, right?
It is not always about price, sometimes it about down payment requirements, or about cash flow, or closing dates, or HOA fees. It may be about emotions not facts. If you can put yourself in their shoes you may be able to close a deal that you otherwise would miss.
It may be about having kids in the neighborhood for them to play with, or it may be about signage rights on a commercial parcel.
Try a little role reversal when you are in your next deal. Empathy goes a long way. Become informed on your buyer or seller. Don’t work blind. Sit on their side of the desk.
The Nibbler
One technique that drives me crazy is the Nibble. You may be able to use this technique, but I for one, cannot stand it. The nibbler is the guy that makes the deal, signs the offer, and then you go home thinking you have settled the transaction.
Not so fast.
When you get home there is a message on your answering machine asking you to call him about the ______________ (fill in the blank here) perhaps it is the carpet cleaning or some other minor thing. You concede. He then calls the next day and takes another nibble, perhaps about the pool equipment, again you concede, and then it’s the termite tenting he wants, and then there is a list of other items that he adds every few days or so. He keeps nibbling at the deal until it no longer resembles the original deal. This is a very effective technique especially when the seller is anxious to close the deal.
The block to this is to not concede even the slightest. (You can’t blink here folks.)
We get nibblers on commercial deals all the time. They need one more week to close, for example, and they don’t ask for it until the end. Then they need a few repairs done; A cleaning; Another week for the survey to come in; They push and push until you won’t get pushed anymore. The block here is to not let them push in the first place.
I will review more negotiating methods next week.
You all have heard me say that Market America is in the real estate customer business, not the real estate agent business. This is how we run our company – concentrating on the customer. But I was thinking about this the other night and would like to add a refinement to this.
Many agents in the business list properties. In fact it is one of their goals. “How many properties can I list?” It is true, the more listings they have, the more they will earn.
We on the other hand, would like to add clients, not properties. Our business is client-centric. We build relationships and through getting to know the objectives, the needs, the goals, and the wishes of our clients – we all benefit. The way to build a client base is through service, but most importantly it is a long term thing – a client will out last a property any day. If you take care of the long term relationship the short tem one will follow.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Most of us have people in our lives who have taught us something we will never forget. One of those people for me was a marketing professor I had in college. I believe his name was Fitsimmons.
“Fitz” as we called him, told the class, “Remember – it is much easier to speed up a trend than reverse one.” It was a pretty simple concept but one I have always tried to remember. I certainly did not remember it as well as some of my friends in the real estate business, however. Many of them folded up their tents and left the business for a year or so and went on vacation. While they were gone, there was nothing to do. In effect, they missed out on a whole bunch of work for very little return. I stayed in town and worked hard but spent more of my efforts on markets that were still strong like office and retail. The good news is I sold all my residential holdings by August of 2005.
Well, I am here to tell you that those guys that left have returned and so has the market activity. This is not just my opinion. I have some facts to give you; the first one is merely anecdotal: Market America Realty and Investments has presented more contracts and has the highest dollar volume of pending deals now than any other period since 2004.
The News Press reported a more concrete fact: Lee County home sales spiked in March – bucking a national trend (Article Here). There were 636 single family homes sold through Realtors in March, and that is a 50 increase from February AND the median price was up 5%. The areas that were hit the hardest (like here) will have the greatest margin of recovery.
Single family home permits and multifamily home permits are down. This is also a good thing. This will help slow inventory growth
If you want to buy a home at BELOW replacement cost, this is the time to do it. There is a ton of inventory and bargains are to be had. Heck, we are selling Parkside not only below preconstruction pricing, but certainly below replacement costs. This is true for Citadel, Grand Isle, and a host of other communities.
Our team has been watching the market carefully, and we have been waiting for a while to see the up ticks in the indicators that we see now. For the past few months the number of pending sales has increased, the number of closed sales has been up, and until now the number of foreclosures has been up. This months list of Lis Pendens (kind of a pre-foreclosure notice) show a down tick, however. This is critical because we believe the Lis Pendens to be a following indicator, not a leading indicator.
We are at bottom.
The commercial buyers have also returned in a big wave. This morning there were almost 70 professionals at our bi-weekly Commercial Investment Professional Meetings, many sales reported and properties are moving.
The industrial market and the retail market have responded favorably to the number of roof tops that are being filled. These companies are coming into town to set up shop.
Those buyers that are sitting on the fence waiting to buy only to see if prices will come down further may miss the market they are watching. I would say this to them; the worse case you may have if you buy now is that there is a further small down tick, and then you will see a gradual and pleasing rise in prices. If you do not buy now, you risk the chance of missing the opportunity altogether.
Last week I wrote about some negotiating techniques (Click Here) but only got to the first one on my list:
Sit on their side of the transaction. (My favorite)
Don’t negotiate with your self (A common mistake)
Remember: Price, Terms, Timing AND Product ( The fourth one here is often forgotten)
Give them the sleeves off of your vest
Ask for the sleeves off theirs
Red Herrings
Surprise
Nibble Nibble Nibble
It’s not over. Ever.
It’s all about price.
My favorite technique that I use all the time is to “sit on their side of the desk”. (Also good for any relationship, by the way, just ask my bride, Gail) To me the best outcome of any transaction is that everyone is happy and both sides feel like winners.
To sit on their side of the desk you need to know as much as possible about them. You need to know what their hot buttons are, what their wishes are, and what they can do without. If you can give them what they want, and you get what you want, you have a win-win situation, right?
It is not always about price, sometimes it about down payment requirements, or about cash flow, or closing dates, or HOA fees. It may be about emotions not facts. If you can put yourself in their shoes you may be able to close a deal that you otherwise would miss.
It may be about having kids in the neighborhood for them to play with, or it may be about signage rights on a commercial parcel.
Try a little role reversal when you are in your next deal. Empathy goes a long way. Become informed on your buyer or seller. Don’t work blind. Sit on their side of the desk.
The Nibbler
One technique that drives me crazy is the Nibble. You may be able to use this technique, but I for one, cannot stand it. The nibbler is the guy that makes the deal, signs the offer, and then you go home thinking you have settled the transaction.
Not so fast.
When you get home there is a message on your answering machine asking you to call him about the ______________ (fill in the blank here) perhaps it is the carpet cleaning or some other minor thing. You concede. He then calls the next day and takes another nibble, perhaps about the pool equipment, again you concede, and then it’s the termite tenting he wants, and then there is a list of other items that he adds every few days or so. He keeps nibbling at the deal until it no longer resembles the original deal. This is a very effective technique especially when the seller is anxious to close the deal.
The block to this is to not concede even the slightest. (You can’t blink here folks.)
We get nibblers on commercial deals all the time. They need one more week to close, for example, and they don’t ask for it until the end. Then they need a few repairs done; A cleaning; Another week for the survey to come in; They push and push until you won’t get pushed anymore. The block here is to not let them push in the first place.
I will review more negotiating methods next week.
You all have heard me say that Market America is in the real estate customer business, not the real estate agent business. This is how we run our company – concentrating on the customer. But I was thinking about this the other night and would like to add a refinement to this.
Many agents in the business list properties. In fact it is one of their goals. “How many properties can I list?” It is true, the more listings they have, the more they will earn.
We on the other hand, would like to add clients, not properties. Our business is client-centric. We build relationships and through getting to know the objectives, the needs, the goals, and the wishes of our clients – we all benefit. The way to build a client base is through service, but most importantly it is a long term thing – a client will out last a property any day. If you take care of the long term relationship the short tem one will follow.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Find Your Own Cat Pee
Find Your Own Cat Pee
Years ago, when I first started looking for homes to renovate and either rent out or resell, I would tell my agent to find me homes that had cat pee on the carpet. You see, I liked homes that smelled bad, were closed up and hot, and had lots of garbage all over the place. I liked homes that most folk touring homes wanted to get out of as soon as they got into them. I liked them even better if prospective buyers wouldn’t even get out of the car to go inside. I liked these things expressly because most end user buyers did not. They just could not see past the garbage, the un-mowed lawn, and the smell of cat pee on the carpet.
You see, I know how to fix the smell of cat pee. I know how to clean up garbage and re-landscape a house. These are easy fixes. As I became more experienced at renovating houses I added more things to my list that began with a bad smell. I looked for properties that had these easy fixes that turned off other buyers. These turn off’s lower the attractiveness of the homes and lowered the price. It made buying them easier for me.
I found a house in San Carlos Park a few years ago. The previous owner had rented it out to someone that actually raised large dogs. The house had all the right things wrong with it. The stench was so bad in the home that most people turned away at the front door. It was the middle of the summer and no air was on. It was closed up, hot, and had flies inside. The garage was full of garbage, old appliances and boxes of junk.
The house also had all the right things – location, three bedrooms, two baths, a two car garage, and the yard, while messy, had a good base of mature trees and bushes. The air conditioning and the roof were in good shape (two key expense factors in renovations). The kitchen and baths, while in need of a good cleaning and paint were in decent shape as well.
I bought the house at an excellent price. To remove the carpet I had to cut it into small pieces. It was so loaded with urine and feces that any piece over 5 feet by five feet was too heavy to carry. I then bought an ionizer for around $700 (I still use it today on renovation projects) and closed up the home with the ionizer and the air running for two weeks before the smell was gone.
After paint, new carpet, new switch plates and outlet covers, and I had a gem of a house to sell.
I still look for cat pee in my deals. I no longer buy single family homes to renovate, but what I mean is I look for problems with a property that I know how to fix. You can be especially successful if you learn how to fix problems that others may not want to address.
Last week I put a contract on a piece of land upon which we would like to develop about 20,000 square feet of retail. The land previously had a UST (Underground Storage Tank) from a gas station that was on the site years ago. I have some experience with UST’s as I owned a bus terminal that had one. I know the risks and I know the cost of remediation. I was comfortable with the worst case scenario and how to handle it. I mentioned to one of my associates that this was just cat pee on the carpet. His reply was, “Huh?”
That’s what reminded me of the cat pee story and was the catalyst for this column. Look for the cat pee deals and furthermore, become experts in different kinds of cat pee, err, problems that can be fixed.
Let me tell you that I have made the mistake of buying properties that had the wrong things wrong with them as well. (I have mentioned before that I have learned more from my mistakes). You can’t fix, for example, not enough parking spaces. I bought a commercial building near downtown Fort Myers years ago and ignored this basic fact. For the entire time we owned it we had parking challenges, but it was 100% occupied when I bought it. However, once we had a vacancy it was almost impossible to fill it – we just could not offer the parking to the new tenant that he needed.
Some times there is a great quantity of cat pee. I once bought a single family home in Wyoming, Ohio, a suburb of Cincinnati. When I was estimating what I could pay for this fixer upper nightmare, I went through the home and assumed I would have to replace literally EVERYTHING; from the roof to the furnace, to air-conditioning to the windows and all the ceilings. I figured on all new plumbing and .all new electric, new bathrooms and two new kitchens. (It was an 8000 square foot home with two stair cases). I based my offer on these replacement costs. It was turned down and another offer was accepted along with two back ups.
Three months later I got a call from the agent – by the way she is still working in Cincinnati and still one of the best agents I ever worked with – Karen O’Keefe. She told me that all the offers had gone away during their due diligence period, “would I still like to buy the home?”
I reworked my figures, again assuming I had to do ALL that work, and Karen placed the offer. Later that day I got a call from the seller’s attorney telling me he would like to save some time and counter over the phone. I told him not to waste his time. My offer was final, but not contingent on any inspections. I would close in thirty days.
They accepted. They were tired of inspections and haggling. I had identified the cat pee and knew how to fix it and what my cost were going to be. By the way – I was correct in all my assumptions about replacement except for the roof. It was slate and cost me, believe it or not, $80 to fix one slipped piece of slate.
Another side note to this deal was that I was able to get 100% financing because I financed all the improvements at the same time as I bought the house. I did have to put up cash for some of the improvements, and a lot of sweat equity; but at closing I brought no cash. .
Look for your own Cat Pee deal, but keep in mind that sometimes the Cat Pee is not with the physical but with the terms. I once had a seller that would not give me the 90 days due diligence I thought I needed to properly evaluate the property. This was a commercial deal that needed lots of site and traffic analysis, water retention issues and parking problems. There was just no way I could get the answers I needed in less than 90 days. I arranged a sit down with the seller. I found out his problem was that his note was due in 60 days and he did not think he had the ability to rewrite the note. I offered to loan him the money to pay off the note in exchange for the first mortgage and guarantees. I would then be able to take my time to evaluate the development possibilities with out committing to the project. I knew no one else would buy at his price with such a short due diligence (The Cat Pee). I knew that my downside was that I would have to sell the property with out developing it, but my taking over the note would let me lock up the property at a good price. It was a win win for both buyer and seller. Because I solved the problem for the seller, I was able to get the deal at a very attractive price.
If you need help identifying the Cat Pee in your deals, work with a professional broker, one that has been there, done that.
Until next time,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Years ago, when I first started looking for homes to renovate and either rent out or resell, I would tell my agent to find me homes that had cat pee on the carpet. You see, I liked homes that smelled bad, were closed up and hot, and had lots of garbage all over the place. I liked homes that most folk touring homes wanted to get out of as soon as they got into them. I liked them even better if prospective buyers wouldn’t even get out of the car to go inside. I liked these things expressly because most end user buyers did not. They just could not see past the garbage, the un-mowed lawn, and the smell of cat pee on the carpet.
You see, I know how to fix the smell of cat pee. I know how to clean up garbage and re-landscape a house. These are easy fixes. As I became more experienced at renovating houses I added more things to my list that began with a bad smell. I looked for properties that had these easy fixes that turned off other buyers. These turn off’s lower the attractiveness of the homes and lowered the price. It made buying them easier for me.
I found a house in San Carlos Park a few years ago. The previous owner had rented it out to someone that actually raised large dogs. The house had all the right things wrong with it. The stench was so bad in the home that most people turned away at the front door. It was the middle of the summer and no air was on. It was closed up, hot, and had flies inside. The garage was full of garbage, old appliances and boxes of junk.
The house also had all the right things – location, three bedrooms, two baths, a two car garage, and the yard, while messy, had a good base of mature trees and bushes. The air conditioning and the roof were in good shape (two key expense factors in renovations). The kitchen and baths, while in need of a good cleaning and paint were in decent shape as well.
I bought the house at an excellent price. To remove the carpet I had to cut it into small pieces. It was so loaded with urine and feces that any piece over 5 feet by five feet was too heavy to carry. I then bought an ionizer for around $700 (I still use it today on renovation projects) and closed up the home with the ionizer and the air running for two weeks before the smell was gone.
After paint, new carpet, new switch plates and outlet covers, and I had a gem of a house to sell.
I still look for cat pee in my deals. I no longer buy single family homes to renovate, but what I mean is I look for problems with a property that I know how to fix. You can be especially successful if you learn how to fix problems that others may not want to address.
Last week I put a contract on a piece of land upon which we would like to develop about 20,000 square feet of retail. The land previously had a UST (Underground Storage Tank) from a gas station that was on the site years ago. I have some experience with UST’s as I owned a bus terminal that had one. I know the risks and I know the cost of remediation. I was comfortable with the worst case scenario and how to handle it. I mentioned to one of my associates that this was just cat pee on the carpet. His reply was, “Huh?”
That’s what reminded me of the cat pee story and was the catalyst for this column. Look for the cat pee deals and furthermore, become experts in different kinds of cat pee, err, problems that can be fixed.
Let me tell you that I have made the mistake of buying properties that had the wrong things wrong with them as well. (I have mentioned before that I have learned more from my mistakes). You can’t fix, for example, not enough parking spaces. I bought a commercial building near downtown Fort Myers years ago and ignored this basic fact. For the entire time we owned it we had parking challenges, but it was 100% occupied when I bought it. However, once we had a vacancy it was almost impossible to fill it – we just could not offer the parking to the new tenant that he needed.
Some times there is a great quantity of cat pee. I once bought a single family home in Wyoming, Ohio, a suburb of Cincinnati. When I was estimating what I could pay for this fixer upper nightmare, I went through the home and assumed I would have to replace literally EVERYTHING; from the roof to the furnace, to air-conditioning to the windows and all the ceilings. I figured on all new plumbing and .all new electric, new bathrooms and two new kitchens. (It was an 8000 square foot home with two stair cases). I based my offer on these replacement costs. It was turned down and another offer was accepted along with two back ups.
Three months later I got a call from the agent – by the way she is still working in Cincinnati and still one of the best agents I ever worked with – Karen O’Keefe. She told me that all the offers had gone away during their due diligence period, “would I still like to buy the home?”
I reworked my figures, again assuming I had to do ALL that work, and Karen placed the offer. Later that day I got a call from the seller’s attorney telling me he would like to save some time and counter over the phone. I told him not to waste his time. My offer was final, but not contingent on any inspections. I would close in thirty days.
They accepted. They were tired of inspections and haggling. I had identified the cat pee and knew how to fix it and what my cost were going to be. By the way – I was correct in all my assumptions about replacement except for the roof. It was slate and cost me, believe it or not, $80 to fix one slipped piece of slate.
Another side note to this deal was that I was able to get 100% financing because I financed all the improvements at the same time as I bought the house. I did have to put up cash for some of the improvements, and a lot of sweat equity; but at closing I brought no cash. .
Look for your own Cat Pee deal, but keep in mind that sometimes the Cat Pee is not with the physical but with the terms. I once had a seller that would not give me the 90 days due diligence I thought I needed to properly evaluate the property. This was a commercial deal that needed lots of site and traffic analysis, water retention issues and parking problems. There was just no way I could get the answers I needed in less than 90 days. I arranged a sit down with the seller. I found out his problem was that his note was due in 60 days and he did not think he had the ability to rewrite the note. I offered to loan him the money to pay off the note in exchange for the first mortgage and guarantees. I would then be able to take my time to evaluate the development possibilities with out committing to the project. I knew no one else would buy at his price with such a short due diligence (The Cat Pee). I knew that my downside was that I would have to sell the property with out developing it, but my taking over the note would let me lock up the property at a good price. It was a win win for both buyer and seller. Because I solved the problem for the seller, I was able to get the deal at a very attractive price.
If you need help identifying the Cat Pee in your deals, work with a professional broker, one that has been there, done that.
Until next time,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Give them the sleeves off of your vest
Give them the Sleeves off of Your Vest
I took the weekend off. No phone. No computer. Gail and spent the weekend at Gail’s brothers condo in Boca Grande. The water was crystal clear, the fish were plentiful, the tarpon were running, and I was reminded why we live here in the first place. What a paradise! Boca Grande; it’s part of Lee County but almost a separate world. This week’s e-letter a little late – but, for me anyway, it was worth the time off.
Last week I posted a few more negotiating techniques and some comments. Here is what was left of the list (We covered number one “using your time schedule, not theirs”, two weeks ago.
Sit on their side of the transaction. (My favorite)
Don’t negotiate with your self (A common mistake)
Remember: Price, Terms, Timing AND Product ( The fourth one here is often forgotten)
Give them the sleeves off of your vest
Ask for the sleeves off theirs
Red Herrings
Surprise
Nibble Nibble Nibble
It’s not over. Ever.
It’s all about price.
Last week I talked about sitting on their side of the desk and the Nibbler.
I see amateurs and pros alike negotiate with themselves. Let me give you an example: You place an offer on a home, say $350,000 on a $400,000 ask price. You spend a great deal of time talking this over with your spouse; your agent; perhaps your brother or trusted mentor; and you sign all the paper work and get the offer off to the seller. Then you drive by the house, start picturing your furniture, and you start imagining yourself sitting on the back porch. In effect, you start to become an owner and your ink is not even dry yet on your offer. You begin to worry that you did not offer enough.
Then a phone call comes. Your broker got a call form the seller’s broker. He relays the fact that the buyer is looking for a minimum offer of $375,000. If you are willing to “negotiate with yourself” you will be tempted to raise your offer. Don’t do it. Better to have your agent tell them this is your final offer or some other strong language, but that he thinks he might be able to get the buyer to look at a counter offer if they throw in closing costs. The point is, do not counter your own offer; let the other party do it first. Have them PUT IT IN WRITING. (This helps counter act the NIBBLER as well)
While we are on the subject of counter offers: NEVER GIVE WITH OUT GETTING. This is a technique that will help you immensely. When you are asked for a concession, ask for one in return. Without doing so cheapens your original offer. Without doing so tells the other party that you really did not think your first offer would fly. On the other hand if you offer, say $350,000 and the seller counters with $375,000 (and perhaps this is your target price) you can counter with, “well, I might be able to meet your price if you throw in the flat screen TV and the closing costs”. Followers of this technique use it all the time – they never ever concede with out a return concession.
How to counter this technique? Give them sleeves off of your vest. My old mentor Henry Tounstine is the first one to teach me this technique. It means, basically, give them something that you don’t have any way, or indeed if you do have it you would not miss it if you gave it away. My favorite sleeve vest give away is giving a loan to a buyer for the amount of the purchase price that you never expected to get anyway. Let’s say you are the seller and are asking $400,000; you are hoping for a $375,000 price. An offer comes in at $350,000. For round one you counter at $390,000, and he has to pay the title insurance. He comes back at $370,000, and will pay title insurance. You counter with $385,000, he pays title insurance but you will take a personal note, secured by a mortgage for $10,000. You get the idea. If he accepts, you get $10,000 more than you planned – albeit over time.
You can use this idea whether you are a buyer or a seller. Try to ask for things that may help you a great deal but not mean much to the other party. A good example of this is to ask the seller to pay closing costs. Ask him to take a part of the purchase price and use it to help your cash position at closing. The dollars are the same to him. (This could also be in the form of a decorator allowance or some other monetary concession). The seller wants $400,000. You finally are stuck at a $390,000 price from him and he won’t budge. Offer him $400,000 (Yes I know this is MORE than the $390,000) and ask him to pay $10,000 or more for closing costs or some other allowance. Check with your lender or experienced broker on this – and you must make sure all is disclosed to all parties, including the lender, and check with the lender about the best way to do this.
One more for today – The Red Herring. This refers to the negotiable point in the offer that is designed to “stick out” so it can be thrown out. It will divert attention from other, perhaps more important negotiable items and give the other party a feeling of victory by getting you to negotiate it away. On a commercial deal you may ask for warrants from the seller on all matters from gopher tortoises to burrowing owls to soil contamination. You also may be adamant about these warrants and insist they are deal breakers. This makes them worth that much more when you finally concede to give them up – but not before you get something valuable in return, like a longer due diligence period. Watch for the red herrings, more often than not they really DO NOT stick out.
Two weeks ago I took a bus tour of THE RIVER DISTICT. The developers of downtown have combined efforts and are taking interested parties like the press and real estate brokers on tours of all the current and future projects in down town Fort Myers. Tatiana and I were so pleased that we took this tour. We stopped in at Oasis, High Point, North Star, First Street Village, Prima Luce, Riverwalk at Sunset, Cypress Club, and Patio Deleon. I highly suggest that if you have not been downtown lately you need to come and see what has happened to our sleepy little town.
Downtown is ready. The buildings are done; the sidewalks are widened; the retail space is primed. Yes there is much more to do – but it is ready for the people NOW.
There just are not enough people. It reminds me of that kid’s game with your two hands…here is the church; here is the steeple, open the doors, and WHERE ARE THE PEOPLE? Gail and I have been watching and waiting for downtown to resurge for ten years. I do believe, however, after taking this tour, that we are right on the cusp of something big. Unfortunately I think at this moment we are at the end of a cycle when some shops and restaurateurs could not last the extra year it will take to make this happen, and the next cycle of new stores and shops have not come into town yet. HOWEVER; with over 3000 new roof tops coming very soon (High Point already closed two towers) Fort Myers will be a pedestrian town. We have all the elements of success. First we need the roof tops and they are JUST about here.
First Street Village will be fantastic – but not until 2009. The Publix, however, at First Street Village will open at the end of this year. Look for great things downtown. The condos are all about the views and the city life. My son Christopher and his partner Leon have made a commitment to down town and have just moved into their 3000sf offices on First Street (Devious Design Studios). Go down town, I think you will be pleased. If you want to look at the real estate opportunities there email Debbie for residential or Ron for commercial
Market America Realty just broke our own record with over $100,000,000 in listings, the highest in our history. This news would be good by itself but we also have more sales pending and under contract than ever before. Both residential and commercial properties are moving at Market America. Our target method of marketing properties works, and we are looking for more good properties to add to our marketing efforts. Please give us the opportunity to look out for your interests. Remember, we are in the real estate customer business, not the real estate agent business.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
I took the weekend off. No phone. No computer. Gail and spent the weekend at Gail’s brothers condo in Boca Grande. The water was crystal clear, the fish were plentiful, the tarpon were running, and I was reminded why we live here in the first place. What a paradise! Boca Grande; it’s part of Lee County but almost a separate world. This week’s e-letter a little late – but, for me anyway, it was worth the time off.
Last week I posted a few more negotiating techniques and some comments. Here is what was left of the list (We covered number one “using your time schedule, not theirs”, two weeks ago.
Sit on their side of the transaction. (My favorite)
Don’t negotiate with your self (A common mistake)
Remember: Price, Terms, Timing AND Product ( The fourth one here is often forgotten)
Give them the sleeves off of your vest
Ask for the sleeves off theirs
Red Herrings
Surprise
Nibble Nibble Nibble
It’s not over. Ever.
It’s all about price.
Last week I talked about sitting on their side of the desk and the Nibbler.
I see amateurs and pros alike negotiate with themselves. Let me give you an example: You place an offer on a home, say $350,000 on a $400,000 ask price. You spend a great deal of time talking this over with your spouse; your agent; perhaps your brother or trusted mentor; and you sign all the paper work and get the offer off to the seller. Then you drive by the house, start picturing your furniture, and you start imagining yourself sitting on the back porch. In effect, you start to become an owner and your ink is not even dry yet on your offer. You begin to worry that you did not offer enough.
Then a phone call comes. Your broker got a call form the seller’s broker. He relays the fact that the buyer is looking for a minimum offer of $375,000. If you are willing to “negotiate with yourself” you will be tempted to raise your offer. Don’t do it. Better to have your agent tell them this is your final offer or some other strong language, but that he thinks he might be able to get the buyer to look at a counter offer if they throw in closing costs. The point is, do not counter your own offer; let the other party do it first. Have them PUT IT IN WRITING. (This helps counter act the NIBBLER as well)
While we are on the subject of counter offers: NEVER GIVE WITH OUT GETTING. This is a technique that will help you immensely. When you are asked for a concession, ask for one in return. Without doing so cheapens your original offer. Without doing so tells the other party that you really did not think your first offer would fly. On the other hand if you offer, say $350,000 and the seller counters with $375,000 (and perhaps this is your target price) you can counter with, “well, I might be able to meet your price if you throw in the flat screen TV and the closing costs”. Followers of this technique use it all the time – they never ever concede with out a return concession.
How to counter this technique? Give them sleeves off of your vest. My old mentor Henry Tounstine is the first one to teach me this technique. It means, basically, give them something that you don’t have any way, or indeed if you do have it you would not miss it if you gave it away. My favorite sleeve vest give away is giving a loan to a buyer for the amount of the purchase price that you never expected to get anyway. Let’s say you are the seller and are asking $400,000; you are hoping for a $375,000 price. An offer comes in at $350,000. For round one you counter at $390,000, and he has to pay the title insurance. He comes back at $370,000, and will pay title insurance. You counter with $385,000, he pays title insurance but you will take a personal note, secured by a mortgage for $10,000. You get the idea. If he accepts, you get $10,000 more than you planned – albeit over time.
You can use this idea whether you are a buyer or a seller. Try to ask for things that may help you a great deal but not mean much to the other party. A good example of this is to ask the seller to pay closing costs. Ask him to take a part of the purchase price and use it to help your cash position at closing. The dollars are the same to him. (This could also be in the form of a decorator allowance or some other monetary concession). The seller wants $400,000. You finally are stuck at a $390,000 price from him and he won’t budge. Offer him $400,000 (Yes I know this is MORE than the $390,000) and ask him to pay $10,000 or more for closing costs or some other allowance. Check with your lender or experienced broker on this – and you must make sure all is disclosed to all parties, including the lender, and check with the lender about the best way to do this.
One more for today – The Red Herring. This refers to the negotiable point in the offer that is designed to “stick out” so it can be thrown out. It will divert attention from other, perhaps more important negotiable items and give the other party a feeling of victory by getting you to negotiate it away. On a commercial deal you may ask for warrants from the seller on all matters from gopher tortoises to burrowing owls to soil contamination. You also may be adamant about these warrants and insist they are deal breakers. This makes them worth that much more when you finally concede to give them up – but not before you get something valuable in return, like a longer due diligence period. Watch for the red herrings, more often than not they really DO NOT stick out.
Two weeks ago I took a bus tour of THE RIVER DISTICT. The developers of downtown have combined efforts and are taking interested parties like the press and real estate brokers on tours of all the current and future projects in down town Fort Myers. Tatiana and I were so pleased that we took this tour. We stopped in at Oasis, High Point, North Star, First Street Village, Prima Luce, Riverwalk at Sunset, Cypress Club, and Patio Deleon. I highly suggest that if you have not been downtown lately you need to come and see what has happened to our sleepy little town.
Downtown is ready. The buildings are done; the sidewalks are widened; the retail space is primed. Yes there is much more to do – but it is ready for the people NOW.
There just are not enough people. It reminds me of that kid’s game with your two hands…here is the church; here is the steeple, open the doors, and WHERE ARE THE PEOPLE? Gail and I have been watching and waiting for downtown to resurge for ten years. I do believe, however, after taking this tour, that we are right on the cusp of something big. Unfortunately I think at this moment we are at the end of a cycle when some shops and restaurateurs could not last the extra year it will take to make this happen, and the next cycle of new stores and shops have not come into town yet. HOWEVER; with over 3000 new roof tops coming very soon (High Point already closed two towers) Fort Myers will be a pedestrian town. We have all the elements of success. First we need the roof tops and they are JUST about here.
First Street Village will be fantastic – but not until 2009. The Publix, however, at First Street Village will open at the end of this year. Look for great things downtown. The condos are all about the views and the city life. My son Christopher and his partner Leon have made a commitment to down town and have just moved into their 3000sf offices on First Street (Devious Design Studios). Go down town, I think you will be pleased. If you want to look at the real estate opportunities there email Debbie for residential or Ron for commercial
Market America Realty just broke our own record with over $100,000,000 in listings, the highest in our history. This news would be good by itself but we also have more sales pending and under contract than ever before. Both residential and commercial properties are moving at Market America. Our target method of marketing properties works, and we are looking for more good properties to add to our marketing efforts. Please give us the opportunity to look out for your interests. Remember, we are in the real estate customer business, not the real estate agent business.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
The World is Getting Flatter
Volume 5 Number 15 May 12, 2007
The World is getting Flatter
The world used to be a very bumpy place; and it is was huge. There were thousands of languages and hundreds of countries; there were mountains to cross; rivers to forge; oceans to sail; and deserts to traverse. These were all barriers to communications and travel.
But now I can bridge the gap between here and any other part of the world in seconds. I can pick up the phone, sign onto the internet, watch live action in Iraq on TV, and I am instantly “transported” to anywhere in the world. In fact , I can go to a restaurant in Milan, Italy and have the same Big Mac and shake that I might have had one day earlier on route 41 on the way to the airport in Fort Myers. The world indeed is flat and easy to “navigate”.
Now my neighbor that lives less than a hundred feet from me was born in country thousand of miles away. Fully 15% of all second homes purchased in Florida were sold to someone that lives in one of 100 other countries. Some peg this number as high as 23%. There is a study done in 2005 by The Florida Association of Realtors that can be viewed HERE. I believe that since the exchange rate with the Euro is much better today that the percentage of second homes sold to foreigners today is above 20%.
I am missing something here, however: In my agency we have sold NO property to foreigners. Yet I have traveled the world in my business for over twenty years. I have friends and contacts from Brazil to Belgium, business associates in Japan, Korea, South Africa, and heck; I can order a beer in at least seven languages. I have look at property in Prague; Quebec; Blenchingly, England; and around the Bodensee in Austria.
Those of you that know me know I don’t bring things up without forethought or some plan (or because it’s been bugging me for awhile). I have been working on a plan to capture (our share) of this market ever since we first took over The Rivers Four at Parkside. A few months ago I sat in an ideation session at Burnt Store Marina to try to figure out why Grand Isle condos were not getting the traffic we needed to sell more condos. “Bring us European buyers”, was the plea. But the budget to do so was too small. This seemed the job of local tourism bureau, not a small community on the water.
Well folks, this is just a teaser because I am not ready to announce the plan yet, but what I am doing is reaching out for residential real estate agents that want to capture this foreign market; I am looking for forward thinking agents that know that the world is “getting flatter” and easier to travel and that may speak a few more languages that the average Floridian. I need more agents that can help me “flatten this world” a bit more. Drop me an email if you are interested in making a move. You may be impressed.
I will be announcing with in the next two weeks a major change in marketing strategy and a Global presence that is not only needed in our market place, but is long overdue.
Furthermore, if you are looking to sell your home into this market, also drop me a line. (Gregg@ma-realty.com). I will be building a short “bridge” to other markets, and you will not be disappointed. Stay tuned.
In the past we just burned our tourists; Now we smoke them.
When I got home from picking up my grandson Adi from school yesterday we stepped out the back door. Our normally unobstructed view across the river was blocked by smoke. It was so thick I could not see Cape Coral OR the bridge. Adi and I could both taste the smoke it was so thick.
If you have not been watching Florida news lately you may not know that we have over 250 brush fires in the state. All day Friday, in fact, the sun was blocked by a slight smoky haze. We are told that this smoke actually is coming in from the Gulf of Mexico, having been blown out there from a rather large conflagration on the Florida-Georgia border. The thick smoke lasted an hour or so and then seemed to rise off. I don’t think it has actually been very disruptive for the tourists. Locally we have had some fires but all have been controlled after a short time. The weather has been wonderful.
Cheap Money
I made a few inquires on loans lately. Money is still very cheap. I can get a home equity loan at less that prime (amazing). And first mortgage rates are still very low. (MBA SITE HERE).
By special arrangement with a few select lenders and the developer, Market America Realty and Investments is offering special incentive packages for condos purchased and closed before the end of July at Parkside at Rivers IV. Select buyers can get six months of payments made by the developer. This will enable buyers to lock in interest rates now. This is a very attractive deal for those of you that may be sitting on the fence and worried about what interest rates are doing. Contact Deb@ma-realty.com to schedule an appointment or visit the sales center on site every day from noon to five.
Motivation
General consensus is that buyers of second homes will not get aggressive until they feel a sense of urgency. This sense of urgency will come from a diminishing inventory, a forecast of more expensive money, or the threat of increasing prices. Inventory is now shrinking, and while money does not look like it will get much more expensive for a while, it does look like credit will get tighter and money certainly is low cost now. Lenders are very aggressively pursuing quality borrowers. Be sure the incentive offers from developers will soon dry up.
While I do not think you will soon see rapid price increases, I have talked to some of the other developers and we certainly agree that we have hit bottom on prices for new product. I have said this before but it bears repeating: Replacement costs are very high. For the new product that is on the market now, the prices will never be lower. This is the time to buy.
By the way - I am looking for at least one North Carolina specialist to join our Mountain Property team. If you know of someone licensed there that may be interested please get them in touch with me.
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
The World is getting Flatter
The world used to be a very bumpy place; and it is was huge. There were thousands of languages and hundreds of countries; there were mountains to cross; rivers to forge; oceans to sail; and deserts to traverse. These were all barriers to communications and travel.
But now I can bridge the gap between here and any other part of the world in seconds. I can pick up the phone, sign onto the internet, watch live action in Iraq on TV, and I am instantly “transported” to anywhere in the world. In fact , I can go to a restaurant in Milan, Italy and have the same Big Mac and shake that I might have had one day earlier on route 41 on the way to the airport in Fort Myers. The world indeed is flat and easy to “navigate”.
Now my neighbor that lives less than a hundred feet from me was born in country thousand of miles away. Fully 15% of all second homes purchased in Florida were sold to someone that lives in one of 100 other countries. Some peg this number as high as 23%. There is a study done in 2005 by The Florida Association of Realtors that can be viewed HERE. I believe that since the exchange rate with the Euro is much better today that the percentage of second homes sold to foreigners today is above 20%.
I am missing something here, however: In my agency we have sold NO property to foreigners. Yet I have traveled the world in my business for over twenty years. I have friends and contacts from Brazil to Belgium, business associates in Japan, Korea, South Africa, and heck; I can order a beer in at least seven languages. I have look at property in Prague; Quebec; Blenchingly, England; and around the Bodensee in Austria.
Those of you that know me know I don’t bring things up without forethought or some plan (or because it’s been bugging me for awhile). I have been working on a plan to capture (our share) of this market ever since we first took over The Rivers Four at Parkside. A few months ago I sat in an ideation session at Burnt Store Marina to try to figure out why Grand Isle condos were not getting the traffic we needed to sell more condos. “Bring us European buyers”, was the plea. But the budget to do so was too small. This seemed the job of local tourism bureau, not a small community on the water.
Well folks, this is just a teaser because I am not ready to announce the plan yet, but what I am doing is reaching out for residential real estate agents that want to capture this foreign market; I am looking for forward thinking agents that know that the world is “getting flatter” and easier to travel and that may speak a few more languages that the average Floridian. I need more agents that can help me “flatten this world” a bit more. Drop me an email if you are interested in making a move. You may be impressed.
I will be announcing with in the next two weeks a major change in marketing strategy and a Global presence that is not only needed in our market place, but is long overdue.
Furthermore, if you are looking to sell your home into this market, also drop me a line. (Gregg@ma-realty.com). I will be building a short “bridge” to other markets, and you will not be disappointed. Stay tuned.
In the past we just burned our tourists; Now we smoke them.
When I got home from picking up my grandson Adi from school yesterday we stepped out the back door. Our normally unobstructed view across the river was blocked by smoke. It was so thick I could not see Cape Coral OR the bridge. Adi and I could both taste the smoke it was so thick.
If you have not been watching Florida news lately you may not know that we have over 250 brush fires in the state. All day Friday, in fact, the sun was blocked by a slight smoky haze. We are told that this smoke actually is coming in from the Gulf of Mexico, having been blown out there from a rather large conflagration on the Florida-Georgia border. The thick smoke lasted an hour or so and then seemed to rise off. I don’t think it has actually been very disruptive for the tourists. Locally we have had some fires but all have been controlled after a short time. The weather has been wonderful.
Cheap Money
I made a few inquires on loans lately. Money is still very cheap. I can get a home equity loan at less that prime (amazing). And first mortgage rates are still very low. (MBA SITE HERE).
By special arrangement with a few select lenders and the developer, Market America Realty and Investments is offering special incentive packages for condos purchased and closed before the end of July at Parkside at Rivers IV. Select buyers can get six months of payments made by the developer. This will enable buyers to lock in interest rates now. This is a very attractive deal for those of you that may be sitting on the fence and worried about what interest rates are doing. Contact Deb@ma-realty.com to schedule an appointment or visit the sales center on site every day from noon to five.
Motivation
General consensus is that buyers of second homes will not get aggressive until they feel a sense of urgency. This sense of urgency will come from a diminishing inventory, a forecast of more expensive money, or the threat of increasing prices. Inventory is now shrinking, and while money does not look like it will get much more expensive for a while, it does look like credit will get tighter and money certainly is low cost now. Lenders are very aggressively pursuing quality borrowers. Be sure the incentive offers from developers will soon dry up.
While I do not think you will soon see rapid price increases, I have talked to some of the other developers and we certainly agree that we have hit bottom on prices for new product. I have said this before but it bears repeating: Replacement costs are very high. For the new product that is on the market now, the prices will never be lower. This is the time to buy.
By the way - I am looking for at least one North Carolina specialist to join our Mountain Property team. If you know of someone licensed there that may be interested please get them in touch with me.
Until next week,
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Top MIstakes Real Estate Investors Make
This is not an all inclusive list; some mistakes are mine, some are from others.... remember, it's much easier to learn from the mistakes of others - and less costly......
Not performing Due Diligence. (This means on the property as well as the market). Before you begin to even look at property, set your objectives and examine the market and what acquisitions will best meet those objectives. Look at rents, trends, vacancies, new construction, and permit applications. A good real estate broker can help you through the process. For example, in our office we have a list of projects that are permitted in a given area so we can advise clients of upcoming competition. Once you place a contract on a property, you need to prepare a check list of due diligence items that need to be addressed regarding the physical attributes of the acquisition. From environmental inspections to zoning, from utility capacity to access; hire a competent engineer to examine the mechanicals and the roof and the major building components. One often overlooked due diligence item is the future road plan. Is there a widening in the future? How about curb cuts? Is there a median in the future plans?
Falling in Love with the property. Ignoring facts in favor of emotion. Years ago I had rental property on Fort Myers Beach on a canal. I found out the fourplex across the canal was for sale. When I inspected it with the seller, he told me the price he was trying to sell it for; I compared this price with the rent – I was shocked. The price was about four times what the rents justified... He said, but Gregg – it's on the water! I replied, “Hey, I am an investor, if I can't get the rents because it is “on the water”, why would I buy it because it is “on the water”? Now, don't misunderstand me, this may or may not have been a good investment for a long term appreciation play. But the numbers didn't work for an income property. Keep emotions out of your income property purchases. Either you or your agent should prepare a financial analysis, with your assumptions as input.
Underestimating time and costs for improvements and upkeep. Both will cost more than you think and take more time. Don't make the mistake of letting your desire to own this showpiece property sway the cost estimates to make the deal look better just so you can justify your purchase decision. I once bid on a rehab house. In my cost assumptions I assumed I would have to put a new roof, new windows, new furnace and air, new drywall, new plumbing, new kitchens and new baths. A total overhaul. I lost the bid. Three months later the seller contacted me back and asked if I was still interested. It seems that the higher bid fell out during due diligence. Too many repair costs. In the end I go the house at my price... It seems that the only thing I was wrong about was that the house did not need a new roof!
Thinking you will get mortgage rates that are advertised on TV and the internet . Interest rates for investments properties are higher and generally the amortization periods are shorter. Do not forget to estimate 20 or 25 years instead of 30 for the amortization period.
Buying price over location. A common error is to buy a lower price investment in a lesser location. In general you will be better off with the superior location rather than the lower price. The old adage is true: Location, location, location. You will find that the better location will have a lower vacancy factor and better appreciation of resale values and rents,
Not preparing for a worse case scenario. This has never been truer than in today's market. There are some buyers that bought four homes in preconstruction and now are sitting with four empty homes that they cannot sell OR rent I always tell me clients, if you can sleep with the worse case scenarios, then the deal is ok. If you can't come up with a bunch of answers that are satisfactory to a litany of “what if” scenarios, you are better off with out the deal.
Not examining alternatives. This is one of my favorites. So, you decide you have $50,000 to invest in real estate and you want to buy the cute duplex across town. WHAT ELSE CAN YOU DO WITH THAT MONEY? Ask your real estate professional to help you, but then look outside real estate. Look at all your alternatives and make sure you are choosing in accordance with your long term objectives and your tolerance for risk. My feeling with looking at alternatives is this: You have already made the commitment on the $50,000. Fine. Now let's make sure the next level of commitment is correct.
Not preparing an exit strategy. Always know where the back door is. How will you sell or exit this investment? Remember, you make your money when you buy, not sell. You get to decide what you will buy for, but the market sets your sell price. Sit down and plan the timing of your exit.
Following the crowd. Remember Mom asking you, “So, if your friend jumped of the bridge would you do that too?” There has been a herd mentality in investing. It happened in the Dot Com boom and it happened over that past years in real estate. This goes back to buying with logic, not emotion.
Over leveraging. Pretty simple. Have enough fluff in your plan for contingencies that you may have overlooked. Leave some credit available for emergencies. I once had a mentor tell me, “if a deal had $1.00 a month positive cash flow I could do a million of them, but how many do you think I could do if I lost $1.00 a month on every deal?” Put enough cash down so you are comfortable with the leverage.
New Releases: PLEASE CLICK HERE .
Market America Exclusive Marketing & Leasing Agents for The Diplomat Shoppes at Del Prado in Cape Coral
Market America Realty Investments, Inc., a Ft. Myers Real Estate Services Firm announced that the firm has been selected as the exclusive marketing and leasing agents for The Diplomat Shoppes at Del Prado in Cape Coral . The Diplomat Shoppes at Del Prado is a mixed use office and retail center near the intersection of Del Prado Boulevard North and Diplomat Parkway East , just north of Pine Island Road . Plans call for approximately 40,000 square feet of office and 35,000 feet of retail and restaurants. For leasing information contact Gregg Fous , 239-425-0771or visit www .ma-realty.com .
Downtown Fort Myers
Market America Realty and Investments, Inc. will put a new emphasis on the downtown condo and commercial market. To his end I am pleased to announce the addition of Sally Bond Lowrey , CCIM to our professional team. Sally will concentrate her and the teams efforts on developer representation downtown and re-sales of waterfront condos along the river. She will be building a team of downtown specialists over the next 90 days and is now adding listings along the river. If you have a condo to sell downtown, Sally is the one to talk to. If you are a developer looking for a marketing team to handle your project, give us a call. We will be making a major investment in Downtown Fort Myers. Fort Myers is getting ready to explode and we plan on being part of that growth. If you have downtown experience as an agent and want a global approach to selling, you need to contact Market America Real Estate and Investments, Inc.
Until next week,
Call us if we can help you. 239-425-0771.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
Not performing Due Diligence. (This means on the property as well as the market). Before you begin to even look at property, set your objectives and examine the market and what acquisitions will best meet those objectives. Look at rents, trends, vacancies, new construction, and permit applications. A good real estate broker can help you through the process. For example, in our office we have a list of projects that are permitted in a given area so we can advise clients of upcoming competition. Once you place a contract on a property, you need to prepare a check list of due diligence items that need to be addressed regarding the physical attributes of the acquisition. From environmental inspections to zoning, from utility capacity to access; hire a competent engineer to examine the mechanicals and the roof and the major building components. One often overlooked due diligence item is the future road plan. Is there a widening in the future? How about curb cuts? Is there a median in the future plans?
Falling in Love with the property. Ignoring facts in favor of emotion. Years ago I had rental property on Fort Myers Beach on a canal. I found out the fourplex across the canal was for sale. When I inspected it with the seller, he told me the price he was trying to sell it for; I compared this price with the rent – I was shocked. The price was about four times what the rents justified... He said, but Gregg – it's on the water! I replied, “Hey, I am an investor, if I can't get the rents because it is “on the water”, why would I buy it because it is “on the water”? Now, don't misunderstand me, this may or may not have been a good investment for a long term appreciation play. But the numbers didn't work for an income property. Keep emotions out of your income property purchases. Either you or your agent should prepare a financial analysis, with your assumptions as input.
Underestimating time and costs for improvements and upkeep. Both will cost more than you think and take more time. Don't make the mistake of letting your desire to own this showpiece property sway the cost estimates to make the deal look better just so you can justify your purchase decision. I once bid on a rehab house. In my cost assumptions I assumed I would have to put a new roof, new windows, new furnace and air, new drywall, new plumbing, new kitchens and new baths. A total overhaul. I lost the bid. Three months later the seller contacted me back and asked if I was still interested. It seems that the higher bid fell out during due diligence. Too many repair costs. In the end I go the house at my price... It seems that the only thing I was wrong about was that the house did not need a new roof!
Thinking you will get mortgage rates that are advertised on TV and the internet . Interest rates for investments properties are higher and generally the amortization periods are shorter. Do not forget to estimate 20 or 25 years instead of 30 for the amortization period.
Buying price over location. A common error is to buy a lower price investment in a lesser location. In general you will be better off with the superior location rather than the lower price. The old adage is true: Location, location, location. You will find that the better location will have a lower vacancy factor and better appreciation of resale values and rents,
Not preparing for a worse case scenario. This has never been truer than in today's market. There are some buyers that bought four homes in preconstruction and now are sitting with four empty homes that they cannot sell OR rent I always tell me clients, if you can sleep with the worse case scenarios, then the deal is ok. If you can't come up with a bunch of answers that are satisfactory to a litany of “what if” scenarios, you are better off with out the deal.
Not examining alternatives. This is one of my favorites. So, you decide you have $50,000 to invest in real estate and you want to buy the cute duplex across town. WHAT ELSE CAN YOU DO WITH THAT MONEY? Ask your real estate professional to help you, but then look outside real estate. Look at all your alternatives and make sure you are choosing in accordance with your long term objectives and your tolerance for risk. My feeling with looking at alternatives is this: You have already made the commitment on the $50,000. Fine. Now let's make sure the next level of commitment is correct.
Not preparing an exit strategy. Always know where the back door is. How will you sell or exit this investment? Remember, you make your money when you buy, not sell. You get to decide what you will buy for, but the market sets your sell price. Sit down and plan the timing of your exit.
Following the crowd. Remember Mom asking you, “So, if your friend jumped of the bridge would you do that too?” There has been a herd mentality in investing. It happened in the Dot Com boom and it happened over that past years in real estate. This goes back to buying with logic, not emotion.
Over leveraging. Pretty simple. Have enough fluff in your plan for contingencies that you may have overlooked. Leave some credit available for emergencies. I once had a mentor tell me, “if a deal had $1.00 a month positive cash flow I could do a million of them, but how many do you think I could do if I lost $1.00 a month on every deal?” Put enough cash down so you are comfortable with the leverage.
New Releases: PLEASE CLICK HERE .
Market America Exclusive Marketing & Leasing Agents for The Diplomat Shoppes at Del Prado in Cape Coral
Market America Realty Investments, Inc., a Ft. Myers Real Estate Services Firm announced that the firm has been selected as the exclusive marketing and leasing agents for The Diplomat Shoppes at Del Prado in Cape Coral . The Diplomat Shoppes at Del Prado is a mixed use office and retail center near the intersection of Del Prado Boulevard North and Diplomat Parkway East , just north of Pine Island Road . Plans call for approximately 40,000 square feet of office and 35,000 feet of retail and restaurants. For leasing information contact Gregg Fous , 239-425-0771or visit www .ma-realty.com .
Downtown Fort Myers
Market America Realty and Investments, Inc. will put a new emphasis on the downtown condo and commercial market. To his end I am pleased to announce the addition of Sally Bond Lowrey , CCIM to our professional team. Sally will concentrate her and the teams efforts on developer representation downtown and re-sales of waterfront condos along the river. She will be building a team of downtown specialists over the next 90 days and is now adding listings along the river. If you have a condo to sell downtown, Sally is the one to talk to. If you are a developer looking for a marketing team to handle your project, give us a call. We will be making a major investment in Downtown Fort Myers. Fort Myers is getting ready to explode and we plan on being part of that growth. If you have downtown experience as an agent and want a global approach to selling, you need to contact Market America Real Estate and Investments, Inc.
Until next week,
Call us if we can help you. 239-425-0771.
If you have missed past emails you can search here: ARCHIVES
Gregg Fous
Gregg@ma-realty.com
© Copyright 2007 Gregg A. Fous All Right Reserved
The website contains copyrighted information and graphics. No portion of this intellectual property may be duplicated, reproduced, or distributed without express written permission of Gregg A. Fous. Any unauthorized use, reproduction, or distribution is expressly forbidden and may result in civil liability.
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