Investing in South Florida Real Estate

noreply@blogger.com (Gregg Fous) — Sun, 13 Jul 2008 15:24:00 +0000

Summer is supposed to be slow;

at least in Fort Myers. It's hot and humid and I can't even bend over and tie my shoes without dripping sweat on the laces. Floridians head to North Carolina or other places cooler up north, but the tourists head to the beach and are easily recognized by the locals by the way they are proud of their red color. For the past two weeks, however, Gail and I have been busy here in town. Today I want to tell you about North Star, High Point, Oasis, Hotel Indigo, and two historic homes for sales in Fort Myers.

Let's start with drinks and dinner at H2. Last week Gail and I joined the always vivacious Christina Boyhan, one of my most favored commercial lenders, now with Florida Community Banks, Inc.. Christina recently left First Horizon who had a residential and commercial loan production office at University Center on the corner of Summerlin and College Parkway in South Fort Myers. They recently closed the residential offices and left Jon Powell as the sole commercial loan officer in the office.

Christina wanted to introduce us to her new company and talk generally how Florida Community Banks can work with us and our developers. I asked Steve Jarvis, the developer of Brantley Commons to join us. We all enjoyed generous drinks, fine wine, and lots of tapas. H2 is one of the survivors in the downtown Fort Myers River District and Harold cooks the way I like to eat: he keeps the food coming in small portions, high quality, and always presents it well. Service is excellent. It's just plain fun eating there.

When Gail and I first arrived it took us about ten minutes to actually get to Christina; this was not because H2 was so crowded, but because we knew so many people there that evening. Near the door was Pat Riley, the project manager for Longwater Yacht Club, Longwater is being planned at the old Manatee World site on Palm Beach Blvd. and Route 75. He is also working on Caloosa Landing, across from Sweetwater on Rt. 31 and the Caloosahatchee River. Both of these projects I have been involved in for the past year or two: hotels, marinas, condos, and restaurants and perhaps timeshare vacation ownership. No links here yet folks: it's way too early. If you want more information, call me. (Developers only please; there are no presales here as the plans are still being gestated.)

North Star Yacht Club

On the other side of the bar were Jennifer Griffin from ISG and Kemp Demming of Continental Realty. Here was their news: Hypo Bank, the original lender on North Star Yacht Club, has taken over the project. Hypo had filed lis pen dens and then came to an agreement with Continental Realty to take over the project. Jennifer and Kemp are no longer involved with North Star. Hypo hired The Marketing Directors, Inc. to take over sales and marketing. Tweed Advertising was released and B-Squared has taken over the advertising. Laurie Hill, one of my favorite condo sales people (at least the most favorite not working for me!) will join the sales effort on Monday, June 23. Laurie was formally at Homes for America (Beau Rivage and St. Tropez). The sales manager at North Star is George Freelove. There have been some price changes but otherwise no other major changes yet. Call us if you want to learn more. 239-277-9309

Hotel Indigo

We also ran in to Phil Hugh. Phil is with DOC Development and has his office right around the corner from our Engel and Voelkers offices. Phil has two projects in town, the Hotel Indigo and an office building on Hendry, a few doors down from us. We are very excited about the new downtown hotel which should be open before the start of next season. The hotel will attract more nighttime visitors to The River District and with an intimate sense of class will be a welcome addition to town.

Oasis

Speaking of class, let's get to Oasis. Earlier this week Oasis had its grand opening and tour of the amenities and four furnished models. Many of you know my dear friend Kevin Manning of BBL passed away from cancer. The Oasis was one of Kevin's key projects and he was proud to be working on it and even more pleased to be involved with Jorge Perez, Micheal Klinger and The Related Group. Kevin's wife Terri and my wife, Gail, are best friends. We of course asked Terri to come to the opening with us. It was a proud moment for me to walk into the lobby of Oasis with both of these beautiful women on my arms. Micheal Klinger, project manager for The Oasis made a point to tell Terri how much Kevin was missed at the event. We also ran in to Mike Bette, owner of BBL and one of Kevin's mentors. It was a bitter sweet moment for those of us that knew Kevin.

Our impressions of Oasis: The pool area and amenities are unmatched in any other project here in Fort Myers. This is truly a resort style community. Think South Beach; think Hotel Delano. White "beds" with canopies (rumored to cost over $10,000 a piece) are scattered around the deck and are punctuated with white lounges, white tables, and fountains; No flapping curtains like the Delano, but white was everywhere and there are sweeping views of the river, downtown, and the bridges. All that is missing here is a restaurant and bar. We found the rooms also cutting edge in style; very urban, clean, and the views, oh the views! The kitchens are very Miami and more reminiscent of urban living than anything here in town.

The party was attended by many of my friends in the real estate business but also in attendance with local luminaries like Fran and John Fenning, renowned artist Darryl Pottorf, Mayor Jim Humphrey and many of vendors that made Oasis possible.

Closing will begin very soon at Oasis as Tower 2 is now complete. There, of course, will be many dropouts - perhaps 30% or more. These will be the people who will walk away from their deposits. Engel and Voelkers is working with many of the buyers and has begun marketing Oasis to the European Market.

High Point

Perhaps it is no surprise that some of the other downtown developers were in attendance. High Point marketing director, the lovely Cheryl Yano, High Point design consultant Laura Youmans and developer Nick Camerata were pleased to have another project like Oasis to bring prospects to the city. I have a few friends that have moved into Highpoint, and for full time living this is one of my favorite downtown. residences. If you have not visited this masterpiece, you need to. Please call 239-277-9309 for a tour.

Tour Downtown

For a tour of any of the downtown projects, Engel and Voelkers is the place to start. We are located at 1635 Hendry, directly across from the parking lot between Second and First Streets. We can give you or your buyers an overview of downtown and the advantages of city living.

Riverfront History

By the way, there are now two riverfront estates on the National Register of Historic Places for sale in Fort Myers. We have the 1925 Stribley Estate, next to the Edison Ford estates offered through our office. Sitting regally on 2.5 acres, this estate has been meticulously rebuilt to the most exacting standards and is now complete and ready for sale. Charles Stribley, a paper industrialist from Kaukauna, Wisconsin, built this winter retreat next his fellow industrialists Thomas Edison and Henry Ford. His home was very opulent, however, especially compared to the austere homes of his neighbors. This historic estate is offered at $5,400,000 fully furnished.

Also available downtown is the Heitman House. This 1908 riverfront masterpiece operates as a Wedding and special event center and is just a short distance from our office.

Call us for Your Real Estate Needs

Readers, we have a great deal going on in both our commercial division (Market America Realty and Investments) and our residential company: Engel And Voelkers. In the commercial arena we just closed on another Brantley Commons Building. (Market America sold four of the top twenty office transactions last year!). We have special retail opportunities now at Shoppes at Diplomat, and have just listed one the last large parcels of developable commercial properties in Cape Coral: 20+ acres - and at a price that makes developable sense. ( Link not ready yet - call me for details).

Ask me to call you

I have hinted in previous newsletters about large offerings of single family homes and condos at "blow away" prices. Be patient. We are making progress and expect some announcements soon. Condos, single family homes, and lots. If you want a phone call on these opportunities, please be so kind to email me at gregg.fous@engelvoelkers.com and make sure you are on my personal call list. Give me your full contact info in that email. When we have to offer what we have to offer, it will not be on the market long.

Thanks for your patronage. Gregg Fous 239-851-5464 Gregg.Fous@engelvoelkers.com

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Land; What it is Good For?

noreply@blogger.com (Gregg Fous) — Sun, 13 Jul 2008 15:23:00 +0000

Land; What it is Good For?

Today I want to focus on a trend. This trend has been evident to me since I have been in business, mostly in the manufacturing sector. In the business of real estate we have deviated from this trend in the United States in a major way a few times over the past 90 years. There has been, however, a pervasive tendency, a movement in a certain direction, which I have been witnessing and profiting from since I have been in business. This trend simply this: do more with less.

To do more with less has always been a goal in manufacturing. The deviations from this mantra were short lived and no more than fads (remember fins on automobiles?).This is because to do more with less; to value engineer; sometimes is contrary to current fashion, or emotional wants, and occasionally we will see extravagances outside of this trend: In houses, look at the McMansion; in automobiles, look to the Hummer.

I believe we are now entering a more resolute period where the United States residential and commercial real estate markets will rejoin the trend to economize land, resources, infrastructure, and construction materials. In order to understand the affects of this trend, we need to understand the inner workings of the commercial developer.

How do Commercial Developers Buy Land?

The price per acre or per square foot means nothing to a developer of a commercial shopping center, an office building, or indeed a residential development until there is a definition of yield. Yield in a shopping center will give the developer an idea of how many square feet of rentable space he will end up with when he is done developing. After he balances parking requirements, city set back requirements, height restrictions, common area needs, and water retention and rights of way, he will come up with a total rentable (or salable) square feet he can build on this property. In order to maximize his profits he must maximize the number of square feet he can build and sell. What he winds up with is a yield number that is expressed as a land load number. Every square foot of building will have a land load. The property may have been sold to him for $28 per square foot; but his land load may be $80 per square foot. Every square foot of salable building has a load factor of $80. This is before he goes vertical.

This load factor is treated differently by different types of developers. The hotel developer want to know his cost per "key"; the hospital developer the cost per "bed"; the residential developers talks of developable units (du's). The higher the yield is, the more that the developer can pay in total for the land.

The land comes with other burdens, however, that will come into consideration. Internal infrastructure is expensive as are county and city concurrency issues. The developer must add to the cost of the load factor such items as impact fees, road construction, utility hook ups, and municipal set-offs such as fire and emergency medical surcharges.

High Density Versus Sprawl

In the spirit of doing more with less, the developer must optimize his yield. This optimization leads him to higher density projects and less suburban sprawl. This optimization will, logically, lead him to where the infrastructure like roads and utilities exist, and where the allowable density is already approved.

Environmentalist and some ill advised county commissioners think that high density is not good for the city or for the environment. They are wrong.

Consider these two alternatives:

1. Big Boy Developers can take 100 acres of green space and build a gated single family home community and build these homes on half acre lots. With roads and other amenities needed, Big Boy winds up with 100 acres of land supporting perhaps 60 homes. Big Boy needs to run sewer, electric, water and phone lines to each home. He needs fire department services for this community and a roving security car and a gate attendant.

2. Smart Guy Developers, on the other hand, buys the same 100 acres. He builds three story buildings on thirty of the acres and has 300 living units. Under some of the buildings there are retail stores, others have offices. Seventy of the acres are left untouched and natural. Smart Guy must build fewer utility lines, less roads, needs no security cars or gate, and because of the mixed use, even the residents need fewer cars.

Infill Option

In the boundaries of the city there are parcels of land that we can infill. Infill developers look for parcels of land surrounded by homes. These infill parcels already have the sewer, water, and other infrastructure needed like roads and fire services. I wonderful example of this is the 22 plus acres in Cape Coral at the corner of Aqualinda and Beach Parkway. Property like this is generally a bargain because many of he costs associated with what is called "green field" developments have loads on them for infrastructure that make them cost prohibitive. Furthermore, parcels of property like this already have the entitlements (Zoning, etc) that "Green field" projects do not. This saves money as well as time. (To see another example of an infill project, look at another project we have in Zephyrhills). The Shoppes at Diplomat are yet another example of infill - smart development by doing more with less. Certainly the high density projects IN THE CITY OF FORT MYERS are infill projects that make great economic and environmental sense - but were fought by some of the city officials. (See last week's column posted HERE). Some of the densities of these projects in the city are as high as 125 du's per acre. This is smart growth and should be supported.

Because of the attractiveness of infill economics, you will begin to see tear down developments: developers buying old, rundown areas and rebuilding them. You saw this in East Fort Myers with Oasis and there are other projects in the same area that are being evaluated for redevelopment.

Land, What is it Good For?

Land; wars have been fought for it, nations built with it, and blood shed on it. Land gives us fuel, food, water, shelter, and security. With the return of World War II veterans and their insatiable need for housing, the United States began its long love affair with suburbia. Furthermore, with the decline in agricultural business and the emergence of the automobile as the major source of transportation; living in the suburbs became the American ideal. For the United States, at least, this was a reversal of the long term trend of urban growth. The decline of the small farmer and the increase in manufacturing headquartered in the cities brought urban growth in the past, but since mid last century we have seen urban populations decline.

This decline is reversing with the approach of $5.00 per gallon gasoline, the high cost of infrastructure for development, and the increasing desire by Americans to preserve land while being close to medical and other services.

What Does all this Mean?

Look for the trend back to urban living. Look for smaller homes on less land. (Look for bargains, by the way, that buck this trend as sellers turn to the cities and higher density living). There will be more infill projects and more homes closer to services like medical facilities, schools, jobs, and mass transportation. Developers and residents alike will be "doing more with less".

Look for more fractional vacation ownership like Dock Of the Bay as buyers buy vacation homes in shares, not he entire pie.

Look for projects that paid a '"high load factor". The infill projects that overpaid for their land will not come out of the ground; certainly not if the developers bought the land un-entitled for high density and were counting on changing the density to achieve their economics.

Prices on multi family and single family projects continue to drop. Many land parcels were purchased when exit strategies included sale prices that no longer exist. Load factors of $30,000/du for multifamily are unrealistic except in the most prime of locations.

The exit strategy for any developer is THE primary consideration. They make their money when they buy, not when they sell, and many developers already blew it with their buy PLUS their exit strategy is out the window. Furthermore they are clobbered by misguided environmentalists that think high density is bad for Florida, undercutting their economics of scale.

We are in a time of constriction and economizing. But remember, unlike the rust belt states, Florida is still in a net growth mode. Lee County will still have 800 new residents a month.

The Baby Boomers are coming.

Perspectives in Real Estate; “And the Good News is….”

noreply@blogger.com (Gregg Fous) — Sun, 13 Jul 2008 15:22:00 +0000

Perspectives in Real Estate; “And the Good News is….”
Commentary by Gregg Fous

Oh how short our memories are; or how young we are: Back in the 1980’s almost every major bank in the US was in big trouble and would have had to file for bankruptcy had not the government given them time to write off their loses. The S and L crisis was devastatingly real. In the 1980 the prime rate was 21% and inflation was 13.5%. (See 1980 news flashback). I remember buying a few investment properties back then and being thrilled to be able to buy two REO properties and getting a five year fixed rate at 12% (The paper was held by the bank that wanted to unload the property)!
Today I can’t turn on the news without hearing about Countrywide, Indymac, Freddy Mac, Fannie Mae and the troubled banking industry. Foreclosure tours, people out of work, and the largest bank crash in recent history are water cooler talk of the day.
The Indymac news is not good (Click here) or is it? For instance, do you realize the bank will actually reopen on Monday as Indymac Federal bank? The Feds will begin to market the bank to get it back into the private sector starting next week. In my mind that fact that this bank has been “rescued” by the Feds so quickly is good news.
The economic run we had since the 1980’s and it’s near banking collapse is staggering, but who would of thunk it back then? Sometimes we can’t see past the end of our empty wallet, or our short order backlog, or our bleak short sighted forecast.
Folks, when I get up in the morning I choose to be optimistic and I challenge you to do the same. Sure times are tough: Oil prices, food prices, impact fees, and job losses are all taking their toll. But amidst all this there is good news, sometimes very hard to see from your own perspective, but there are ways for us all to benefit, in the long term, from how we all respond to the current economic crisis. The good news is how we as Americans ultimately respond to the current economic crisis.
On the Indymac situation: the depositors succumbed to fears about the bank collapsing and caused the bank to collapse. The collapse, in turn, elicited a swift and decisive response from the Feds. They took over the bank, assuring the safety of the deposits. Furthermore, I believe the government will not allow the collapse of Freddie Mac and Fannie Mae. The storm will be tough, but we will weather it. We may see a few more failures but the resultant belt tightening and restructuring of the banking industry and its loan practices will have long lasting, positive effects.
Indeed it is how we respond and react to these tough economic times that is the most important thing. We will evolve into a stronger, more stable economic base, where logical growth will prevail over irrational exuberance.
So what’s the good news in all this? The banking debacle should not have been a surprise, and the good news is that we are already in the correction, the fix, and the appropriate response. I will say that I believe that we have perhaps over corrected in the short term in the banking industry. We have over tightened lending requirements and shut down profitable segments of the business along with the unprofitable ones. But this over correction will swing back around and the end result will be good, sound banking. It hurts us now, but we needed it.
Our responses to other bad news is, well, good.
I have referred you to this link before but the law of supply and demand is worth revisiting. The law predicts that the price level will move towards the point that equalizes quantities supplied and demanded. This law is the reason we will never run out of oil. This law is also the reason that all the vacant homes in Cape Coral and Lehigh will be purchased.
Here are some of our good responses:
• Belt tightening. Doing more with less. Economizing where possible.
• Price adjustments. Move prices down to meet demand.
• Protect the core. Protect the family, shelter, provide food. Move down to Maslow’s base needs.
• Fix what broke us. Lax lending; overleveraging; irrational purchases; and poor long term planning.
• Go back to basics. Offer sound service; take no short cuts; and take all the steps needed on the path to success.
• New Business models are developed based on the above. New opportunities like virtual offices, urban living, economical transportation and housing, and in-fill projects. Look for changes where manufacturing facilities are placed, how houses are constructed and their size Look for a “New Conservatism”
• Investing in property now at prices that are below replacement costs. Buying distressed land and development opportunities for a mid-term hold.
Less than good responses
• Opportunistic flash in the pans. Taking advantage of short lived opportunities and building a long term strategy on them is wrong. Just as building a long term strategy on making money by flipping rapidly appreciating homes was wrong yesterday, so is it wrong to build a strategy on short lived businesses like foreclosure tours, buying and selling REO’s, and selling bank paper.
• The Ostrich approach. Don’t hide your head in the sand. Take remedial action now. Talk it out. You are not in an exclusive club right now. Get out and find solutions with your network of business and social networks.
Let me mention just a few of our “problems” and comment on the good news:
Too many houses on the market. What we really need to look at is the number of vacant homes on the market; these are the “overage: we need to fill. Prices have now dropped to a low of around $80/sf. At these prices the houses are selling. As the selection gets “slimmer” the prices will climb again. After all, builders cannot duplicate these homes at these prices. These homes are bargains in today’s market. Housing is now affordable. Lee County is now attractive to retirees again. This is good news.
High Gas Prices. The response from most Americans is to drive less (consume less gas) but I am sure we will get accustomed to these prices and this response will be tempered somewhat. The good news is that Americans now need to live closer to work and more of the infill housing will sell and get occupied. Some other good news: Look for more local distribution centers, more manufacturing near consumption, and more mass transit. Look for the long term response in automobile design. TIP: It is easier to drive 20% less than sell your gas guzzler to save $100/month on gas by paying another $5000 for an “economical” car.
Hard to borrow money. The banks are in an over corrective mode now, but this over correction has brought more logic and sound investing. This is good news.
Food prices High. Most of these price increases are related to high energy costs and high corn prices. (See ethanol production and food costs article) It is hard to see the good in high food prices, but I believe the good you will see will come out of how we respond to these high food prices. The law of supply and demand will curtail some of these increases and now Americans are adjusting their shopping habits and food consumption patterns.
Jobs hard to find. This is tough one to see any good in, but again, the response we have to this is what will be the positive spin. Lower wages attract more employers. Loss of jobs encourages more entrepreneurism. It hard to tell you that your job loss is good for the economy, just as it is hard to tell the tree that burned down that the fire was good for the forest. But macro economics will prevail.

I am optimistic about the responses we will have in Lee County to the current economic situation. But, will Lee County Commissioners implement a stimulus package by waiving impact fees? Why not waive them for all infill projects where the infrastructure already exists? How about mass transit, will we promote this? Will the Airport Tech Park get an added economic boost for completion? How about removing some of the red tape for new businesses?

In the final analysis, it is how we respond to adversity that is more important than the adversity. It is in our repose that we will see the solutions. We need to be proactive in our own destiny. We need to take action, look at the long term results and look for the good news in everything.

Gregg

noreply@blogger.com (Gregg Fous) — Sun, 18 May 2008 15:29:00 +0000

How Rude of You to Notice! Gail and I were driving down Route 41 one day and there as a minor fender bender off to one side of the road. The two automobiles involved were off on the turn lane way off to the right. There were two sheriff deputies and their cruisers with lights flashing; one in front of the accident and one behind. None of the cars were a physical hindrance to the flow of traffic. Traffic, however was backed up for at least one half mile in either direction. As I approached the accident site, I was determined not to look. I kept my eyes focused on the car ahead of me, forcing my concentration away from the side of the road; feeling my blood pressure rise every time the guy in front of me turned his head and slowed his car. My mother's admonition of it being "rude to notice was ringing in my ears. My mother was a sweet lady that stood about five feet tall and weighed around 100 pounds. But those 100 pounds packed a sharp wit and ability to cut me down to her size with ease. Now understand that I am 260 pounds and six feet four inches tall and I don't cut down easily. One of things she taught me was, "Gregg, it's rude to notice." I still remember with a smile, when mom, in her later years, her, well, um, sphincter muscles weren't as athletic as they should be. If I dared to exclaim "Oh Ma, pullleeese!" to her as she rather noisily walked around her kitchen, she would, without hesitation, turn and look me in the eyes and say, " How rude of you to notice!". But, it's human nature to notice, it's what we do after we notice that is important. In my business we track the foreclosures. Every Monday I get a complete summary put on my desktop of all the lis pendens and the properties scheduled to go to the court house steps. I will admit to you that when I first get the lists my immediate reaction before organizing the spread sheet by value and then by region or bank so we can best serve our clients that deal in paper; is to scan the list of property owners to see if there is any one I know. (There always is; Sorry mom). We live in such an open society compared to other countries. Did you know that in Germany most sellers of homes don't even allow a sign to be put in their yard? If a broker over there wants to find out the history of a particular home, nothing is on computer, or if it is, the information is protected. They can't look up the owner of an address like we can, they can't get a running total of sales in the district, or indeed see what a house sold for down the street: At least not very easily. We Americans don't think "noticing" is rude. We believe that it is our right. We are accustomed to open information, frank open discussions, and open and free dissemination of information. I shudder to think how tough my residential and commercial business would be if I could not sit here by the riverside in my shorts and tee shirt and do research on property and people on my laptop. For example, right now we are involved in the acquisition of large portfolio of bad paper from a small group of banks. The means we will be acquiring the notes and mortgages from defaulted homes for our client. Some properties in the portfolio have already completed the foreclosure process; some are still in the process. We will be bringing in over 150 single family homes to sell and many vacant lots. Once our final offer is accepted we will have just over TWO WEEKS of due diligence. Imagine inspecting documents and doing physical inspection of over 150 homes in two weeks without all the easy access we have to information, with out court records and liens at our fingertips, without Google Earth for aerial pictures and mapping systems for locating the properties. When I first get the packages, the first thing I look at is the total. Twenty Million dollars; Forty Million dollars: Just numbers right? But all real estate is local and each property has a name, a family, and certainly always a story. This is not a commodity like corn or pork bellies. Foreclosures are everywhere and it would be a rare resident of Lee County that does not know someone that is going through it. When you read in the press about large hedge funds buying up portfolios of loans, remember that there always has to be "feet on the ground"; there has to be a company to manage each individual property and deal with each individual loan. The homes need to be taken care of, lawns need to be mowed, electric bills to be paid, and the home has to be preened for the market. There are personalities involved in every deal. It is certainly hard to not "notice" the foreclosure issue. Foreclosure. Real estate is one of the few things that you buy in life that needs all sorts of documents describing and proving that you indeed own it. Most things you own you can possess, you can move the item and proving ownership is more a matter of acting as an owner. Not so with real estate. In fact having the title does not even prove ownership, according to some court cases. Title insurance, however, will solve most of these situations for the borrower. The lender will require title insurance for just this reason. The insurance protects the lender and you against claims against that title that may occur after you close. Florida is a lien theory state. Here in Florida the property acts as collateral for the note. When you borrow money to buy a home you sign two very important documents. The first is a note to the bank that says something like, "I promise to pay you X dollars under the following terms". The second piece of paper is a mortgage. In effect, you give a signed mortgage to the lender that says if I DON"T pay you, you can take my house instead. When you fail to perform to the terms of your note, the bank will file a lis pendens, in effect a public notice that the property is being foreclosed upon. Full foreclosure proceedings can take six months to a year for an uncontested foreclosure. Once the home is foreclosed upon, the bank may be entitled to a deficiency judgment that will allow the bank to seek damages that they may incur if the amount of money they get for the foreclosed property at auction is short of the amount owed. In addition, any amount of loan that is forgiven by the bank may have adverse tax consequences as well and may be treated as taxable income to the borrower. Should you find yourself in the unfortunate position of being foreclosed upon, please seek the advice of a competent attorney and tax advisor. This is not a matter to be treated lightly and there are ramifications of taking no action at all. Do not hide your head in the sand and hope the situation goes away. That being said there are a large number of homes that have been foreclosed upon or are in the process of being foreclosed upon that will find their way back to the buyers at market prices that in many cases are less than half or what was owed to the bank. ( This will be the case on the properties we will bring to market shortly) A good real estate agent can work with you to find these bargains. Do not fool yourself that just because the house sold for $400,000 three years ago it is a bargain at $200,000. This may or may not be the case. Get competent advice here. Once you decide to spend a certain amount of money, look at all your alternatives. Real Estate, like Politics, is Local Lee County real estate may be affected by the national trends; heck we may have even influenced the national trend, but we are not, in any shape or form, just like the national trend. Real Estate prices are a very local thing. Prices for an identical home can vary from place to base based on location, orientation to the sun, closeness to a bus line or shopping, and who or what is next door. Let's not be fooled by media reports discussing national trends. They are meaningless to the guy that wants to sell his canal front lot. All he needs is one qualified buyer to walk up to his door with a checkbook. But let's take a look at some of these media trends regarding the housing market. There are seven states that have a "situation" regarding foreclosures The Midwest states of Ohio, Michigan, and Indiana have been the states hardest hit with the number of foreclosures, but these foreclosures were caused by the loss of jobs and a trend that started years ago.The heavy investor states of California, Nevada, Arizona and Florida were affected by investor glee. The job losses followed by the downturn in the construction industry. Locally Lehigh was hit harder than Cape Coral, the North Cape harder than the South West Cape, and single family homes harder than condos. What really brought on the current over supply situation locally was affordability. A few years ago I was attending meetings and conferences about the affordable housing crisis. The new buzzword was "workforce" housing. Where were our teachers, policemen and the people that worked for a living going to be able to afford to live? One of the reasons Florida grew so fast over the years was the ready availability of affordable housing. Heck it was cheap to move here and it was cheap to live. When that no longer became the case, people stopped buying. They stopped buying but the problem is builders failed to notice this and were slow to react or were unable to act because of the long supply chain between land acquisition, permitting, building, and getting a certificate of occupancy. Or indeed they noticed it, but failed to tell their "investors" that the exit strategy the investor was counting on was locked shut by lack of demand.What is going to get us out of the housing crisis, at least locally, is the return of affordability. It's happening now. Buyers are returning to scoop up the bargains left in the path of the foreclosure steam roller. Banks are taking it on the chin an average of 60% on the unpaid balances. Buyers, and these are the end users that left in August of 2005, are realizing great savings on their purchases compared to prices of late 2005 and early 2006. Don't take my word for it , get a reliable Realtor and get the facts. Remember, you make your money when you buy, not when you sell. Only you decide how much you will pay for something, but when you sell, you need to let the buyer make the decision on what he will pay. Come on back to the housing market. It is affordable again.

Gregg.Fous@engelvoelkers.com

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Archive Newsletters

noreply@blogger.com (Gregg Fous) — Tue, 13 May 2008 15:26:00 +0000

Paralysis by Analysis in Real Estate I am sure that all of you have heard term "Analysis Paralysis" and even seen or experienced the phenomenon yourself. Whatever the decision that needs to be made, it is forestalled and in most cases avoided, by excessive analysis. As Realtors we see it all the time. Commercial transactions may have a higher incidence of it but more and more residential buyers are suffering from the same malady. I may suffer from the reverse malady: "Ready? Fire! Aim!" but both maladies have some things in common and I would like to go over some of them point by point ( Is this too much analysis?? LOL): 1. The more complex the situation.

Ok, it's pretty clear if there is a deal or transaction that you don't understand, you will have to do some analysis first. The less background you have, the less experience you have, the more comparisons and indeed, study you will have to do. I guy like me, that may have many transactions under his belt on duplexes for rent may seem like a "ready, fire, aim" guy, when buying another duplex; but the reality is that familiarization lessens the need for analysis. I may make assumptions on past experience where the newbie cannot. He must analyze more deeply.

2. The higher the risk.

We must always keep in mind that the amount of analysis should be in direct relationship to the amount of risk. If I am a newbie making an offer on a duplex, and the only risk I am making is to spend the next thirty days doing my deeper analysis, then the actual making of the offer is a low risk step. Many newbie buyers fail to realize this. They will ask for all sorts of information that is not as easy to get as it would be if the property were under contract. I am often asked, for example, for the list of tenants in a commercial building prior to receiving an offer. The prospective buyer wants to look at lease expiration dates, the financial credibility of the tenants etc. Better the prospect should make the offer first, based on assumptions of what he expects to see in the due diligence period, and then adjust his offering price after due diligence based on the facts that he did find out. There are ways to mitigate your risk (due diligence, escape clauses, ) that will help you avoid analysis paralysis.

3. The ability to delegate

Buyers need to build a team of trustworthy advisors like a good real estate agents, attorneys, and accountants. The inability to trust those people will lead to analysis paralysis. I see it all the time. I will say this, trust but verify; after all it is YOUR money, not your agents and certainly not your accountants. But delegation to your support people should be routine.

4. Prioritization

In order not to get bogged down in minutia, set your priorities. I have often said in this column that sitting down with your real estate adviser and establishing priorities and objectives is critical. This is not to say that they cannot be changed, but actually writing down your objectives and sharing them with your trusted advisors will help crystallize your analysis and help you avoid paralysis

5. The Ritualist .

The ritualist is the person who goes through the ritual of the analysis but ignores the purpose. I see ritualists every day. I'll say to someone, "Did you get through with so and so and find out the answer?" They reply, "I faxed him", or "I sent him an email," or "I left him a message"; Just to let me know they are trying but don't have the answer.. They think the proof of the attempt will satisfy me. In the same way the ritualist loses sight that the goal is to make a purchase, not just to do the analysis.

6. Goals

"Setting the goal; Making the goal; Scoring; Keeping your eye on the goal post." We all hear these things but many fail to do so. Unclear goals will muddy the analysis. What are we looking for? What are we trying to prove? Is the goal an 8% cap rate? A certain cash flow? A home on a golf course from under $700,000? Without clearly defined goal analysis gets stalled.

7. Experience

Ever hear someone remark that good old so and so has good gut instincts on when a deal is right? This may be true, but his instinct comes from experience. He has seen the situations before, he recognizes a situation from the big picture. He picks up details while absorbing the entire picture. He may look at a deal for a ten year old rental property and make some assumptions during his lighting fast analysis. He knows that ten years is about the life of a water heater, air conditioner, and most appliances. He didn't actually go into the home and inspect them yet. He made his offer with out inspection, figuring he would get to look if his offer was accepted during the due diligence phase. To some he may look like a "Ready? Fire! Aim!" guy, but his experience tells us he really is not.

8. Pack Mentality

For some reason earlier this week I had to go to Tatiana's desk to look something up on her computer.. She had a note posted on her monitor that was a quote from. Warren Buffet: "Be fearful when everyone is greedy and greedy when everyone is fearful" I love it. It changed my attitude the rest of the day. People are very fearful right now; buyers are scared and sellers are desperate. Now is the time to get greedy. Following the pack? Not me. Too much analysis will slow us down.

9. Defensibility

Some people go though analysis so they can later say, "This is why I did not buy." They are doing the analysis for the wrong reasons. They want to be able to defend their inaction.

10. Alternatives

Remember Yogi Berra saying, "When there is a fork in the road, take it?" Successful people are all about alternatives. "If not this, then what? If you have already decided that you can invest, say $100,000, what are the other ways that you can do this? What are the alternatives? Any analysis should take this into consideration. There is always an opportunity cost. Look fot r it, look for alternatives.

11. Hung by their own Petard.

"Don't let him get hung by his own petard" Is an expression that I have used when talking about a decision made not on reliable analysis but faulty analysis that was self serving. He knows his goal and made the data support the answer he already had in mind. If you are going to be honest with anyone, make sure it's your self.

12. Fear of Failure.

If we keep analyzing we eventually will be right, or the deal will be gone and we will not have to fail. Weigh your risks. Sometimes you will not know if the fork you take is the correct fork or the wrong fork until you take it.. But it is not like jumping out of a plane at 30,000 feet.. You should be able to turn around and try the other fork. (Stick your toe in the pool before you jump in)

13. Romance versus Logic.

Buying a home and buying an investments are two different things.. Don't confuse them. You need romance in your home, you don't need it in your investments. More next Week, GreggGregg.Fous@engelvoelsker.com

Archive Newsletters

Who Does your Agent Work For?

noreply@blogger.com (Gregg Fous) — Thu, 08 May 2008 15:31:00 +0000

WHO DOES YOUR AGENT WORK FOR? (MAKE SURE IT'S YOU)

Many years ago when I was living in Cincinnati I went to a business luncheon and the Key Note Speaker was a local journalist and ex-mayor of Cincinnati, Jerry Springer. There were only about 40 to 50 in attendance so it was a rather intimate gathering. I have always remembered something Jerry said about interviewing a potential news source. He said that he got the most important information from his sources after the interview was over; after he turned off the camera, turned off the microphone, or put his notebook away. The source would then let his guard down, assuming he was off the record, and he would wind up thinking Jerry was just a friendly guy that he could confide in. The source would "forget" who he was talking to.
In real estate, never forget who you are talking to. Is that agent you are chatting with working for you or for someone else? In fact, is that agent that you HIRED working for you or someone else? In Florida, a residential real estate licensee has three clear roles. He can act as
1. A single Agent, or
2. A transaction Agent, or
3. No Relationship at all
In all cases you should assume that the agent works for the OTHER GUY in the transaction unless you have signed a document that makes him YOUR SINGLE AGENT. Be careful what you disclose about your motivation, how high or low of a price you will take or pay, or any personal information that might effect negotiations (like your pending divorce or financial status).
When taking a listing for a property most Florida real estate agents represent themselves as a transaction broker. A transaction broker owes no loyalty, obedience, full disclosure, or full confidentiality to his client like a single agent would. Most agents find in easier to act is this role than as a single agent.
As a broker I always prefer to sign a single agency listing. I like to know very clearly who I am working for and who I owe loyalty to. It's less confusing for me and serves the client better.
When you are touring open houses or models for a developer, you can be sure that the agent is either a single agent for the seller or at the very least a transaction agent. Having a sharp agent as a single agent representing you and your interests is a wise move. There is a well believed myth that if you want to make the best deal on a purchase you should call the agent that has the listing. The popular thinking is that you can make a better "deal" when only dealing with one agent. The theory is that he has more room to negotiate since there is only one commission. It is my belief, however, that you are ALWAYS better off with good, professional and skilled representation in negotiations than if you deal on your own. The key here is the quality of your agent and how he can negotiate.
I have found that some agents not only don't work for their client very well, they really are just working for their own objectives. A few years ago I made an offer on a commercial condo here in Fort Myers, not too far from my home. I represented myself to the listing broker as an agent and made an offer on the property that was close to asking price. In the contract I was entitled to half the commission. Later that morning I was discussing this potential purchase with one of my friends. He knew the seller well. I asked him to do me a favor and put in a good word for me, tell him I was a serious buyer etc. My friend later reported to me that the seller had a few other offers that same day. I promptly called the listing agent and told her what I had heard and that I would remove all financing contingencies, I would shorten the due diligence period and told her very clearly that I wanted the place and there was room in my price. I clearly wanted the condo.
She called later that day to tell me that the seller had accepted another offer. No counter. No negotiations. I was furious. Indeed I would have paid OVER the asking price and was prepared to do that. Very simply the listing agent was not looking out for the best interest of her client. She was more concerned about getting the full commission - EVEN THOUGH TAKING A HIGHER THAN ASK OFFER WOULD HAVE BENEFITED THE SELLER. You see, the client was paying six percent no matter what. I lost the deal and the seller lost another $10,000 or so.

Brick Walls are there for a reason

noreply@blogger.com (Gregg Fous) — Thu, 08 May 2008 15:30:00 +0000

Brick Walls are there for a Reason

This past week I traveled to Tampa for a meeting with the other franchise owners for Engel and Voelkers. We all had dinner just down the street from the Tampa Engel and Voelkers Shop. It was motivational for me to be around other like minded entrepreneurs anxious to be a success in the luxury home brokerage business. We compared stories over the tinkling of glass and the factitious care of waiters and wine stewards. As I looked around the restaurant (Timpanos in Tampa's Hyde Park) I could not help but think that business was good, we are not in a recession, and all these real estate brokers were making not only their quotas but enough money to eat at Timpanos and listen to Frank Sinatra recordings over the din of martini glasses and the poof of the flames of Steak Diane prepared table side. But alas, we were being treated by the master license partners, we lowly brokers did not have to pick up the tab, and indeed once we left the establishment, reality started to leak back into my conscience.

I left a bit early than the rest of the guests and headed over to my brother-in-laws' home to spend the night. Jake and his wife Janice live in Tampa. Jake builds restaurants up and down the east coast. We shared some stories about the slowing restaurant business and commercial real estate in general.

Once I got settled in for the night in the guest room, on the night stand was a copy of Randy Pauch's book, "The Last Lecture" It is a short book recounting Randy's lecture on what he wanted to tell his kids before he died. At 47 Randy was given six months to live. (Randy Pausch). The book was inspiring, made me cry a bit, and indeed deprived me of a full nights sleep.

There was a chapter in his book about brick walls. Randy eloquently teaches us that brick walls are there for a reason. They teach us how badly we want something. We all have our brick walls. Some are big; some are small, but their size and their ability to stop us depend more on us than the wall.

As a manager of a business I am confronted with brick walls on a daily basis; many of these brick walls belong to someone else and it is my job to put these walls in perspective for my associates. Scaling walls is not easy. Going round them is not easy. Turning away from the sight of one, unfortunately is easy.

In our real estate business we have many brick walls. The question you have to ask yourself is: how badly do I want to accomplish my goals? Are there alternative ways around the wall? Can I climb it? Can I knock it down? Is it indeed a real wall? Is the wall there just for you or can some one else with different tools knock down that wall?

A few Fridays ago I showed up at our downtown office to meet a family that was due to close on their home purchase. The representative for the lender was there but the title agency, after an hour wait, was still a no show. A brick wall - the title rep had all the paperwork. The buyers had their money and were ready to move in. The lender was ready to fund, but the title company, representing the bank that was selling the home (it was an REO sale), was a no show. I was told there was no way to close because we could not reach any representative of the title company in Sarasota.

I don't like brick walls: a few phone calls later, we had seller email all the documents to Valid Title, here in Fort Myers and with in three hours the deal was closed and the buyer was able to move in that afternoon. No brick wall.

A few years ago I was getting ready for another closing - one on a house Gail and I were buying. My attorney called me three days before the closing and told me that there was a cloud on the title and the home could not be sold. This was a surprise to the seller, who had already put a deposit on another home and had packed their moving van; it was a surprise to me, as Gail and I had already begun our move, and it was of course a surprise to the lenders. The deal was in danger of falling apart totally. The seller was going to lose their new house purchase and deposit, Gail and I were going to lose our dream home, and money that was spent was, well, spent. Time for some brick wall climbing.

We went around this brick wall this way: We were able to loan the seller $250,000 by taking a mortgage from them on another home they had that had clear title on, this way they could buy there next home, Gail and I were able to lease the home from the seller until title cleared, and all parties were satisfied. Wall gone.

Sometimes I hear about little brick walls from people that indicate to me that they really didn't want something bad enough to find away around the brick wall. I always tell my employees I do not like to hear why something can't be done.. I like to hear alternatives. I want to here ideas.. tell me how TO DO IT, not HOW NOT.

"My business cards didn't come yet." The agent who doesn't want to go out call calling may use this as their brick wall that prevents them from cold calling.. The agent who adds, "So I printed some temporary cards in the meantime," is used to scaling walls and getting to his objective.

Eighty percent of our success comes from within, not from our tools or outside influences. Don't blame the brick walls, and indeed don't count on them as substantiation for your failure.. Find a way around them to your goals.

noreply@blogger.com (Gregg Fous) — Sun, 13 Apr 2008 15:27:00 +0000

How Business?

"How's Business?" I probably get asked this question at least once a day. Only thing is, these days, the inquirer really wants to know and is not just making a polite greeting. I'm always torn between the deep truth and a glossy version of it. The glossy version is that business is slower than I want it to be, in both my commercial segment (Market America) and residential (Engel and Völkers). Residential is picking up velocity and we are seeing Europeans buyers come in and buy and we are seeing end users come in to feed on our wonderful bottom priced inventory.

Here's the deep truth. Let's start with Commercial. Market America handles retail and office leasing and many properties for investors. We are really a boutique commercial agency and take great pride is selling most of our own listings. I have always been a "deal' guy and an immersion investor and broker. But most of the investors are on the sidelines right now. They have either have been over leveraged and are not able to put the funds together for a deal or are patiently waiting for cap rates to come up.

Lease rates for office and retail are declining. For a recent swumary of lease rates in office in our area, GO HERE. Notable exceptions are the Pine Island Road Corridor for retail. This is because this has been an underserved part of our county. Our Shoppes at Diplomat leasing is going well. To see our other listings lick here and Also Here (Two Groups of listings). Bridge Plaza, an existing shopping mall in front of the Landings on McGregor is for sale. We are also handing the few vacancies that come up. Activity in commercial has slowed perceptibly the last three to four weeks as walk-in traffic has slowed. We are seeing quite a bit of requests for smaller space as companies downsize in this market.

Many restaurants are closing and some businesses are shuttering for the summer. The mid to low range restaurants are faring better that the high end establishments. Belt tightening is happening all over the economic spectrum and diners either stay home or go to lower priced eateries.

The hospitality segment (Hotels) are seeing lower cap rates and money is hard to come by for this segment. Hotels suffer when car travel goes downs.

Developable land is not moving well - and when it is, it is at distressed prices. This is a good time to land-bank multifamily, single family lots and commercial parcels. We are selling a few parcels for immediate development, but not many - and the prices are low.

We are doing a great deal of work on foreclosed and bank owned properties. Our commercial division is working with the banks and the funds. We are doing acquisition consulting, due diligence, and planning their exit strategies. This is where we are uniquely qualified since we also operate the Engel and Völkers franchise. We examine the portfolios.; make buy recommendations, and then put the inventory onto Engel and Völkers sales team. The commercial team is very busy - just not very profitable right now.

In the Residential Segment, business is also very busy but not as profitable. As I need it to be. This is because the segment of the market that is moving is the lower end. Also - when we do get deals , it seems that often the lending side of the transaction is often falling apart. Our title company, Valid Title, tells me that they are seeing many deals being pulled by the banks at the closing table. This because the underwriting requirements seem to change often. Money is not expensive, but the lending institutions are very strict on underwriting.

Our European marketing is paying off as we have buyers flying in and buying - mostly single family homes. Engel and Völkers now has 14 agents and at least half of them are working with buyers. The buyers are patient and not making quick decisions. We have, however, had a number of instances that the homes that the customers are about to tour or make offers on are gone - sometimes the day they call on them. I do like to see this because it emphasizes some urgency. The great deals do not stay on the market long.

Traffic at sales centers like Parkside and Dock of Bay is down, but the quality of the traffic is high - there are not many lookers, but those that are, seem to be buyers. The unfortunate thing is that these buyers are still not pulling the trigger. Many of the sales offices report that they the buyers left town this year without buying, thinking that there would still be inventory here when they come back. Some will be disappointed.

Waterfront property prices have held up well and we are starting to pick at the inventory as it slowly goes down. Right now we have a number of waterfront offerings; you can search our E and V site HERE. I am pretty excited about our newest listings - an estate next to Henry Ford's home on McGregor. To see the listing click here on CASA RIO. Be sure to look at the virtual tour: Virtual Tour. The owner has been rebuilding this home for four years and it is now ready for resale. Two and ½ acres river front on McGregor is certainly a rare find.

Foreclosures in Lee County continue to be a major concern and as I mentioned above, we are very involved with both the funds acquiring blocks of these properties and the banks to help them dispose of these properties. You will be hearing more about this from me in the future.

You can search the MLS at any time bny registering by clikcing the side bar box in the email.

Best to you and yours,

Gregg
Gregg.Fous@engelvoelkers.com

What is Really Going on in Fort Myers Real Estate?

noreply@blogger.com (Gregg Fous) — Tue, 19 Jun 2007 05:26:00 +0000

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

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Real Estate Auctions, Short Sales, High Point, North Star

noreply@blogger.com (Gregg Fous) — Tue, 19 Jun 2007 05:19:00 +0000

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

Yield Curves, European Buyers, Commercial Growth

noreply@blogger.com (Gregg Fous) — Tue, 19 Jun 2007 05:14:00 +0000

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.

What is the "Right Price" on Commercial Properties

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:31:00 +0000

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.

Price Elasticity of Real Estate

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:30:00 +0000

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.

Tend to the Trend

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:29:00 +0000

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.

Find Your Own Cat Pee

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:27:00 +0000

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.

Give them the sleeves off of your vest

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:26:00 +0000

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.

The World is Getting Flatter

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:25:00 +0000

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.

Top MIstakes Real Estate Investors Make

noreply@blogger.com (Gregg Fous) — Mon, 04 Jun 2007 02:24:00 +0000

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.

Insurance Impact Fees and Taxes

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:37:00 +0000

Volume 5 Number 2 January 12, 2007
Insurance, Impact Fees, and Taxes
From Will Rogers, "...out here I had been putting what little money I had in Ocean Frontage, for the sole reason that there was only so much of it and no more, and that they wasn’t making any more..." April 13, 1930 (Note: this is the line that is often paraphrased to say: put your money in land, because they aren't making any more of it. This is the most "famous" of the Will Rogers quotes on land or real estate.)
Real Estate has not changed much since 1930, they still are not making any more waterfront land, but now what land there is, is getting taxed, insured and other wise burdened with the ever increasing cost of government.
As investors in commercial and residential property here in Florida, the triple whammy of Insurance, Impact Fees, and Taxes will open up opportunities for us, not just problems.
Older properties are costly to maintain and insure, and yet on the other hand new properties will be much more expensive to build and permit. In between lie the opportunities; opportunities in newer construction and buildings that are under construction.
(By the way, Hurricane Charlie’s EYE OF THE STORM went right over my then brand new Grand Isle in Burnt Store Marina – I had ZERO damage to the condo and only minor damage to the roof air conditioner units. New construction with out a doubt in my mind can withstand amazing stress.)
My update to Will’s famous quote would be something like, “Buy properties that have been built since 1994 but before they raise the impact fees in mid 2007, cause after that it will be too darn expensive to build.” Once this inventory is gone, those condos and buildings that need to be built after that – will be SO much more expensive.
Let’s take a quick look at each of the three “challenges” we have – Insurance, Impact Fees, and Taxes and where they may actually open up an opportunity for us:

Insurance
The Problem: Skyrocketing insurance premiums for improved property.
Very simply, older buildings cost more to insure than new buildings. Older income properties will have to increase common area insurance charges to their tenants and will sometimes cost more to rent than newer builders of a like kind, just because of the higher CAM charges. Older condo will have condo associations that will have to pass through VERY high insurance premium renewals.
Furthermore, when income properties change hands the new owner will have a higher insurance cost than the previous owner. (I am not sure why, but we have seen this to be the case time after time) - This means that sales prices will have to be adjusted to compensate for the lower returns cause by higher insurance costs or simply the higher cost of ownership, in the case of residential.
High insurance costs open up opportunities to the knowledgeable buyers that make use of this information to either negotiate a better deal or make a smarter buy on a newer building. Smart investors will make sure that their leases are drawn up properly with insurance costs pass-throughs. This puts the burden of the increasing insurance cost onto their tenants.
Savvy investors also realize that many tenants will be vacating older expensive leaseholds in favor of buying new energy and insurance effective buildings. This is why new office condos like Brantley Commons are selling well.
Impact Fees
Road impact fees are the fees that a builder or developer has to pay the county for the right to pull his permits and the money theoretically goes to build roads. These impact fees are set to triple come the end of this month. This means where the road fees were about $3000 for a single family home they will now be about $9000. A 10,000 square foot office building road impact fee was $23,000. Now it will be $74,000!! For the full schedule of ALL impact fees click here.
There is a mad scramble by builders, developers, and architects to get their plans submitted in time to get under the fee increase deadline the end of this month.
The buildings that will miss this deadline are simply gong to cost that much more to buy or rent. What is the effect of this? Higher costs for every one. Make no mistake, prices will not come down lower to meet the pre increase price, all buildings will ratchet up in price to the new levels.
What is the opportunity? Buy buildings that did not have to absorb these higher costs; lock in rental and purchase prices now. This big inventory we now have DOES NOT HAVE THESE FEES ON THEM.
Soon there will be a slow down in building, which will decrease supply, which in turn will increase prices because of the demand imbalance. We need to buy at the right time in this cycle.
Existing buildings, residential or commercial are a wise buy – until things even out because of supply and demand. (This is a GOOD time to buy). Let me put it to you this way, if I told you that there would be a mandatory price increase from all sellers on every building that will be built after, say June 1st, wouldn’t it behoove you to buy NOW? Of course it would.
Taxes
The Save our Home Initiative places a limitation of 3% on annual assessment increases on homestead exempt property. This generally is a good thing. But the unintended effect of this SOH was to, in essence, trap home owners in their homes. Many cannot afford to move and lose this ceiling on their taxes. Ken Wilkinson, the author of SOH, is a big advocate of the portability of this exception (See article here). Until this portability issue is addressed and approved, taxes on all new homes and commercial property will be the same. Homesteaded property will, however, have only a 3% increased in assessed value.
Once this portability is approved there will be many opportunities in the residential market. Homeowners that want to down size or simply change residences will be able to.
For more information on this issue, please visit www.leepa.org and click on Exemption Information on the left column.
As buyers of real estate in Lee County, Florida, you must have a thorough knowledge of the issues I mention above. My conclusion and I cannot repeat this often enough, is that prices will go up, not down. Be it a second or first home or an investment property, now is the time to buy.
To find our condo opportunities: www.investinwaterfront.com.
For some of our commercial listings click here
For archived weekly emails you can go here
Thanks! Happy New Year!
Gregg Fous
Gregg@ma-realty.com

Snowbirds - 2007

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:37:00 +0000

Volume 5 Number 1 January 8, 2007

Fort Myers Prepares for Snowbirds – 2007

The rumor is out that Pulte took over 150 reservations for their new offerings in Ave Maria. The new community has started quite a buzz and we are all pleased that there are so many buyers out there. The reservations go to contract soon and we are anxious to see how many convert to contract. I suspect the number will be impressively high.
I spent a good part of the last few days visiting sales centers and getting the pulse of what is going on for the New Year. December was a slow month – but there are exceptions. WCI Crown Colony had their best month of the year, Lennar’s new Community Tern Bay, just North of Burnt Store Marina and Grand Isle on Burnt Store road sold 18 homes last month. I visited their sales center and was impressed with both their prices and their offerings: Condos from $220,000 and single family homes up to $410,000 – all with bundled golf. David Meyers, the Area Sales Manager, told me that the amenitised projects for Lennar are doing very well. Their buyers are normally buying their second or third home and like the life style of their communities – in particular bundled golf. (The golf course will open up in two weeks). This project is just north of Burnt Store Marina where I spent the morning talking with condo owners in Grand Isle. There were a few closings last month in Grand Isle and one already this month. There is not a better deal for waterfront condos that I am aware of on this coast. It’s about the boating folks; they are just not making any more deep water marinas that you can live on. Now is definitely the time to buy here.
From Grande Isle I ventured inland to River Hall and The Verandah; both on Palm Beach Boulevard east of I-75. The Verandah was impressive and will eventually have 1,700 tops. Look for that to be by 2011. I particularly liked the feel of the community and the style of homes. Make no mistake, these homes are not by the beaches – it will take you a good hour in season to stick your toes in the Gulf – but they are wonderful lifestyle communities centered around golf, tennis, and active life style. Both have incorporated mix used commercial projects in their plans, River Hall will encompass a town center with a firehouse, a new elementary school and a village square.
The big boys like Bonita Bay and LandMar think growth out east of 75 and Palm Beach Boulevard is happening and so do I. There are some diamonds in the rough out there and if you are interested in adding some “in the path of growth properties” to your portfolio let one of our agents help you. Both Burnt Store Road, where WCI, Realmark and Lennar are building and Palm Beach Boulevard are excellent choices. But be careful, the blood is already in the water and the sharks are circling. Let a good agent guide you.
We are involved in some other waterfront (read RIVERFRONT) property on Palm Beach Boulevard and our commercial division is looking for an anchor restaurant for a waterfront location that we are working on. (Another great marina location that we will be marketing much down the road.) We also have an eight acre parcel for sale on the north side of the river that would be good for five or ten single family homes or up to 90 condos.
I promised an update on our North Carolina trip: We fell in love with the Boone, Banner Elk, Blowing Rock area and will return in April to scope out a place to rent for a month later this summer. I spoke to many Realtors and looked at a lot of land. Most in the business commented that they have not seen a down turn in the market. Keep in mind this is not a boom town area – more of a steady slow paced growth. Vistas and temps are marvelous with elevations from 3000 to 4500 feet; Lots of restaurants, shops and things to do. Gail and I sojourned here exactly because it has been a summer resort area for many decades. We stayed all week in a lovely B and B in Blowing Rock called Crippens. We could walk to shops, restaurants and bars, or sit by the fireplace and read. Home prices were not low, at least not close to town, but I will have to stay a while to get a good sense of what and where to buy. More to follow.
On the commercial front we now have about twenty properties that we have listed for sale – from Land to entitled development sites to office buildings and warehouses. I also have some good places to park 1031 money if you have some. Good NNN investments are still hard to find – so we continue to make our own.
I receive a weekly e-letter that I believe is superb and worth getting. It is written by John Mauldin and worth looking into. Today’s issue has a good piece on the housing market and his forecast for the next year. Click HERE to subscribe. My general feeling about the boom or bust in the housing market in our area is that I am going to ignore it - just like all the out of town buyers seem to be. For my team and me – it’s back to business as usual – usual being pre- 2005.
Best to all-
Gregg Fous
Gregg@ma-realty.com

Year End Message

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:36:00 +0000

Volume 4 Number 31 December 23, 2006

Year end message from Gregg Fous

It has certainly been a tumultuous year in real estate here in South West Florida, at least for me. But I am thankful. Thankful for all the friends I have made, the support I have received, and the professionals that have helped guide me through the year. I want to thank all of you that have been subscribers for the past years and for your kind comments and suggestions. I am thankful for my wonderful wife, Gail, who has been by my side every day offering support, wisdom, and the emotional connection that I need to keep me anchored.

I have been a goal setter since I can remember. Some goals I have achieved and some I have not, but the bar is always moving and as I reflect on the past years I realize that some of my previous goals have been met and indeed exceeded; and yet I failed to notice and I failed to reflect on those successes.

So now I reflect, sitting here in the early morning in a waterfront home basking in balmy temperatures of south Florida, a wonderful family all close by.

And I want to say thank you to all of you.

Have a very safe end of year, and please, as the end of the year approaches, take some time to reflect and enjoy the fruits of your labors.
____________________________

Gail and I will leave Florida for ten days and take a “busman’s holiday” and go property exploring in North Carolina. I don’t expect to buy anything, but any of you that know me know that when I played Monopoly when I was a kid I bought what ever I landed on. I will give you an update in January.

All the best to you and your family,

Gregg

PS. You may notice that I sent this email from my Hotmail account. I did this because I have been getting many complaints from subscribers that have not been receiving my weekly emails. If you get this one but have not been getting the emails for a few months, I would appreciate a return email telling me so - I may change software. I suspect that some servers are blocking my newsletter as Spam. Remember you can always go to www.investinwaterfront.com and read the newsletters from the archives.

Gregg Fous

Our Real Estate is Local, Our Buyers are National

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:34:00 +0000

Our Real Estate is Local, Our Buyers are National

The local housing market is showing signs of stabilizing, based on anecdotal evidence of new mortgage applications and activity at local title agencies; and some “running of the traps” by yours truly. I have also seen resistance by sellers to go below certain price levels and first time home buyers are being enticed back to the market with attractive interest rates and attractive buyer incentives. Sales center traffic is up and buyers are making deals.
Locals mostly agree that Lee county feels the pain last and heals the quickest, based mainly on the steady influx of new buyers retiring (Remember Baby Boomers?)
But are we in for a recession? It seems there are many pundits on each side of this issue, but put me on the side of the fence that is looking for a slowdown, and rather short lived at that, rather than a recession.
I believe we will still see some softening of housing prices, especially in some pockets, but in general they are beginning to stabilize and indeed in some niches like waterfront, increase.
“If my house is not selling at $500,000, why not have it “not sell” at $550,000?” These sellers are creeping up the price perception within communities. They figure if they are going to wait for a buyer, they might as well get the higher price. They may be right.
I tried last week, rather unsuccessfully perhaps, to get the point across that we need to think outside of our box. Our buyers will come from out of town and are not jaded by the negative publicity about falling prices and over inventory. The fall in prices, by the way, was just from the just the froth. The froth in high prices that had no substance in true value but was based more on speculators “whipping up the mix”.
Here are some of the reasons I believe we will not see a recession:
The inverted yield curve. While most inverted yield curves (Short term rates higher than long term rates) preceded a recession, this time our short term rates are not high, rather it is the long term rates that are low.
Credit is ample and cheap. Rates are still low and lenders, while tightening up on the sub-prime market, will not get hurt badly by the foreclosure rates on mortgages because they have sold that debt into the market. They are still aggressively pursuing debt. (By the way – I just got a new car loan at less than 6%!)
Inventory is being curbed. Housing starts are down and builders are not fueling the fire with an over abundance of single family homes and condos. Auto and manufacturing inventory is being curbed not because of interest rates but because of a correct and speedy response to demand softening. Manufacturers ability today to track and respond to demand is unparalleled in history.
US Exports are up. This is a result of the strong economies of our trading partners.
Retail sales are strong. The November results are above expectations over October (up 1%). Locally malls are reporting heavy traffic and strong sales.
Bond yields have jumped recently. (This indicates investors are more optimistic about the future)
Unemployment rate is low and looks like it will remain low.
Price decreases in the housing market lately were just “from the froth” of the last speculative drive up in prices.
Pressure on prices at the pump for gasoline have been alleviated
I am constantly reminded about the difference between local perception in our market and the perceptions from an outsider. Folks, we are still booming here. Ask any visitor from the north. Right now we have an absorption problem, but that is an insider view. To the outsider we have ample choices for their second home, fantastic weather, attractive financing, great restaurants, beaches, golf, and shopping. The high inventory is not a problem to them, but an advantage.
Two years ago buyers were being asked to buy in areas that were not served well by retail. Now, the retail developers have responded well to anticipated growth and have built new malls and neighborhood centers. Now the buyers can still get great deals and they don’t have to hope for the retailers to come. This is a big difference from now and two years ago.
This season is a great time to buy a second home and in a few years from now we will be looking back and kicking ourselves for not buying now, locking in both low prices and low interest rates. Our commercial business is very strong – both from investors and end users.
(If you still think our market is local, wait until Boston Red Sox Spring training starts and Daisuke Matsuzaka starts bringing in the tourists from Japan).
Lee County only recently topped the 500,000 population mark. This is a watershed event in our growth and has put us on national and international economic radar that we were not on before. Our prices and attractions are SOOOO much better that the west coast of the US. Matsuzuka will bring us exposure to a market that in the past has largely ignored us. (Thank you Red Sox)
In macro economic sense, Lee County is thriving and shows great promise in all indicators. This “bad time” in the housing market is just a spacer between good times. It will not last long and then I suggest you hold on and get ready for explosive growth.
Let us help you with your home buying needs. If you decide to sell, let us counsel you.
If you are interested in commercial investments click here.
Gregg Fous
Gregg@ma-realty.com

Who are you and What do you Want?

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:34:00 +0000

Volume 4 Number 29 December 3, 2006

Who are you and what do you want?

Friday night Gail and I threw our first Christmas party at the new home. About 90 guests enjoyed an unusually warm Friday evening riverfront poolside. The yard and pool area was spectacularly decorated by my daughter Nicole Long (Visual Manager at Saks Fifth Avenue) and catered by Jack and Micheal Elias, Inc.. Gail did a stupendous job making the house Christmas festive, warm and welcoming, and elegant but comfortable.. We both saw very little of each other as we mingled and made sure everyone got to meet each other.

I believe one of the reasons the party was a success (measured by the comments, emails and phone calls I have received since Friday – and perhaps the absence of left over food and alcohol) was the wide variety of folks that Gail and I count as friends. You may have heard me say before that, “it’s only work if you would rather be doing something else”, and indeed we do enjoy what we do and the people we associate with. We do business with our friends.

A great deal of the conversation was about real estate, as you can imagine; we have friends that are investors, builders, architects, real estate agents, doctors, lawyers, bankers, hair stylists, developers, furniture store owners, and retired tennis pros. We have friends that are handymen, teachers, salesmen, secretaries, photographers, marine biologists, and restaurant owners. There were as many opinions about what was going on in the market as there were people in attendance. Some negative, some positive, and some refreshing.

Those in attendance were all concerned about well, themselves. Their take on the market was tunneled by their own experience and shaded by their own palette. The furniture guy wanted to sell more furniture, the architect to design more buildings. The land investor was excited about the current market and buying more land. The builder was worried about the slow down in construction. The caterer is too booked to worry much about anything in the real estate business, and the stock broker talked about the effect of the housing market on the general economy and on Wall Street. We all look at things from our own box.

I just read Denny Grimes editorial today (December 3, 2006) in the News Press. I could not find a link for it so you will have to look for yourself. It was very well written and in it Denny urges sellers to lower prices to sell their homes. This is what Denny does, he makes his money by representing sellers and buyers of homes, but of course he only gets paid when the homes actually sell.. He agrees with me that this is a great time to buy. He tells us that buyers, however, are waiting for “the bottom”. I would add that we will not see the bottom except in our rear view mirror, and by then it may be too late.

Denny is in the middle of the market, in essence he is in the middle of the forest. He is about the best at what does and the consummate professional; but even so, his view of the market is affected by the fact that his business may be down a certain percentage from the previous year.

I, for example, will in many cases not suggest lowering the price. Indeed it will not be until prices start to go up that the buyers will realize they missed the bottom. My advice is patience and confidence in the market. But my box is a bit different from Denny’s. I deal more with investors than general residential real estate

I think it is time we think outside the box. I have heard the term for years. I am sure you have too. It’s one of those catch phrases that consultants use. To me the expression means to look at something from outside your current realm of influence. For the past hour, before I started writing this missive, I went Yahoo searching for articles on “Thinking outside the box” and I did not find any article that actually presented a view from outside the respective influence the article was written from. In order to think outside the box you must first recognize what your box is.

All of us live in various communities. Certainly Gail and I live in Florida. We also live in downtown Fort Myers, but we also live in “parent community”, the “real estate community”, the “grandparent community”, the “developer community”, etc. We, like you, wear many hats, or live in many “boxes”. Most likely our perspective is confined and guided by these influences, by these boxes.

For many years, I was in the plastics business. I sold plastic film to the diaper and sanitary napkin industry all over North, Central, and South America. I was immersed in that business. My “box”, if you can believe it, was diapers and sanitary napkins. For years business was wonderful because Latin America was my oyster. My pearl was that 15 years ago most of Latin America was not using diapers or sanitary napkins. The business grew like crazy. We built capacity, but after a few years we needed more business. In order to find it, I needed to look outside the box. I went to trade shows for totally unrelated fields to “think outside the box”. I actually went to wood working shows, metal conferences, health conferences, rubber conferences. I went searching for new markets, new uses. Eventually, I started supplying house wrap, roofing membranes, protective films for packaging and more. In order to grow and succeed, I went looking for needs to fill in new communities. I thought outside my box.

In an earlier newsletter I talked about investment advisors that tell you that they will review your entire investment portfolio, but never even mention real estate. Stocks and bonds are their “box”. You need to learn what box people you deal with are in so you can adjust your thinking. Don’t let them trap you into their box.

On Friday night I got perspectives from many walks of life at our party, but still pretty narrowly focused. I love to meet folks from out side our town, outside our state, and outside our business. I can learn from everyone. I absolutely love to meet new people with fresh perspectives.

Know your “box” and know how to get out of it. You will learn and grow. Know the “boxes” of your friends and the people you deal with. You will be better for it.

The simple facts in our market are that we are in an “over inventory” position, but when you talk to visitors from out of state; they are thrilled with their choices, our weather, our shopping, and our restaurants. Home price have dropped, for sure, but not below prices two years ago. If you stick with the four year hold rule AND you bought reasonably well – patience will be your friend. If you bought poorly at the peak, you may want to take your losses sooner rather that later and not pour more good money after bad.

I would love to hear from you and find out who you are and what your concerns and objectives are and learn more about you.

It is my belief that many of you are sitting on the sidelines waiting for prices to go back up before you buy.

Who are you and what do you want?

News Reporters are on the outside of Every Story

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:32:00 +0000

Volume 4 Number 28 November 27, 2006

News Reporters are on the “Outside” of Every Story.

No news reporter has the inside scoop, the full story, or the total background. They are, by definition, outsiders. Years ago, when I was living in Cincinnati, I attended a business luncheon and the key note speaker was a local reporter turned politician by the name of Jerry Springer. (This was indeed after the erstwhile politician Mr. Springer got caught passing a bad check to a call girl in Northern Kentucky.)
Mr. Springer proved to be a very interesting and informative speaker. He talked about a pivotal turning point in Presidential news coverage – The assassination of President Kennedy. Ever since that poorly filmed assassination, no president travels without an entire bus or plane full of reporters with cameras at the ready. Reagan came to Cincinnati around that time and there were bus loads of reporters following him. They followed him even though there was no scheduled public appearance. But what I found insightful was Mr. Springer’s take on investigative reporting and “insider” reports.
Reporters operate on a deadline, start with zero contacts and little or no background, they have no time for in depth immersion into a story; and often they resort to quoting self serving publicists or activists with an agenda.
What got me to thinking about this is the press coverage of the real estate market – both nationally and locally. The National Association of Home Builders (NAHB) recently posted an article about the amount and effect of all this negative press coverage. While the NAHB certainly has a dog in this fight, the article makes some excellent points:
The nation’s prospective home buyers may derive some of their information on the housing market from the news media, but at the end of the day the things that matter far more when they are deciding whether to make a purchase include the price of the new home, mortgage interest rates and their housing needs, according to a new nationwide survey commissioned by NAHB.
“While the majority of the households we polled indicated that they found the media a reliable source of information on the housing market, what they read in the newspaper, saw on television or heard on the radio was no substitute for actually going out and shopping the market,” said Thomas Riehle, a partner in RT Strategies, which conducted the research for NAHB.
“When people are actually thinking about buying a home, they are driven by the details of how it will impact their family budget and lifestyle and contribute to their long-term wealth, and that gives them a much closer perspective on the market than what can be conveyed in news coverage,” Riehle continued.
When asked to rate the importance of several factors that might affect their decision to buy or not to buy a home, survey respondents put the home’s price at the top of the list, with 80% citing its significance.
That was followed by: the potential for the new home to appreciate in value, 71%; the prospect of selling their current home at a fair price, 70%; the level of mortgage interest rates, 69%; and personal life changes, such as a new job or an addition to the family, 60%. On a list of eight items, news stories on real estate market conditions ranked second from the bottom, with 28% saying that it was an important factor behind their decision to buy.
When further asked about the influence of the news media on their decisions of when to buy a home, only 19% of the respondents said it played an important role; 23% indicated that it had some importance on their decision; and 7% said it played a minor role. A full 48% said it had no influence whatsoever.
Sixty-one percent of the survey participants said that the media is “sometimes trustworthy” as a source of information on the housing market and 5% said that it is “always trustworthy.” Twenty percent and 8%, respectively, said it is “seldom trustworthy” and “never trustworthy.”
“The media provides an important service by giving consumers the big picture of what is occurring in the housing marketplace, even the big picture in their local markets. But despite that, local reporting can't convey the information that consumers consider the most when they are looking for a new home,” said NAHB President David Pressly. “The fact is that even as the national market is slowing down from the unsustainable pace of the past few years, there are sizable numbers of families who need new homes. And with a wide selection of new homes to choose from, with mortgage rates remaining near historic lows and with incomes and jobs continuing to grow, the opportunities are extremely favorable for buyers in today’s marketplace.
Home builders are working down their existing inventory of homes fairly quickly and the current slowdown in production is expected by NAHB economists to have run its course by the middle of 2007. From that point forward, the industry is expecting to see a good balance in the marketplace between supply and demand, setting the stage for a healthy and sustainable trend for housing, supported by a growing U.S. economy. (Full story click here)
There is nothing, and I mean NOTHING, that can replace actually field time and “face time” in the marketplace. You have to go out and test the water your self. You have to BE THERE. You may read in the paper that the market is soft so you decide to go visit a community you have had your eye on and perhaps pick up a deal. When you get here you learn that this particular community is doing well and has only a few condos left for you to choose from. The news in the paper is way too broad for you to be making decisions on. Unfortunately this is a lesson I have to learn over and over again. I love to go out in the market and talk to the sellers, the buyers, the developers and the builders. When I sit and work a few weeks in the office without venturing into the field, I am relying on the perspective of others and lose immediacy of the information.
I was in Seoul Korea on a business trip some years back. In fact on that trip I was there for ten days. When I got back I was bombarded with questions from my friends about all the rioting in Seoul. My friends had read that parts of Seoul were shut down, the American hotels were under heightened security, and there was tear gas in the streets. But my personal experience was uneventful and I never heard a thing about any unrest or riot for the entire period I was there. My point is that if things are going well, there is no news. It is only the exceptions that make it to print.
I will often drop my office work and drive through a community with one of our agents. We stop into open houses, walk through commercial complexes, talk to tenants and talk to buyers. I call it “running the traps”. If you need to be convinced that this is a good time to buy – come here and “run the traps”, ignore the headlines and look beyond the negative press. The 30,000 foot view will not serve you well – you need to get in the trenches.
Right now interest rates are low; inventory is high, and sellers are eager to negotiate; incentives are available, choices are many. Will prices go down? Maybe, maybe not.
Will prices go up? Most assuredly. It is just a matter of WHEN (Timing is everything, isn’t it?)
Last week I talked about the disparity in prices in some communities and the need to get current comparative information on an area to make sure, if you are a buyer, you are getting the best deal, of if you are a seller that your home is priced where you want it to be.
We reviewed all the prices at Grand Isle in Burnt Store and found an amazing disparity in pricing by the sellers– by as much as 55% for the same unit size unit! Admittedly there are differences; the upgrades, the view, and perhaps some decorating; but a difference from $545,000 to $845,000 is hard to explain away. For all the current up to date prices at Grand Isle click here. Scroll down the page to see the price and availability of all units in each building. Or call me239-425-0771 and I will go over the summary – I have it in a spread sheet for easy review. There is a furnished unit for $499,000, and some gorgeous end units at very attractive pricing.

You Own two Homes, Now What?

noreply@blogger.com (Gregg Fous) — Fri, 19 Jan 2007 08:31:00 +0000

Volume 4 Number 27 November 20, 2006

You Own Two Homes - Now What?

Our office gets many calls from reluctant condo and home owners that jumped on the real estate “profit wagon” only find the wagon dropping them off at a time of unparalleled inventories and very few buyers. In short these owners have a bit of an over inventory problem themselves. They have one or even worse, two homes extra.

The extra home affects each investor differently. I am normally asked the question, “What should I do?” with little or no background on the customer or the particular holding. In order to give sound advice I really need to know both. But let me review your options and the consequences.

You have three choices: Market; Hold, or Walk Away. If you are even considering the third option I suggest you consult a good attorney first. It is not a course that I recommend not do I fully understand the ramifications.

Let’s look at my first choice – Holding. When considering a hold strategy you have to make the assumption that the market will get better at some point in the future. By better, I mean the buyers will return and prices will stabilize. Perhaps the best advice I can give you is to look at your total cost of the home. This would include the acquisition costs and the carrying costs of interest, maintenance, insurance, condo fees etc. less any rental income you can capture and the tax benefits of owning. Once you have a good handle on that (we can help you prepare a summary) you will then have the basis for making the hold decision or not. (We would need to know your cost of money, your tax bracket, condos fees, insurance, etc.). We will compare this total cost with the exit value.

The hold decision must come with some assumptions. The most important relates to timing and how long you will have to hold and what the home will be worth after that time period. How long will you have to hold may depend on how well you bought. I have said it time and time again – you make your money when you buy, not when you sell. If you bought at the peak and prices have subsequently dropped 25%, your hold period may be very long. Does the community you own in have a few hundred “like kind” properties for sale or is your holding unique with little competition? Obviously, the more unique (pool view, end unit, penthouse) the better for your resale prospects.

If you want a thorough and honest review of your particular situation, contact us. If we can help you make this decision, we will. If we can’t help you we will tell you so. I would suggest that you not get into the category of reluctant holder. Don’t bother to put your investment on the market with no hope of selling. It will only frustrate you and your agent and get your property “market tired”.

If you do hold should you rent? The answer here depends on you and the property as well. If you are only going to rent “for a while” until the market returns; forget it. In my opinion this is not worth it. Only rent if you are prepared to do so for at least a few years, you are prepared to repaint and carpet at the end of the term, and you have realistic expectations on your rental income. Unless you are on the beach or golf course – go for an annual tenant. Seasonal rentals are tough on a property, are management intensive, and it normally takes about three years to get 100% occupancy on seasonal rentals. We can help you do the analysis, but leasing properties is a specialty that we do not possess.

I have been involved lately in analyzing a few large apartment complexes. We have examined absorption, percentage of occupancy, rents, and features. I have recently learned the term “shadow market”. The apartment complex industry refers to all the new condos that are being rented by individual owners as the “shadow market”. Normally the shadow market is not well organized so new residents to an area are not as likely to rent from an individual condo owner. But once the resident is established in an area they discover that they can rent a much larger home for a lower price in a condo community. The market rate for apartments is about $900 to $1200 per month, normally about 1100 square feet. Condos can be rented in the Fort Myers area for close to that same price, and they are bigger and normally have nicer amenities. Good for the renter, bad for you. Figure about a dollar per square foot per month less for larger units, more for smaller ones.

Your second option is selling your unit. You may think you have to sell it. You have no choice. You can’t afford the payments; your spouse is going to shoot you if you don’t; or you simply are going into a money pit that you will never be able to climb out of. The first thing we will do is go though the full analysis that I mention above. We will determine together if selling is the best economic option. In most cases it is not. At least not right now.

If it is the best option, you have to be slapped with the new reality. Most of the new realty has to do with price and how long it will take to sell. Being the lowest price condo in the entire community will give you a much better chance of selling than any one else – BUT IS NOT A GUARANTEE THAT IT WILL SELL. Buyers now are waiting to see if prices will go lower. There is one strategy that I have seen in this market that has the broker lowering the price by $5000 a month until the condo sells. To me this is training the buyers to wait and it is not a strategy that I recommend unless the seller is very desperate.

I do have some tips if you are going to sell. Make your condo or home the best value on the market. This may mean upgrading, painting, wall coverings, window treatments, or even furnishing. This will also mean pricing at the bottom, the very bottom, of the tier if there are many like kind units. Make your home easy to show, have your agent visit once a week to make sure the air is working and the home is presentable. Hire a cleaning company to come twice a month. List with a Realtor that pays for premium positioning on www.realtor.com and has your home on the internet (We do). List with a Realtor that knows your project, has access to the condo docs, brochures and floor plans and knows the competition. You should not have to educate your agent about your community. You have the wrong agent. Now is the time to hire an agent to really market your home and this does not mean offering less of a commission by the way. Better to pay more and get the right service than pay less and suffer the consequences.

Have your agent give you comps, like he did when you gave him the listing, every month. We are in a very volatile market and prices are changing daily. I looked at a single family home in Cape Coral last month that was priced fully $80,000 over the same home a block away – AND it was listed by the same agent. To me this is unforgivable.

You may have to pair financing with your sales price. Buy down the mortgage for your buyer, for example. Market America can help you arrange this. You may also offer to pay closing costs or over other more creative incentives (Golf memberships, etc)

The bottom line is, however, if there is no traffic and there are no buyers this means that all your incentives and lower prices are for naught.

Want good news? The market will get much better. It's called a cycle, because, well, it cycles. This is a great time to buy. Money is cheap, sellers are bargaining, and prices are low. Happy Thanksgiving and have a great week.