Believe me, I've read more than a few excellent books on real estate investing and real estate law, But I am a better Gregory Yates lawyer and the dirt guys I was a decade ago due to practice, practice and more practice. There is no substitute for experience. Period. If there is a quick and simple solution to how to proceed, would have us all do. You live, you learn, you go to the next case and you (I hope) going better each time.Attorney Gregory Yates
Saturday, December 7, 2013
Sunday, October 20, 2013
How to win an election
I must confess, I loved as a blogger the most always local elections. Yes, they're not so much in terms of the policy as a State and federal election where can I feed my inner wonk, but everyone loves a good train wreck. And candidates for the election of the city tend to train to run wrecks. Are the place where the ankle crazy biters, and spinner trying her hand a political eccentric. But since this is the holiday season, I feel like you are generous, so I "explain How to win an election" is exactly in this city. This is a total freebie people. And I give here don't worry, not the way of the nuclear launch codes. I'm just saying what has worked to win
campaigns.
Thursday, October 3, 2013
Thursday, September 26, 2013
Low-Ballers or Prudent Investors - A Stark Matter of Perspective
By
Suzette West
More often than not, there is a great expectation by eager
sellers who would seek to maximize their net sale proceeds. For owners
of well-maintained properties--who have invested faithfully in the
upkeep and ongoing maintenance of their properties-they are justified in
seeking and obtaining the highest possible net proceeds. However, when
it comes to the investment value of properties that require a lot of
work and capital investment, most sellers expect too much. I believe
the reason is because most sellers are left uninformed about the way an
investor buys properties. It may be that such sellers hope to find a
handyman type buyer who intends to live in the house, and who is
typically not so concerned about immediate resale value. While these
buyers are out there, they are not as plentiful as the investor
community at large; most investors acquire real estate to earn a profit,
and they must do so while balancing the cost of capital. It is due to
these factors that an investor must offer what makes most financial
sense for them to engage in a real estate investment opportunity.
Here is an example:
Let's say that MLS sales statistics for the past 6 months indicate that remodeled properties are selling in a certain area for an average of $105.26 per square foot; and within this area is a property that is 1,292 square feet. It would seem practical that a buyer would expect to pay $135,996.00 for the property, if the property is in remodeled condition. However, the property in our example is a fixer, and the seller of this property has it listed for $159,000.00; which is far above the $135,996.00 we calculated based on historical sales data from the MLS; and it does not even take into account the $30,000.00 to $40,000.00 (or more) investment of capital it will take to bring the property up to a remodeled condition.
The Ideal Investment Scenario
The ideal-as many real estate investors learn -is the 70% Rule where an investor makes it a goal to acquire properties at 70% of after-repair value minus rehab costs. While the 70% Rule is always a good goal, it is not always possible. A lot depends on market conditions. With that said, an investor must justify the use--and cost--of capital, or they will be investing only for the pleasure of investing.
When it comes to acquiring fixers, sellers should be more realistic in their expectations. Instead of overpricing their property, they should place more focus on seeking a middle ground. When both sides are aware and considerate towards what the other side needs, a fair deal has a chance to materialize.
The Balance between Risk and Return
A house remodel requires an investment of capital; the use of that capital comes with a cost, and those costs must be taken into consideration when calculating offers. The resulting number is the amount an investor can pay for a particular property. It not only takes into account the cost of capital, but it also factors in the level of risk assumed by taking over the property. Prudent investors will not take on an investment where the risks and cost of capital cannot be justified by a decent rate of return.
I believe the growing stigma against MLS listed properties could be lifted a great deal, if only sellers would realize how investors actually see their properties; especially, fixers that are in need of a lot of rehab work. It is a realization that could mean the difference between a property that sells quickly for a mutually fair price, and a property that sits on the market unsold because it was overpriced to begin with.
Here is an example:
Let's say that MLS sales statistics for the past 6 months indicate that remodeled properties are selling in a certain area for an average of $105.26 per square foot; and within this area is a property that is 1,292 square feet. It would seem practical that a buyer would expect to pay $135,996.00 for the property, if the property is in remodeled condition. However, the property in our example is a fixer, and the seller of this property has it listed for $159,000.00; which is far above the $135,996.00 we calculated based on historical sales data from the MLS; and it does not even take into account the $30,000.00 to $40,000.00 (or more) investment of capital it will take to bring the property up to a remodeled condition.
The Ideal Investment Scenario
The ideal-as many real estate investors learn -is the 70% Rule where an investor makes it a goal to acquire properties at 70% of after-repair value minus rehab costs. While the 70% Rule is always a good goal, it is not always possible. A lot depends on market conditions. With that said, an investor must justify the use--and cost--of capital, or they will be investing only for the pleasure of investing.
When it comes to acquiring fixers, sellers should be more realistic in their expectations. Instead of overpricing their property, they should place more focus on seeking a middle ground. When both sides are aware and considerate towards what the other side needs, a fair deal has a chance to materialize.
The Balance between Risk and Return
A house remodel requires an investment of capital; the use of that capital comes with a cost, and those costs must be taken into consideration when calculating offers. The resulting number is the amount an investor can pay for a particular property. It not only takes into account the cost of capital, but it also factors in the level of risk assumed by taking over the property. Prudent investors will not take on an investment where the risks and cost of capital cannot be justified by a decent rate of return.
I believe the growing stigma against MLS listed properties could be lifted a great deal, if only sellers would realize how investors actually see their properties; especially, fixers that are in need of a lot of rehab work. It is a realization that could mean the difference between a property that sells quickly for a mutually fair price, and a property that sits on the market unsold because it was overpriced to begin with.
Does Wall Street's Demand for Corporate Profits Negate A Corporations Value to Society?
Some would say that corporations and their quest for ever
increasing shareholder's equity and quarterly profits wreaks of greed,
corruption, and everything that is wrong in our society and
civilization. Okay so, I am not here to defend any big corporation, they
can very well take care of themselves, still, let look a little deeper
here before we point too many fingers shall we?
First, for a corporation to make more money, it must produce more of what society needs, wants, and desires - provided all things are equal and we are walking our talk when it comes to free-market capitalism. Unfortunately, we aren't are we? We have a terrible challenge with a pay-to-play government in Washington DC, with lobbyists making twice that of a US Congressperson. There is no honor in any of that, but much of the competitive force in our economy is played there instead of in the free-market place where all debts are settled by efficiency, and delivery of goods and services.
Remember, I didn't say corporations are perfect, they have all sorts of issues, like nepotism for instance, but what I am saying is that the system they are playing in is not as it was designed to be - basically with all the crony capitalism going on, we are practically proving Karl Marx right in his work Das Capital, not that Adam Smith didn't pre-warn us of this problem 100-years prior to Marx.
Not long ago, an acquaintance, Jared Kent explained to me; "Wall street demands the corporation not only get values but get very high scoreboard values. Another area I see this breaking down is in generational ownership. Just because a father was an ethical thinker does not mean a son will be, but the son will be immediately into the top tier of thinkers based on his/her ownership and scoreboard value."
Right! I talked about Nepotism, Jared is correct, the genetic son may well receive wealth passed down and smart genes to use as he pleases - but that doesn't make him ethical. Beware, skip-generation success models are real, and Nepotism is dangerous, not always but very often that is the case, although I did read an interesting book once; "In Defense of Elitism" by William Henry III, who also noted that the son, may very well have all the right potentials, upbringing and a deep understanding simply being so exposed to that of the parent's domain.
So, I think I concur, it "does not mean the son will be," as Jared says, but it also doesn't mean he won't be. We often see bad apples not falling far from the tree too, or is it just that we are looking for such? Remember the stereotype traps. Next, if we look at college buddies hijacking corporate boards and voting themselves higher salaries we see a similar issue.
But, in the end if the corporation does not provide the goods and services that the society needs, wants and desires, then all bets are off, as that corporation will fail to return on invested equity or match the streets expectations in subsequent future quarters. Maybe, the system is self-righting after all and maybe that's why nepotism is often so frowned upon and it a company cannot keep the scoreboard in their favor, they will lose the game. Please consider all this and think on it.
First, for a corporation to make more money, it must produce more of what society needs, wants, and desires - provided all things are equal and we are walking our talk when it comes to free-market capitalism. Unfortunately, we aren't are we? We have a terrible challenge with a pay-to-play government in Washington DC, with lobbyists making twice that of a US Congressperson. There is no honor in any of that, but much of the competitive force in our economy is played there instead of in the free-market place where all debts are settled by efficiency, and delivery of goods and services.
Remember, I didn't say corporations are perfect, they have all sorts of issues, like nepotism for instance, but what I am saying is that the system they are playing in is not as it was designed to be - basically with all the crony capitalism going on, we are practically proving Karl Marx right in his work Das Capital, not that Adam Smith didn't pre-warn us of this problem 100-years prior to Marx.
Not long ago, an acquaintance, Jared Kent explained to me; "Wall street demands the corporation not only get values but get very high scoreboard values. Another area I see this breaking down is in generational ownership. Just because a father was an ethical thinker does not mean a son will be, but the son will be immediately into the top tier of thinkers based on his/her ownership and scoreboard value."
Right! I talked about Nepotism, Jared is correct, the genetic son may well receive wealth passed down and smart genes to use as he pleases - but that doesn't make him ethical. Beware, skip-generation success models are real, and Nepotism is dangerous, not always but very often that is the case, although I did read an interesting book once; "In Defense of Elitism" by William Henry III, who also noted that the son, may very well have all the right potentials, upbringing and a deep understanding simply being so exposed to that of the parent's domain.
So, I think I concur, it "does not mean the son will be," as Jared says, but it also doesn't mean he won't be. We often see bad apples not falling far from the tree too, or is it just that we are looking for such? Remember the stereotype traps. Next, if we look at college buddies hijacking corporate boards and voting themselves higher salaries we see a similar issue.
But, in the end if the corporation does not provide the goods and services that the society needs, wants and desires, then all bets are off, as that corporation will fail to return on invested equity or match the streets expectations in subsequent future quarters. Maybe, the system is self-righting after all and maybe that's why nepotism is often so frowned upon and it a company cannot keep the scoreboard in their favor, they will lose the game. Please consider all this and think on it.
Importance of Understanding Rating Criteria
One of the most important things that investors consider when
investing in fixed income securities is the credit rating of the
instruments. Credit rating is an indicator of the creditworthiness of a
security. There are three rating agencies that are recognized globally -
S&P, Moody's and Fitch. These rating agencies assign ratings to
fixed income securities that are issued by sovereigns, corporate and
financial institutions. The rating methodology is different for each of
these types of issuers.
Within corporate ratings, the criteria for assigning ratings are different for different sectors and different countries. For example, the methodology for rating property development companies in China would be different from that for Europe and India. There are several country specific factors that need to be considered. Rating agencies have different rating methodologies for analyzing credit derivatives such as Asset Based Securities (ABS) and Mortgage Based Securities (MBS).
The rating criteria comprise both qualitative and quantitative factors. Some of the qualitative factors that are considered in corporate credit rating are: market position of a company, scale of operations, brand name, corporate governance, degree of data disclosure, volatility or cyclicality of the sector, revenue visibility, and diversification of operations in terms of geography, business segments, products, and customers. Some of the most common quantitative factors are leverage (debt to EBITDA ratio), gearing (debt to equity ratio), cash to short term debt ratio and interest coverage ratio (EBITDA to interest ratio). There are some credit metrics that consider cash flows such as; i) Cash flow from operation (CFO) to gross debt, ii) Funds flow from operation (FFO) to gross debt, iii) CFO to interest, and iv) CFO to capital expenditure.
It doesn't make sense for investors to just blindly look at ratings while taking their investment decisions. It is worthwhile to understand the factors that are considered to assess the credit quality of a security or the issuer issuing the security. For example, bonds issued by two different companies may have the same ratings but one of the companies may be of better credit quality. If investors are able to distinguish between these two credits, then they would be able to invest in the stronger credit. The rating criteria are published by the rating agencies on their websites. While some of these are available for free, some have to be purchased or they are available for paid subscribers.
Especially, investors should understand the rating methodologies while investing in high yield (HY) bonds. The high yield bonds or junk bonds offer higher yields and are attractive investment opportunities for fixed investment investors. However, unlike investment grade (IG) rated instruments, the credit risks are high and hence, we advise investors to seek advice of financial advisors who have a better understanding of the rating criteria and the credits.
Within corporate ratings, the criteria for assigning ratings are different for different sectors and different countries. For example, the methodology for rating property development companies in China would be different from that for Europe and India. There are several country specific factors that need to be considered. Rating agencies have different rating methodologies for analyzing credit derivatives such as Asset Based Securities (ABS) and Mortgage Based Securities (MBS).
The rating criteria comprise both qualitative and quantitative factors. Some of the qualitative factors that are considered in corporate credit rating are: market position of a company, scale of operations, brand name, corporate governance, degree of data disclosure, volatility or cyclicality of the sector, revenue visibility, and diversification of operations in terms of geography, business segments, products, and customers. Some of the most common quantitative factors are leverage (debt to EBITDA ratio), gearing (debt to equity ratio), cash to short term debt ratio and interest coverage ratio (EBITDA to interest ratio). There are some credit metrics that consider cash flows such as; i) Cash flow from operation (CFO) to gross debt, ii) Funds flow from operation (FFO) to gross debt, iii) CFO to interest, and iv) CFO to capital expenditure.
It doesn't make sense for investors to just blindly look at ratings while taking their investment decisions. It is worthwhile to understand the factors that are considered to assess the credit quality of a security or the issuer issuing the security. For example, bonds issued by two different companies may have the same ratings but one of the companies may be of better credit quality. If investors are able to distinguish between these two credits, then they would be able to invest in the stronger credit. The rating criteria are published by the rating agencies on their websites. While some of these are available for free, some have to be purchased or they are available for paid subscribers.
Especially, investors should understand the rating methodologies while investing in high yield (HY) bonds. The high yield bonds or junk bonds offer higher yields and are attractive investment opportunities for fixed investment investors. However, unlike investment grade (IG) rated instruments, the credit risks are high and hence, we advise investors to seek advice of financial advisors who have a better understanding of the rating criteria and the credits.
Overview of Relative Value Trade Ideas
One of the most interesting types of reports for fixed income traders and investors are relative value (RV) trade ideas. Talk to any trader and you will know that they look forward to trade ideas. The most common form of trade ideas is switch trades. In switch trades, analysts recommend to buy one credit and sell one credit. If there are two fixed income instruments with similar rating, it implies that their credit risks are similar. If their maturity and duration are also same, then it implies that the interest rate risks are also similar. Applying the basic principle of risk and return, these two securities with identical risks should be priced identically. However, as we are aware, financial markets are not perfect. Information asymmetry exists, which can lead to price variations and differentials. In such a scenario, it makes sense for investors to buy the cheaper security and sell the costlier security. In bonds space, it means that investors should sell bonds which are giving lower yields and buy bonds which are offering higher yields.
Let us consider an example to understand this. Consider two bonds, A and B, which are issued by two companies in the Hong Kong property sector. Let us assume that the companies have same corporate credit ratings and the bonds issued by them also have same ratings of 'A-'. Both bonds have similar maturity; bond A matures in August 2015 and bond B matures in September 2015. If A offers 2% and B offer 2.2%, there is an trade opportunity available to sell A and buy B.
Let us slightly modify the example. A matures in August 2015 while B matures in February 2016. A is yielding 2% and B is yielding 2.6%. Here, we notice that B has six months longer maturity, and hence should yield higher. The question here is how much higher the yields should be. By taking a sample of bonds with maturities in 2015 and 2016, the average yield differential between securities with half year maturity difference can be computed. Let us assume that, on an average additional 0.3% yield is offered for half year maturity extension. Then, the yield differential between A and B is higher than the average observed. So, the yield differential should reduce over time. Hence, we can say that investors should sell A and buy B.
In investment grade (IG) rating category, it is relatively easier to come up with RV trade ideas. However, in high yield (HY) space, it is difficult as analysts cannot just go by credit ratings. The credit risks are higher and hence analysts should be more careful to assess all available information and analyze their impact on the credits.
3 Ways to Make Money Through Low Risk Investments
Most people find "investing" to be quite scary, especially if you
don't have sufficient money to spare at the end of each month. As we're
all aware, all types of investments carry an element of risk. As such,
it's wise to seek out those opportunities that will cut down your risk
while gaining reasonable profits.
In order to make an investment safe, it's best to go for the time-tested "top dog" where the return on investment (ROI) is from moderate to high.
Types of investments you may consider:
1. Bonds. Investing in bonds is generally safer than investing in stocks. This is because stock investment doesn't come with a guaranteed ROI, whereas a bond is something like a loan and has a promised ROI, plus interest.
- There is a distinction between guaranteed and promised. In fact, there isn't an investment that's guaranteed. However, with bonds, you know what you'll be getting at the end of the day. Seek out investments in a company with proven record as it's less likely to go bankrupt.
- Bonds are normally paid back to you by year-end. Nevertheless, the terms can vary for one agreement to another.
- The bigger the bond, the bigger the profit. But bearing in mind, you'll be making more money on a higher interest bond. So, it would be better for you to invest your money in one high interest bond instead of two or more, lower interest bonds.
2. Stocks. As mentioned above, there is an element of risk when investing in all types of investments, but for stocks, the ROI will be higher. Of course, you can cut down your risks by investing in safer or defensive stocks.
- Companies like Kentucky Fried Chicken (KFC), The Procter & Gamble Company (P & G), Johnson & Johnson (JNJ) and Wal-Mart Stores Inc. (WMT) are among the safer picks in the stock market. These companies also place higher value on their shareholders' positive return of dividends.
- Investing in defensive stocks that are reliable and have proven record of their sustainability and profitability, gives some security that you wouldn't get when investing in the newer and lesser-known companies, which can wind up at any time.
- Bear in mind, there are no one hundred per cent safe picks when investing in stocks, but you can lower your risk by going for stocks of a time-tested and profitable company. Alternatively, you can spread out your risk by investing your money in profitable and time-tested mutual funds where your ROI will be based on a part of a whole portfolio of stocks.
- Stocks can be a better pick for your long-term investment plans. If you're an investor who can't afford to take higher risk, go for a long-standing profitable company to place your investment.
3. Multi-family dwelling property. The right time to invest in a multi-family dwelling property will be during a housing meltdown. You'll then find many multi-family dwelling properties going at below market prices.
- A multi-family dwelling property is a more secure investment than a single-family one for the simple reason that it can house more tenants. Therefore, if one tenant chooses to vacate at the end of their agreement, you'll still have other tenants being housed in other units that are still giving you monthly income.
- Multi-family dwelling properties give you better return than single-family ones. For instance, if you have four 2-bedroom units renting for $600 each per month, you're profiting $2,400 per month. Of course, your profit from a single-family one will be much lesser since it'll be just from one tenant.
Coming up with an investment portfolio requires patience and a sincere evaluation of the highest level of risk you can tolerate. Investing in properties is increasing in popularity in recent years. Having a fully tenanted multi-family dwelling property guarantees a monthly positive return even if you need to allow for maintenance and other charges from time to time.
Bonds are safer form of investment, but the return is by far, the lowest. However, you can still find certain bonds in the market that offer higher interest rates. Though stocks give you a higher return but you're exposed to higher risk and moreover, the return isn't guaranteed.
A wise investment practice is to spread your risks and returns through a few investment portfolios, where you've a few with lower risk and the rest with moderate risk. You should only partake in high risk investments provided you've a high risk tolerance! By practicing this strategy, you should enjoy consistent and positive returns throughout the years.
In order to make an investment safe, it's best to go for the time-tested "top dog" where the return on investment (ROI) is from moderate to high.
Types of investments you may consider:
1. Bonds. Investing in bonds is generally safer than investing in stocks. This is because stock investment doesn't come with a guaranteed ROI, whereas a bond is something like a loan and has a promised ROI, plus interest.
- There is a distinction between guaranteed and promised. In fact, there isn't an investment that's guaranteed. However, with bonds, you know what you'll be getting at the end of the day. Seek out investments in a company with proven record as it's less likely to go bankrupt.
- Bonds are normally paid back to you by year-end. Nevertheless, the terms can vary for one agreement to another.
- The bigger the bond, the bigger the profit. But bearing in mind, you'll be making more money on a higher interest bond. So, it would be better for you to invest your money in one high interest bond instead of two or more, lower interest bonds.
2. Stocks. As mentioned above, there is an element of risk when investing in all types of investments, but for stocks, the ROI will be higher. Of course, you can cut down your risks by investing in safer or defensive stocks.
- Companies like Kentucky Fried Chicken (KFC), The Procter & Gamble Company (P & G), Johnson & Johnson (JNJ) and Wal-Mart Stores Inc. (WMT) are among the safer picks in the stock market. These companies also place higher value on their shareholders' positive return of dividends.
- Investing in defensive stocks that are reliable and have proven record of their sustainability and profitability, gives some security that you wouldn't get when investing in the newer and lesser-known companies, which can wind up at any time.
- Bear in mind, there are no one hundred per cent safe picks when investing in stocks, but you can lower your risk by going for stocks of a time-tested and profitable company. Alternatively, you can spread out your risk by investing your money in profitable and time-tested mutual funds where your ROI will be based on a part of a whole portfolio of stocks.
- Stocks can be a better pick for your long-term investment plans. If you're an investor who can't afford to take higher risk, go for a long-standing profitable company to place your investment.
3. Multi-family dwelling property. The right time to invest in a multi-family dwelling property will be during a housing meltdown. You'll then find many multi-family dwelling properties going at below market prices.
- A multi-family dwelling property is a more secure investment than a single-family one for the simple reason that it can house more tenants. Therefore, if one tenant chooses to vacate at the end of their agreement, you'll still have other tenants being housed in other units that are still giving you monthly income.
- Multi-family dwelling properties give you better return than single-family ones. For instance, if you have four 2-bedroom units renting for $600 each per month, you're profiting $2,400 per month. Of course, your profit from a single-family one will be much lesser since it'll be just from one tenant.
Coming up with an investment portfolio requires patience and a sincere evaluation of the highest level of risk you can tolerate. Investing in properties is increasing in popularity in recent years. Having a fully tenanted multi-family dwelling property guarantees a monthly positive return even if you need to allow for maintenance and other charges from time to time.
Bonds are safer form of investment, but the return is by far, the lowest. However, you can still find certain bonds in the market that offer higher interest rates. Though stocks give you a higher return but you're exposed to higher risk and moreover, the return isn't guaranteed.
A wise investment practice is to spread your risks and returns through a few investment portfolios, where you've a few with lower risk and the rest with moderate risk. You should only partake in high risk investments provided you've a high risk tolerance! By practicing this strategy, you should enjoy consistent and positive returns throughout the years.
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