https://activerain.com/blogs/sflainvestandbuild en-us https://activerain.com/blogsview/2190129/ypn-where-are-you- Are you active in a local YPN (young professionals network?)  YPN is a network for the "young" and the "young at heart."  I've been involved with our local chapter, YPN Palm Beaches and have found it to be a great resource to help bridge the gap between the seasoned veterans and the ambitious young guns.  If you have a YPN chapter in your area or if you are active in this network, please leave a comment below.  I'd love to grow my network with you. Ben Hoadley (ERA Herman Group Real Estate) Tue, 15 Mar 2011 11:29:32 -0700 https://activerain.com/blogsview/2190129/ypn-where-are-you- https://activerain.com/blogsview/2181548/small-business-owner---quality-service-too- I have worked a vast and diverse array in my professional career.  I was indoctrinated into the professional world when I worked as a Project Engineer for a ONE BILLION dollar a year Design/ Build company.  Those in my position were given just enough autonomy to know we could make a difference but not quite enough to do any harm. While at that post, things were pretty easy.  Sure we had the daily fires to extinguish but once you understood your role in the job, you understood you were nothing more than a cog in the machine. This is probably a good thing for a twenty something engineer fresh out of school, ready to take the world by its horns.  You really could not screw anything up because the corporation had the reigns tight and several systematic fail safe’s that kept eyes of hierarchy on EVERYTHING you did. I was in for a world of shock when I left that place.  No longer did I have the comfort in knowing that the decisions made were the right ones.  No longer did I have a guiding hand to offer instruction.  No longer did I have the comfort of an assistant to type my letters or a chief engineer to redirect negotiations. I was on an island all my own.  I had to figure out, and fast.  I had to learn that no one was going to be there to hold my hand to make sure my work got done, and done properly.  Gone were the days of a cushy laid back job where I could predict the outcome of the day ahead. Suddenly upon me was the reality that I am now the do-it-all resource.  I had to become the assistant, the filer of files, and the answerer of phones and returner of emails.  I was now responsible for keeping the check book balanced AND the clients coming in, not to mention filing those quarterly tax reports and retirement planning just to name a few.  My new hat meant that if it was going to get done, I personally had to see to it that it was so.  So what changed? That’s right; I became a small business owner.  One of the hardest lessons I had to learn and apply is that while you wear these many hats, there is still a job to be done.  I can be worried about EVERYTHING else that needs to be done, but if I’m not worried about the client first it is all for naught. It can be a challenge, being a small business owner.  But it has its rewards.  Many people think the freedom of making their own schedule, working when they want, getting out of bed when they want to is the reality.  The REAL reality, not the made for TV kind of reality show reality…the REAL reality is finding yourself at your desk all hours of the morning and night.  It means working on Saturdays and Sundays too sometimes.  It means doing things that need to get done when everyone else is enjoying their time off. It is that challenge that motivates the small business owner.  It can be done.  People do it everyday.  The key is finding a balance of identifying critical tasks and those that can wait until later as well as utilizing professional help along the way when it makes sense to.  Use your resources to maximize your ability to improve the quality of service you provide.  If you are not working constantly to stay on top of that thing called service, you are in trouble. Out there in this great big world there exists a contingency of hard working people who foster the can-do American spirit.  If you’re not working to provide the best service to your clients, rest assured, somebody else is! Ben Hoadley (ERA Herman Group Real Estate) Thu, 10 Mar 2011 08:24:06 -0800 https://activerain.com/blogsview/2181548/small-business-owner---quality-service-too- https://activerain.com/blogsview/2178758/5-baby-steps-to-qualify-for-a-home-loan 5 EASY BABY STEPS TO QUALIFY FOR A HOME LOAN 1.    Order your credit report and scores from all 3 bureaus: Experian, Equifax, and Transunion. Review your credit report, line by line, account by account.  Verify that the payment history is accurate.  Verify the amount owed is accurate.  Verify that your monthly payment on each account is accurate.  Be sure that old or closed accounts are not reporting a monthly payment.  If there is anything inaccurate in your credit report, go to work on it first prior to applying for credit.  It can make a major difference in how much you spend over the life of the loan and how much you may qualify to borrow. 2.    Establish a detailed report that outlines ALL of your finances. Figure out where you are spending your money.  Gather up your monthly, quarterly and annual bills and outline all of your expenses thoroughly.  Itemize all your expenses.  Determine what your PITI expenses are.  PITI is an acronym for a mortgage payment that includes - principal, interest, taxes and insurance.  Also determine your total monthly debt expense.  Debt expense includes items like: Auto Loans, Student Loans, Personal Loans, Charge Cards, Child Support, Alimony, and Federal Tax Liens. In determining your debt expenses do not include: utility bills, car & health insurance, cell phone bills, or any bills not reflected on your credit report. You are almost there!  Now that you’ve done your research, confirmed that your credit report is accurate and identified all your expenditures, you can do a preliminary check of your expenses to determine how much mortgage you can afford and assess the same ratios that your lender will use. 3.   Calculating the FRONT END RATIO The front end ratio is determined by taking your monthly housing expenses (PITI) divided by your monthly gross income Front end ratio = Monthly Housing Expense Gross Monthly Income *This percentage needs to be 29% or less for approval on a FHA loan. 4.  Calculating the BACK END RATIO The back end ratio is determined by taking your total monthly debt expense (see #2 to calculate) divided by your gross monthly income. Back end ratio = Monthly Debt Expense Gross Monthly Income *This percentage needs to be about 41% or less for approval on a FHA loan. *-These percentages are a rough guideline for what you can expect when applying for a FHA loan.  Just because your ratio may be a bit higher does not disqualify you automatically.  The bank will consider your credit score as well as your income in determining whether or not you can afford the loan. 5.   Apply for the loan You’ve done your diligence.  You’ve inspected your credit report and corrected any mistakes. You’ve identified and outlined all of your expenses.  Now you can use these ratios to paint your own personal picture of your finances in the same light that the bank will. A common mistake many people make is agreeing to the first set of terms on a loan that you’ve been approved for.  Remember, EVERYTHING is negotiable.  Points, interest rates, fees…these are not set in stone although your loan officer may have you believe otherwise. If you are unhappy with the rate or the terms of the loan offered, ask for a different product or look elsewhere for your loan.  This is one of the most important financial investments you will make in your lifetime- make sure it is on terms you can be happy with.  Good luck! If you would like a free worksheet to help outline your budget/ expenses and calculate these ratios for you, please send me an email and I’ll be happy to forward you my worksheet for free. Ben Hoadley (ERA Herman Group Real Estate) Wed, 09 Mar 2011 04:26:56 -0800 https://activerain.com/blogsview/2178758/5-baby-steps-to-qualify-for-a-home-loan https://activerain.com/blogsview/2178737/considering-a-contractor- 8 Things to Consider with your Contractor in building your project: 8.  SHOW ME THE LICENSE. Not every state requires licensure of contractors.  Florida certainly does.  Most states have a website that will allow you to look up licenses from an online database.  The Florida website is here: https://www.myfloridalicense.com/wl11.asp  Look on this website or call the licensing board and confirm that no disciplinary action has been taken against the licensee. FYI, an occupational license is not sufficient in ANY construction trade. 7.  SHOW ME THE INSURANCE This is such an easy thing to overlook.  Do not do that!  Why?  Let’s say an uninsured “handyman” comes to work on your house- maybe your roof is leaking.  The “handyman” climbs onto your roof, proceeds to lose his footing, falls off your roof and breaks his back.  Now what?  That “handyman” can take you for a wild ride is what and you WILL be responsible.  It will be an insurance claim against YOUR insurance.  This is EASY to avoid.  Ask for a copy of their certificate of insurance.  But that’s not enough.  Unfortunately in this day in age con-men are prepared for this question and I have seen companies try to pass off expired certificates as valid, I’ve seen forged copies of insurance, some scams run as far as having their insurance active just long enough to get a certificate of insurance for you and then cancel the policy.  Seems ludicrous but it happens.  Be diligent, follow up, talk to their carrier and make SURE the policy is active.  Look for both liability and worker’s compensation insurance coverage.  If you bring them on board for your contract, insist on being named an “additional insured.” 6.  WHO WILL DO THE WORK Ask your contractor specifics about your project.  Ask about how the workload will be divided - what portions of the work will the contractor perform himself and what portion of this work will be completed by a subcontractor.  Ask who will supervise the work.  Ask for the name of the Superintendent and Project Manager that will handle your job.  Ask specifically what vendors will be supplying materials for your job.  There is also another reason why you want a detailed list of subcontractors and vendors on your job- see #5. 5.  HOW TO PAY A CONTRACTOR When your contractor submits a pay requisition you need to do a few things before you submit payment.  In #6 we talked about requiring a detailed list of subcontractors and vendors.  You need to know who is working on your job so that you know who needs to be paid.  You may be getting in the mail a piece of paper called “Notice to Owner.”  Many people have no idea what this is so they ignore it.  Please don’t do this!  Think of it this way- a “Notice to Owner (NTO)” comes from somebody who has been working on or supplied material to your project.  The NTO is a notice that a battle will likely be coming in the event that they are not paid.  What kind of battle?  Lien laws vary state to state but for the most part, the general contractor, subcontractor or vendor/ supplier can and will put a lien on your property if they are not paid.  If 3 suppliers send you a NTO but your contractor only pays 2 of them, you very well may be out of luck and forced to pay for the material again. How do you prevent this from happening?  It is a very simple process but one that you must take to protect yourself and the interest of your project.  Require of your contractor to submit a LIEN RELEASE from everyone on the job for that pay period when they submit their requisition.  The release will be dated and good through a certain date- typically month to month.  Do not release the check until you have a LIEN RELEASE from everyone, period. The next thing to consider before giving your contractor a check is retainage.  Retainage is something that should be addressed prior to signing a contract.  Retainage is an agreement that you will hold a percentage of EVERY payment until the work has been satisfactorily and substantially complete.  Retainage is typically withheld at a rate of 10%.  If your contractor balks or argues with you about withholding retainage, find another contractor!  Retainage is an every day occurrence in the construction world.  Do not let them tell you otherwise- and some probably will try. Also be wary of ANY contractor that asks to be paid in cash or asks for a percentage of money upfront. Do not release final payment or retainage until all permits have been signed off and the quality and craftsmanship is satisfactory to you. Also, ask the contractor before the project begins for a schedule of the work to be completed and a draw schedule or cash draw down schedule.  This can be a useful tool to ensure your project is on time and that you are paying for work that has just been completed. 4.  SCHEDULING THE WORK This may be one of the most underrated or most overlooked aspects of working with a contractor.  I can almost guarantee you that somewhere along the line somebody on your job is not going to show up when they are scheduled to.  It IS going to happen. Discuss this with your contractor up front.  Ask him about missed work days.  Ask how they deal with delays in the schedule and what plan of action they will take to get your job back on schedule.  It will depend on what type of contract agreement you have in place with your contractor, but if overtime is required to get the job back on track, that onus is on the contractor, not your pocketbook.  Remember that!  This is also a good opportunity to address problem/ dispute resolution.  Ask how they handle possible conflicts and their answer shouldn’t make you squirm.  A reputable contractor is going to want your repeat business and a quality reference from you.  If their approach to dispute resolution is middle finger management, it is going to be a long road. In some cases making work up with overtime is not possible.  Again it depends on the project but if you have workers remodeling your home and their work day is say- 7:30-3:30, you’re not going to want your house full of people working at 6:00 p.m. when you are home from work and ready to unwind.  The only way around it in this scenario is to add manpower during the regular scheduled work hours.  Again, it is not your responsibility to absorb this cost.  That responsibility lies with the contractor. What about weather delays?  Again this will depend on the contract agreement you have in place but your contractor should account for some minor delays or rain days included in his/her schedule.  You can look at an almanac, determine the average expected rainfall for your project duration and adjust the schedule at Day 1 accordingly.  If you get an abnormal number of rain days your contractor may talk to you about the impact of a schedule- if you have a proactive contractor who has communication with you on his mind.  For the most part, they aren’t going to say a thing unless you do.  Don’t let rain be an excuse.  Rain is no surprise.  Plan for it, schedule for it, and when it doesn’t rain maybe you gain some time or get ahead in your schedule. Schedule can be a #1 indicator of job cost.  In the construction industry (and most other industries as well) time is money. 3.  COMMUNICATION A “proactive contractor” is someone with communication with you on his mind.  Most contractors are not rooted in customer service.  Most contractors are not proactive and certainly most contractors do not make communication with you the project owner a top priority.  Why?  The excuse I hear most often is that it takes effort and time.  In reality it shouldn’t take anymore effort and nothing more than the time of a daily report, weekly report, or a phone call.  A contractor that is up on the details of your project doesn’t have to spend any extra time or effort to communicate an update to you.  It is when you have a litany of unanswered questions or “let me get back to you on that” that you might need to be alarmed.  The project manager should be hands on and relevant.  What does that mean?  A project manager can’t manage your job remotely.  He/She has to show up every day to check progress.  If you find yourself talking to somebody who you have never met or never or rarely is on site, know that you need to be on your toes and paying full attention to every detail. 2.  QUALIFICATIONS Due diligence is a must if you are going to have a successful project.  You need to ensure the contractor you are considering is qualified to do the work you need performed.  You wouldn’t want a NASA engineer to do dentistry work on your teeth.  You don’t want a utility contractor hanging your crown molding either.  Check the work history of the contractor you are considering.  Require a set of professional references and a list of previous projects.  If somebody is unhappy with the work their contractor did, they will tell you this for sure- IF you take the time to call and ask the question. 1.  CHECK REFERENCES This one is kind of obvious I think.  I don’t think you can complete the tips above if you’re not prepared to check references.  Make sure the project was finished on time according to the original schedule.  If there were any delays in project completion from the original scheduled date- find out why.  Ask if there were any problems or conflicts on the job and how were they handled.  Ask about the budget- was the work completed within the terms of the original budget.  Again, if it wasn’t, find out why. Take the time to learn about their professionalism.  Ask detailed questions of the references:  Did the contractor maintain a neat job-site?  Was it safe?  Did anyone get hurt?  Did they take time to put protective foot coverings on their boots or did they track mud all over your house?  These are the details that make all the difference when someone is working in your home and these are the separators that qualify a quality contractor. I realize these tasks may be a bit daunting.  They certainly can be.  If you are not up for the challenge or do not have time to manage these details, considering hiring an Owner’s Representative to do this legwork for you.  If you have any questions about this article or want to inquire about Owner’s Representative Services, feel free to email me at anytime. Ben Hoadley (ERA Herman Group Real Estate) Wed, 09 Mar 2011 04:17:17 -0800 https://activerain.com/blogsview/2178737/considering-a-contractor- https://activerain.com/blogsview/2176482/why-rent-to-own- If you have perused my profile here you'll know that RENT TO OWN properties are one of my favorite market segments.  I feel very strongly about this, especially given the current market conditions. Why?  There are a number of reasons: We have seen a collective perfect storm in the real estate and construction industries over the last 3 years.  Speculative buying artificially inflated home prices as well as construction costs.  We know that bubble has burst.  So where does that leave us now? In short, our economy has an abundance of qualified professionals and skilled craftsman that are out of work.  A large percentage of home buyers (most buyers who purchased in this market in the last 5 years) are underwater on their mortgages.  Investors who bought during peak market conditions now find their investments have depreciated or are no longer profitable.  The combination of depreciating real estate values and limited, reduced or eliminated revenue streams means people are having a hard time paying their mortgages. All these things are factors that amount to a distressed economy.  This means there is a large mass of desperate people unsure of the direction they should take.  Now this is an entry for another day and I promise to cover this topic soon- but there are a number of avenues a distressed property owner can take to find resolution. The title of this entry is RENT TO OWN and I haven't said a thing about it yet.  Let's get to it! We know people are losing their homes at historic rates.  Where are these people going?  Some people are moving in with family members while others may find a friend to call roommate.  A large percentage of these people are transitioning from homeowners to renters.  This can be a devastating pill for a family to swallow.  It is not the end of the world, although it may feel like it sometimes. This is where rent-to-own becomes attractive.  Maybe the client has lost his/her home to foreclosure. Maybe a client has strong revenue resources but damaged credit due to the housing market conditions.  Both can find their way back to home ownership by utilizing RENT TO OWN.  People with damaged credit find traditional lenders reluctant to lend, especially in the case of recent foreclosure.  Some people with GOOD credit have a hard time getting a loan so little opportunity might exist for someone whose credit has been damaged. In the case of RENT TO OWN properties, decisions are made on an individual, case by case basis and the note holder is not a traditional lender.  Typically the property owner holds the mortgage and can work out a sale price and payment plan that is beneficial to both the new tenant and the property owner.  The property owner is happy to have a tenant in place with a vested interest in the property.  This in theory means reduced risk of damaged or neglected property for the property owner (as is often the case in traditional rental history.)  The property owner also holds the note (consequently the title as well) until the lease and purchase agreement has been satisfied.  This is another plus for the investor/ property owner as they can take back the house in the event of a default. If you find yourself forced into the rental market, consider RENT TO OWN.  If you are going to be paying rent anyway, I would argue it makes the most fiscal sense to have that rent going towards something you will eventually own. Let me give you a physical example as to how RENT TO OWN can be more beneficial than the route of traditional lending.  Let's say a single family home is listed for $185,000.  An offer is accepted at $182,900.  The new buyer has gone the route of traditional lending.  They put 3% down ($5,487) and have a 30 year fixed mortgage at 6.25% which puts their payment around $1,100/ month.  Some traditional lenders tend to not like what I'm about to say but I digress. If you look at the amortization over the life of the loan you might be frightened by what you see.  I want to look only at the first 10 years of the 30 year note and compare it to the same property on a RENT TO OWN lease over 10 years. In the case of traditional lending, you will pay $13,108.35 per year for 30 years.  That's $393,250.50 for an $189,900 home!  Again, looking only at the first 10 years of the traditional loan- that's $131,083.50 paid to the lender after ten years. Of that $131k, $103,119.14 of your money goes to interest on the loan while $27,964.36 of your money goes towards reducing the principle.  103k of 131k in interest...that's 78%!  Seems funny that your interest rate is 6.25% but during this period 78% of everything you pay is going toward interest.  That leaves you with only 20 more years and $262,250.50 worth of payments to go. In the case of RENT TO OWN the owner of this same home agrees to the following terms with a new tenant- 10% down of the agreed purchase price.  In this instance the owner and the buyer agree to a sale price of $245,000.  Now you may be saying to yourself, well there you go- that's the problem, you're paying 245k for a house that is worth 189k.  It's not quite that cut and dry.  The rent to own buyer and  seller agree to this higher selling price to account for interest and appreciation.  Please see me through to the end of the example! So the buyer has put 10% down or $24,500.  The balance of the note is $220,000 for the 10 year term.  They agree to equal monthly payments- or $1,833.33 a month. If you consider that real estate "traditionally" has appreciated at a rate of 3% a year over the last 25 years or so (bubble years excluded of course), what is that 189k home worth in 10 years?  You might be surprised to learn that home is worth $246k if it appreciates 3% every year for the next 10 years! Another factor to consider, the original property owner has some risk exposure here regarding appreciation.  What if the real estate market heats up in 8 years and the average appreciation of homes is 5%?  In this case, the new buyer would have paid 245k for a house that is now valued at 293k!  That would mean the new buyer has about $48,000 equity in their home and if they sell- have made 19.5% return on their investment! You tell me, which deal makes the most sense to you? Ben Hoadley (ERA Herman Group Real Estate) Tue, 08 Mar 2011 02:33:14 -0800 https://activerain.com/blogsview/2176482/why-rent-to-own-