Author Archive

Property News Reports – Is the Bubble About to Burst?

Written by Landlord Property Management Magazine on . Posted in Blog

Kathy specializes in teaching people how build multi-million dollar real estate portfolios through creative finance and planning. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn more about Kathy & the Real Wealth Network at http://www.RealWealthNetwork.com

Why are so many 1031 investors choosing to 1031 exchange into Delaware Statutory Trust (DST) properties?

Written by Landlord Property Management Magazine on . Posted in Blog

By Dwight Kay | Kay Properties & Investments

From eliminating the struggles of property management to owning investment grade real estate, the potential benefits of opting to 1031 exchange into DST properties are many. At Kay Properties and Investments, we’re specialists in the DST 1031 exchange marketplace, and provide our clients with superior, knowledgeable advice to help them make informed decisions about their investments. We also are careful to help our investors understand the risks and disadvantages of real estate and DST properties.

Understanding Delaware Statutory Trust Real Estate

Real Estate investors all over the country are choosing 1031 exchanges into DST offerings as a way to defer their capital gains tax, diversify their real estate portfolio, increase the possibility of increasing their cash flow and much more. But what is a DST 1031 Property exactly? With a minimum investment of $100,000, DST 1031 properties give investors more leeway to spread their proceeds into multiple properties. Some call this similar to 1031 exchanging into a REIT however, a REIT is not like kind for a 1031 exchange and yet a DST is. With the DST we are able to create a broadly diversified portfolio of between 1-50 properties for our investors. Understanding the current DST properties for sale and how to construct a quality portfolio for our clients is what we do best. Contact us today to learn how we can help you with a free consultation. (www.kpi1031.com or info@kpi1031.com)

Types of DST Listings

The types of DST 1031 properties available can vary greatly, with the common properties being triple net (NNN) leased single tenant retail, apartment communities, medical properties, office properties and all-cash/debt-free properties. With a NNN leased property, tenants are typically responsible for taxes, maintenance and insurance, potentially leaving the investor with less responsibility in terms of property management and costs and a “net” amount of rent each month.

At Kay Properties we typically have access to 15-30 different DST listings from many of the DST sponsor companies in the industry as well as our own proprietary Kay Properties client exclusive DSTs just for our clients. If you’re interested in learning more about how 1031 exchanging into Delaware Statutory Trust properties could potentially work for you, give us a call today! 1(855) 466-5927

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. Kay Properties & Investments, LLC, is registered to sell securities in all 50 states. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

BEWARE. Fed Rate Hike Could Burst Bubbles

Written by Landlord Property Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com

FedRateHike

The Federal Reserve followed through on its latest promise to raise interest rates. Fed Chief Janet Yellen announced a quarter point hike in the federal funds rate Wednesday. But the increase has little to do with the ripple effect on mortgages and consumer loans, and more to do with a message from the Fed about the economy.

This is the first rate hike of 2017 and the third since December of 2015 when the cycle of monetary tightening began after the Great Recession. The first rate hike brought the overnight lending rate a quarter percent off zero. The second rate hike three months ago, raised it another quarter point. The latest increase brought it to a range of 0.75% to 1%, which is still quite low historically.

Consumer loans may notch up a bit because of the rate hike but economists say with so much talk about the increase, many lenders have already priced it in. And some economists say the hike has more to do with Yellen’s desire to portray the economy as “healthy” than it does with monetary policy.

She said during a press briefing: “We have confidence in the robustness of the economy and its resilience to shocks.” And that: “It’s performed well over the past several years. We’ve created, since the trough in employment after the financial crisis, around 16 million jobs.”

Raising the Fed Fund rate is supposed to correspond with a robust economy. Increases are meant to keep inflation in check. If economic growth and inflation are rising too quickly, a rate hike helps slow them down as it tightens the money supply.

Core inflation is about 1.9% right now. Up slightly from the previous forecast and right in the 2% range that the Federal Reserve has been targeting.

But there are big questions about U.S. economic growth.

If you focus on the stock market, you might think the economy has been advancing rapidly. Wall Street has been on a bull run since President Trump was elected with the Dow hitting over 21,000 for the first time ever.

There’s also been a steady increase in jobs with unemployment dropping from the double digits during the recession to under 4.7% right now. That’s giving consumers confidence about the economy, despite flat wages. The February report on consumer confidence says it hit a 15-year-high of 114.8.

But what some economists are pointing out is the troubling lack of economic growth. Chief investment strategist at Clarity Financial, Lance Roberts, wrote in a blog, that: “Outside of inflated asset prices, there is little evidence of real economic growth.” And that’s one thing that Janet Yellen said a rate hike would be tied to — economic growth.

The gross domestic product, or GDP, is our economic report card. And the Atlanta Fed just downgraded the first-quarter GDP to just .8%. That’s well off the 2% that Janet Yellen said is needed for a rate hike, leaving some economists wondering why the central bank went ahead and approved the increase.

Just weeks ago, the GDP was closer to the central banks rate hike comfort zone, at 2.3%. It also increased to 3.4% briefly last month after positive news about manufacturing and construction spending. But when disappointing data on retail sales and consumer prices came out a few days ago, the Atlanta Fed lowered its estimate to the .8% level.

Roberts says that charts show a rate hike at a time like this could actually push us into another recession. He told Market Watch that raising interest rates from ultra low levels at a time of slow economic growth could impact spending and that charts show this type of situation has lead to recessions in the past within three to nine months.

Nobel Prize-winning economist Robert Schiller is also warning people that Wall Street exuberance has gone overboard. He told Bloomberg that traders are captivated by President Trump’s bold plans to slash regulations, cut taxes, and “turbo-charge” the economy with an infrastructure building-boom.

He warns that when situations like this have happened in the past, it hasn’t ended well for the investors. Think dot-com bust and housing meltdown. Both experienced sharp drops in the stock market.

Schiller says investors are shoveling money into the market with the hope that President Trump will make good on his campaign promises. But they are also ignoring the enormous amount of uncertainty associated with getting those new policies through Congress and the legal system.

The Trump Administration is proposing some extreme budget cuts that may not sit well with some of his own constituents. A preliminary budget was introduced that slashes $54 billion from most federal agencies including the EPA, HUD, and Health & Human Services. That money will then be spent on defense. There’s also the affect of the Obamacare repeal. Depending on how many people lost their healthcare coverage, there could be a lot of unhappy voters. And if this political turmoil jostles the stock market, we could see a reversal that could happen quickly, and without mercy.

There has never been a slow letting out of air from a bubble. It usually bursts.

Kendrick Wakeman, the CEO of financial technology and investment analytics firm FinMason, told CNBC that investors are in for a rude awakening. He says no one knows when the stock market correction is coming. But, he says on average, the stock market crashes every eight to 10 years. And when it does, the average loss is about 42%.

He told CNBC that stock market investors need to ask themselves: “Would you hang yourself in the closet if the market crashed and you lost 35 percent?”

I have been warning investors for over a year now that a recession is coming. I’m sure some people think I’m crazy since the stock market has made significant gains since I gave this warning.

But remember, the same thing happened before the Great Recession and the Great Depression. In January of 2008, Ben Bernanke, the Chairman of the Fed said, “The Federal Reserve is not currently forecasting a recession.” 9 months laterin September of 2008, Lehman Brothers collapsed and the financial markets worldwide came tumbling down.

The Federal Reserve is supposed to be in charge of regulating the economy. It’s terrifying that they couldn’t see that recession coming… and even more frightening that they may have seen it coming, but didn’t warn us.

Be extremely defensive in your investing strategies today. Make financial decisions as if it were 2006. People who were prepared fared very well during the subsequent recession.

Rising interest rates can be the exact prick needed to pop the stock market bubble. That may be the very reason the Fed is raising rates – to slow down the irrational exuberance that taking the bubble to new heights.

A slowdown could turn into a meltdown, depending on how big that bubble has become.

How would a slow down in stocks affect real estate?

1. Cities that are more dependent on stock market fluctuations would be more affected by a stock market crash (SF, NY, Seattle).

2. Mortgage interest rates would decline if there were a correction in the stock market as more investors flock to the safety of bonds – which are more tied to the 10 year Treasury bond market.

3. Commercial real estate would get hammered while landlords could fare well as more people are forced to rent, driving rents up.

Now would be a very good time to “cash out” and sell your high priced assets while the market is hot. You can exchange those properties for low-priced, high cash flow properties in recession-proof markets.

If you have concerns about your portfolio or would like to speak with one of our investment counselors about how to find out which markets are best for investing today, visit www.RealWealthNetwork.com.

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.

Avoid Common Marketing Mistakes By Using These Ideas on Your Path to Community Success

Written by Landlord Property Management Magazine on . Posted in Blog

by Elaine Simpson, President of Occupancy Solutions, LLC

marketing mistakes

To be successful, multifamily professionals must recognize common marketing mistakes and know how to avoid them.  We must first understand what marketing is and is not.

Marketing is an essential element for every business.    Marketing and advertising for rental housing has gone beyond the classic printed ads, billboards and rental magazines.  Thanks to the rise of technology and social media, the world of marketing and advertising has become bigger than ever.   Unfortunately, all of these resources can cause confusion and intimidation, but if we learn the right strategies and use the right tools, we can handle our marketing without fear or hesitation.  Marketing is the first step in building a relationship with the customer and building brand recognition.

First things first.  Marketing is not the same as advertising.  Similarly, marketing is often confused with the simple act of selling.  Marketing is made up of the activities companies use to attract the attention of their potential residents and lead them to the sale or purchase.  Marketing starts with the process of identifying potential customers with the interest and income to rent from you.  This is known as your target market.  It involves understanding who your potential residents are and what they want from your community.  Colors, logo and other design elements help to align the image of your community with the interests of your target audience.  It is marketing that defines your brand and attracts the potential residents you want.  Advertising is the process of making your community known to the marketplace and is essentially spreading the word about what you have to offer based on what you know about your audience.  Put another way, marketing is the way in which you convince potential renters that you have the right apartment for them.  Advertising is how you communicate to them the existence of that perfect apartment.

As professionals we must understand what to do right and what to avoid in order to successfully market our communities and management companies.

Things to avoid:

Using just one marketing type;

Thinking marketing, selling and advertising are all the same thing;

Placing advertising that does not contain a “call to action”;

Using the same old methods of yore;

Ignoring current residents as a source of promotion;

Using social media inconsistently and/or without tracking efforts, monitoring or maintenance;

Creating a marketing campaign without doing proper market research.

Defining and building a target market requires extensive market research.  In the rental housing industry, we can create and utilize a market survey of nearby rental communities with rental rates and amenities similar to our own to assist us in defining our market.  Once our market survey form is created, one need only update the data on a monthly basis.  The data collected allows management to adjust rental rates and gauge occupancy levels of the competitors.  Many large management companies today have special computer programs that analyze various factors such as availability of specific floor plans and rental “specials” within submarkets and then set rental rates that can change daily.  Smaller companies must rely on their staff, managers and corporate representatives to use the data collected in the periodic calls and visits to the competitors.  Data collected is used to set marketing goals and marketing strategies.

Things to do:

Train Your Employees – Every interaction counts in a successful marketing campaign so it is important to train your employees how to communicate with your prospects in face-to-face encounters, over the telephone and on the internet.

Set Appropriate Marketing Goals – This is important in order to provide direction for your campaign.  You must also create specific objectives and plans to reach your goals.

Inform and Educate Your Target Market –  Concentrate on relevant content through the use of different media such as blogs, webcasts, social media, newsletters, etc.  Choice of media also depends on your budget and target market.  Consider only specific publications, banner ads and use of search engine optimization (SEO) for the internet.

Create advertising that focuses on how your clients’ lives will improve by living at your community.  This is usually accomplished by using “Feature Benefit Closing” techniques and should be used throughout your marketing campaign.

Give your residents and prospects a voice by creating an outlet for communication through the use of surveys, focus groups, interviews and reward programs.

Be consistent in your image, product and customer service.

Anticipate customer needs and understand customer wants.

Keep up with market trends.

Practice “the pitch” after making it concise and focused.

Sell value and lifestyle, not the price.

Offer extraordinary customer service.

Keep it fun or entertaining to create and hold attention.

Be confident in your presentation.

Integrate the “four P’s” – product, price, place and promotion to support your branding & campaign.

Understand the different types of marketing and mix them to be most effective:

Direct Marketing – emails, phone calls or texting to a captured list of prospects with a call to action.  Also use interactive web pages, promotional letters and offers.

Active Marketing – approach and follow up is important when using on-line blogs and forums, instant chatting and cold calling.

Inbound Marketing – use of Search Engine Optimization, web pages, FaceBook, Twitter, etc. to bombard prospects with information then wait for return responses.

Outbound Marketing – this is the most traditional method and is easy but you may spend more time and effort casting a wide net rather than reeling in the fish.  Examples are television, magazine ads, some internet ads, some web pages and grass roots outreach efforts.

Guerrilla Marketing – use of unconventional methods to “wow” prospects by creating unique visual perspective and engage their imaginations.  Examples are public relations stunts such as forming flash mobs or interactive advertisements such as dinosaur footprints leading from public places to your community.

Promotional Marketing – holding contests, sweepstakes, giveaways, or raffle tickets for free gifts.

Smaller companies generally do not have the benefit of having a marketing director telling them what to do and how to do it and must come up with ideas on their own or turn to outside marketing consultants and companies such as Occupancy Solutions  for guidance and training.  Occupancy Solutions offers in-person training, consultations to review and develop individual marketing plans, on-line e-learning webinars and training courses and much, much more.

 

 

 

 

 

 

 

 

DST 1031 Exchange Case Studies

Written by Landlord Property Management Magazine on . Posted in Blog

By Dwight Kay

DST property

Challenge: The client was looking for specialized and focused help in evaluating DST 1031 properties for her 1031 exchange. She had been introduced to a financial advisor that not only did not fully understand how 1031 exchanges and investment real estate work, but also only had two DST properties available.

The client was then introduced by a family friend to Kay Properties and Investments, LLC. She was relieved to find a group that truly specialized in DST 1031 properties, had answers to her specific real estate related questions, had access to a full menu of over 20 DST 1031 properties and lastly was able to construct a portfolio that met her needs and objectives as opposed to what met her financial advisor’s.

Result: In the end, the client was grateful to Kay Properties for helping her to avoid the higher risk asset classes in the marketplace such as student housing, hotels, oil and gas and saltwater drilling. The client was able to successfully complete her 1031 exchange into a diversified portfolio of DSTs that did not expose her to additional risk factors entailed in the exotic asset classes just mentioned.

Challenge:

The client was a real estate investor that had paid off his rental properties completely over the years. When researching DST properties, financial advisors pitched a handful of properties with large balloon mortgages that would ultimately come due in 5-10 years. What the “financial advisors” failed to mention was that when those properties were sold he would then not be able to purchase any property at any loan-to-value, but that he would then have to take on “equal or greater debt” per the 1031 exchange IRS guidelines.

Result: The client was thrilled to have been introduced to Kay Properties and Investments, LLC by his CPA, as he was able to learn the ramifications of going from an unleveraged position in his rental properties to a leveraged position in DST properties with 5-10 year balloon mortgages. At best he would have had to replace the mortgages with equal or greater debt upon the DSTs sale. At worst he would be looking at a potential foreclosure if things didn’t proceed as planned at the property and with the economy.

The client opted to invest in a diversified portfolio of Kay Properties’ all-cash/debt-free DST properties. He now had the peace of mind of NOT having to take on debt upon the sale of the DSTs, NOT having the risk of a lender foreclosure and NOT having the risk of a 5-10 year balloon mortgage upon the DST’s sale. Through Kay Properties’ debt free DST properties the client was able to stay in a completely debt free position as well as increase his projected cash flow considerably.

Challenge:

The client was a real estate investor that had previously invested in a basket of student housing, senior care, hospitality, regional mall and oil and gas 1031 properties in 2005 with a broker that touted his group’s due diligence as being second to none. Fast-forward to 2009 and 2010 and the investor lost millions of dollars of equity due to the higher risk nature of these asset classes combined with the great recession and credit crunch.

Result: The client was introduced to Kay Properties and Investments, LLC by a CPA who had been working with Kay Properties for years. The client was able to build a diversified DST portfolio consisting of all-cash/debt-free properties, multifamily apartment properties in growing locations and long-term corporate-backed single-tenant retail properties leased to credit tenants. The client said over and over that he had wished he had been able to invest with Kay Properties the first time around. Since his first 1031 exchange with Kay Properties the client has done multiple subsequent 1031 exchanges into Kay Properties recommended DSTs.

Past performance is no guarantee of future results.  This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

This material contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment.

Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation.

Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado.

Kay Properties & Investments, LLC, is registered to sell securities in all 50 states.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

 

 

RED FLAG WARNING for Commercial Property Owners – a $45B Problem

Written by Landlord Property Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com
Commercial Building

This may be the year that billions of dollars in commercial mortgages go belly up. These loans were financed in 2007 and are maturing this year. That means some commercial property owners will be faced with huge balloon payments and for some, a major headache to pay them off.

The Federal Reserve stated in its semiannual Monetary Policy Report to Congress on Tuesday that commercial property prices were becoming a “growing concern.”

Specifically, the report said, “”Commercial real estate (CRE) valuations, which have been an area of growing concern over the past year, rose further, with property prices continuing to climb and capitalization rates decreasing to historically low levels,”

While commercial property debt remains small compared to the overall economy the report said that the rising “valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline.”

According to Reuters, commercial real estate loans by U.S. banks surpassed their pre-financial crisis levels in September 2015, and at last reading for January stood at a record $1.97 trillion. Small banks hold nearly two-thirds of that total, some $1.22 trillion.

Commercial property values in the U.S. have more than doubled from their 2009 low, according to Green Street Advisors’ Commercial Property Price Index. Things started slow down in 2016, with just a 3% rise in values.

And this all comes at a time when there’s also a concern about a tidal wave of commercial loans that will come due this year. Lending standards in 2007 were lax and real estate investors jumped in with both feet, taking on huge amounts of debt in that red-hot market. Back then it was difficult to see anything but skyrocketing real estate market.

Then, the impossible happened. The residential real estate bubble burst, and property valuations plummeted back to earth, and even below the water line. We know now that many homeowners lost their property because they couldn’t make the payments or because banks simply failed.

This is the year we could begin to see the same fall-out on their commercial loans.

While commercial property in the most populated metro areas like New York City and San Francisco are seeing record high prices for real property,  the real-estate recovery has been a little lopsided.

There are many U.S. markets where valuations have not caught up yet. It’s those landlords who might have trouble refinancing their monster balloon payments, and if they can’t refinance because they are underwater on the loans, they might have to sell at a loss.

Bloomberg says that prices for suburban office buildings are still 4.8% below their peak compared to Manhatten skyscrapers that have surged 50% higher than they were at their previous peak. So when it comes time to refinance loans for buildings that aren’t worth as much, lenders may want landlords to cough up the difference… and that may not be easy to do.

Borrowers may also have to pay higher interest rates, or they may run into lenders who are now pickier about what the buildings they are willing to finance. Bloomberg writes that lenders may not be eager to finance retail properties, especially malls, as e-commerce takes a bite out of their sales.

Lenders may also have to retain a 5% stake in any loans they make to comply with the risk retention rule under the Dodd-Frank Act. That prevents them from making risky loans and selling 100% of the risk. It also makes banks more selective about the loans they grant.

The fate of the Dodd-Frank Act is uncertain however. President Trump has signed an executive order to begin the unraveling of those regulations and the risk retention rule is sure to be reviewed. But those changes won’t happen over night and maybe not in time.

So just how hard will commercial property owners get hit?

Bloomberg says the delinquency rate is expected to hit 5.75% this year,  after several years of declines. Because these mortgages are packed into bonds, there could be more bondholder losses as well.

According to Bloomberg, banks sold $250 billion worth of commercial mortgage-backed securities to institutional investors in 2007. But not all of them are maturing this year because many have already been refinanced or the properties sold. Property owners with less desirable properties and weak financials have already defaulted.

Using data from Morningstar, Bloomberg says the amount of debt that will actually come due this year now stands at about $90 billion dollars. From there, Morningstar is estimating about “half” of those remaining loans will run into refinancing roadblocks!

For people faced with this situation, it’s critical to have a back-up plan. You shouldn’t wait until the last minute or you might end up losing your property. It’s best to start working now on refinancing, or selling the property before you run out of time.

If you are looking for commercial investments, be careful about paying too much and accepting low cap rates. If you just wait a bit, you could find much better deals.

And all this is happening just as the economy is in a major shift. Baby boomers are turning 65 at a clip of 10,000 per day. Their spending habits will change and that will affect commercial property. Plus, technology and innovation is quickly making some industries obsolete practically overnight.

A commercial builder asked me if we’d like to finance the construction of an auto dealership in Sacramento, “because the auto industry has been booming.”

After researching it a bit, I told him that yes, it has been booming, but only because of easy financing. But this is the year that many leases will be returned to car dealers and we could very well see a huge glut in cars for sale. My daughter needs a new car and I told her to wait just a bit longer as we could see some steep discounts this summer.

Never base your decisions on the way things have been. In 2005, Fed Chair Ben Bernanke said, ”We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize…”

Bernanke was dead wrong, and made the fatal mistake of not taking into consideration massive debts from easy lending that couldn’t be repaid. We are seeing some of the same debt issues today, just not in residential mortgages.

We expect to see some bargains in the commercial property world over the coming year. If you’d like to be first to know about those, join the network to get on the VIP investor list.  www.RealWealthNetwork.com

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.

Is Your Toolbox Equipped For You To Be A Successful Leasing Professional? 

Written by Landlord Property Management Magazine on . Posted in Blog

By Elaine Simpson, President of Occupancy Solutions, LLC

property manager success

Set yourself up for leasing success  by making a resolution to consistently use these basic leasing tools.  If you put all of them in your leasing toolbox and use them regularly and properly, they will lead you to success!

The Tour Path

As they say, “put your best foot forward”.  After making sure the office entrance and office look inviting, are clean and in order for the day, take the time to preview the path on which you  will take your prospects while touring and demonstrating why your community is perfect for them.  Be sure to pick up any trash or cigarette butts along your route.  While walking your tour path, be sure to take notes of maintenance or other issues that must be addressed to make your tour route look its best so you can impress your prospect.

Models and Vacant Market Ready Apartments

Preview the apartments that you will be showing. Create  a “sparkle kit” of basic cleaning supplies to carry with you so you can clean a mirror, dust a shelf, pick up a dead bug, change a light bulb, etc.  Include furniture markers to touch up scratches and scuffs on the model furniture.  All the interior lights in the apartment should be on.  Set the thermostat to the proper temperature for the day.  Turn on the radio and open the blinds.

Leasing Binder

We love to use Leasing Binders to hold and organize our paperwork.  Leasing binders are generally 3-ring notebooks with tab dividers and pockets to hold: availability list; product knowledge; marketing materials including brochures, floor plans, photos and current flyers; market surveys so that you can educate your prospects regarding the competition (remember not to gossip but speak factually about what they offer or don’t offer); guest cards; applications; business cards; calculator; tape measure.  Also use page protectors to keep the documents and pages looking clean and crisp.

Product Knowledge Notebook

Make this section of your binder a place to keep all of the information that you can find about the physical asset:  year built, number of acres,  type of zoning, number of units, unit mix, type of construction, type of insulation, floor plans, room dimensions, window sizes, carpet and flooring colors, lists of upgrades, etc.

List of Competitive Advantages

Make a list of the things that set you apart from your competition to help you sell against them.  This list can help you when overcoming objections.

Telephone Call Log

Everyone in the office should be logging their telephone calls.  It will capture how many calls were answered by a person during business hours.  The data will also illustrate which days and times of day are the busiest.  Many people just hang up and won’t leave a message when they hear a voice message so try to answer every call in person.

Terrific Telephone Techniques

The goal is to give and receive as much information as possible in an organized way in very little time in a polite and professional manner that leads to an appointment to visit the community or a lease over the phone.  You can create your own leasing script.  We don’t want you to sound like a robot, but if you follow along with a script you won’t forget to ask important questions and to give each caller a brief description of the apartment interior and community amenities, invite them to tour and set up an appointment.  You should ask for each caller’s name at the beginning of the call and use it during your conversation to personalize the call.  Find out how each caller heard about your community so you can track what advertising sources are working and which ones are not working for you.  Your list of questions should also include: Desired floorplan? How soon needed? Number of occupants? Pets? Length of lease? Why moving? Your description should include: feature/benefits of apartment interiors; community amenities; utility information; deposits and fees; invitation to visit; location and office hours; directions if needed; instructions on how to apply, etc.

Ear Appealing Descriptions and Words to Avoid

Each leasing consultant should take the time to write out a description of each floor plan within the community and then practice verbally  using those descriptions for their presentations whether over the phone, on line or in person.  Think of your own “ear appealing” words to use in your descriptions.  Examples:  exceptional, unique, charming, cleverly designed,  stylish, etc.  Avoid using industry words.  Replace complex, property, site and unit with community and apartment or home.

Proper In-Person Greeting

Stand up to greet each prospect.  Look them in the eye, extend your arm to offer a firm handshake, verbally introduce yourself and welcome them to your community.

Guest Cards

Whether you use printed or computer guest cards, best practice is to fill out the guest cards for your prospects instead of asking them to do it.  You can ask questions and make notes while making conversation.  Record their “hot” buttons and note what is really important to them in finding their next home.  These notes will help you later during your presentation, tour and closing.

Product Demonstration

We suggest you show your selected vacant apartment(s) before showing your model(s).  This helps prospects envision their own furniture being placed in their new home. Use the information from your guest card and point out the features and benefits you already know will interest them.  Take this time to build rapport and start closing the sale.

Closing Techniques

There are several ways to approach closing the sale.  You can set the stage for closing when you first speak to a prospect on the phone or at the beginning of an office visit before you ever leave the office by asking two key questions:  1.  What other options are you considering?  2.  If you see something you like, are you prepared to lease today?  This will start the dialog you need to work your magic.

Fantastic Follow Up

It is a little old fashioned, but we suggest the use of a “tickler box” in your leasing office to keep track of ALL leads from ALL employees so constant, progressive follow up can be done with each prospect until they tell you that they have leased somewhere else or to stop contacting them.

Elaine Simpson, owner of Occupancy Solutions, offers awesome in-person training sessions on this property management topic and many others in addition to e-learning courses and webinars.  She can be reached at (800)  865-0948  or www.occupancysolutions.com.

How To Dodge A Tax Hit When Selling Rental Property By Making The Right Move, Sellers Can Sidestep The Capital Gains Tax

Written by Landlord Property Management Magazine on . Posted in Blog

By: Dwight Kay

Tax - scrabble blocks

The life of a landlord certainly isn’t easy.

There are plumbing issues that eat into time and money. There are tenants who fail to pay the rent. There are broken leases and leaky roofs.And the hassles don’t even end when the beleaguered landlord finally decides to sell the property. After the deal closes, the Internal Revenue Service is waiting in the wings to collect a capital gains tax on the profits from the sale.

“Depending on your situation that can definitely end up being a significant hit when tax time arrives,” says Dwight Kay, founder and CEO of Kay Properties and Investments (www.kpi1031.com).
But Kay says with the right planning those landlords – and anyone who sells commercial property – can sidestep paying the capital gains tax.

Here’s how: When they sell their property, they can invest the proceeds in what is referred to as “like-kind” property using Section 1031 of the Internal Revenue Code. Essentially, they are exchanging one piece of commercial property for another, but hopefully one that better meets their needs, Kay says.

“A landlord who decides he’s tired of all the work he has to put in on his rental property could use the exchange to get an income-producing property where someone else is dealing with all the problems,” he says.

All types of commercial properties can be considered “like-kind,” including apartment buildings, vacant land, farmland, office buildings and warehouses among other properties.
One drawback is that the seller has just 45 days to identify what property they are going to exchange into. It’s not always easy to find 1031 exchanges quickly, but there’s also a solution to that, Kay says.

If the seller qualifies as an accredited investor, which is generally defined as an investor with a net worth of greater than $1 million dollars excluding their primary residence, the seller can potentially invest in Delaware Statutory Trust properties. A Delaware Statutory Trust (DST) is a trust that lets investors buy an interest in commercial property, but managing the property is left to professional asset managers. Because Delaware Statutory Trust properties are pre-packaged for 1031 exchange investors, they provide a viable solution for those concerned about meeting that 45-day deadline.

Also, despite the name, the property doesn’t have to be in Delaware. Kay, for example, says his Los Angeles and New York City-based company works with clients and properties in all 50 states. Kay goes on to say, “A Delaware Statutory Trust property could be a property that has a long term lease with Costco or Walgreens or it could be a 200 unit apartment community built in 2014 and located in Denver, Colorado. Investors are able to invest as little as $100,000 into each DST thereby creating a diversified portfolio for there 1031 exchange.”

Kay says there a several potential benefits for investors. Here are just a few:

Eliminating the day-to-day headaches of property management. The Delaware Statutory Trust 1031 property provides a passive ownership structure, allowing the investor to enjoy retirement, grandkids, travel and leisure, as well as to focus on other things that they are more passionate about instead of property management.

Increased cash flow potential. Many investors are receiving a lower amount of cash flow on their current properties than they potentially could be, Kay says. That might be because their properties have under-market rents or multiple vacancies. It could be that they have raw or vacant land that is sitting idle. These Delaware Statutory Trust exchange properties provide an opportunity for investors to potentially increase their cash flow on their real estate holdings.
Portfolio diversification. Often times, 1031 investors are selling a property that comprises a substantial amount of their net worth. They want to reduce their potential risk and instead of buying one property they decide that investing into a diversified portfolio of Delaware State Trust properties is a better fit for their goals and objectives.

Dwight Kay

CEO and Founder

Dwight Kay is the Founder and CEO of Kay Properties and Investments, LLC (Kay Properties). Kay Properties is a provider of DST brokerage and advisory services headquartered in Los Angeles, CA with an office in New York, NY. Registered Representatives at Kay Properties and Investments specialize in helping 1031 exchange clients throughout the country purchase DST properties and are securities licensed in all 50 states, Washington D.C. and the U.S. Virgin Islands. Mr. Kay has personally been involved in over $200,000,000 of client purchases of DST properties and other securitized real estate products.

kpi-real-estate-investment-3d_smallDwight is a published author with multiple published white papers and articles on 1031 exchanges, Delaware Statutory Trust (DST) properties and real estate securities. He has been interviewed on local and nationally syndicated radio stations on the matters of 1031 exchanges and replacement properties. He also is the author of the published book “Delaware Statutory Trust (DST) Properties: An Introduction to DST Properties for 1031 Exchange Investors.”

Dwight began his career in commercial real estate working for a national commercial real estate brokerage firm focusing on multifamily and commercial real estate. Mr. Kay received his Bachelors in Business Administration from Point Loma Nazarene University in San Diego, California, and successfully obtained his Series 7, 22, and 63 securities licenses as well as a real estate broker’s license.

Risks & Disclosures

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment.

Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation.

Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. 303-962-7267.

Kay Properties & Investments, LLC, is registered to sell securities in all 50 states.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

Taxes, Fees, Charges and Assessments: What Difference Does It Make?

Written by Landlord Property Management Magazine on . Posted in Blog

By Jon Coupal

taxes

What’s the difference between a tax and fee? There is no easy answer and the political class likes it that way. In fact, they would prefer that the public remain confused to the point of apathy.

The political class, of course, consists of elected officials, bureaucrats and their special interest allies who are to the Capitol what insider traders are to Wall Street. Working in lockstep, their approach to increasing the take from taxpayers was best outlined by Jean Baptiste Colbert, Minister of Finance under Louis XIV of France: The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.

But taxpayers are not defenseless because they have approved three constitutional amendments defining – and limiting – taxes and fees. These include Propositions 13 (1978), Proposition 218 (1996) also known as the Right to Vote on Taxes Act, and Proposition 26 (2010) which provides comprehensive definitions of taxes and fees. All three provide effective weapons against an insatiable government ever in search of more revenue.

However, to protect themselves, taxpayers must be knowledgeable, alert and ready to fearlessly protect and exercise their rights.

Therefore, while most taxpayers don’t have a law degree, here are some basics about the difference between a “tax” and a “fee.” There are very few legal limitations on “taxes.” About the only way a tax could be unconstitutional is if it impaired a fundamental right (a “poll” tax on the right to vote) or if it singled out some group for discriminatory purposes. But fees are different. A fee is a charge for something that confers a benefit to the fee-payer that is not available to those who do not pay the fee. A classic example is a charge for entering a state campground.

Until the passage of Proposition 26 in 2010, the legislature could approve fees with a simple majority vote. But in 2011, the Legislature approved, with a simple majority, charging 850,000 rural homeowners an annual “fire fee” of $150. The “fee” was not accompanied by any additional benefit or service, clearly making it a tax requiring a two-thirds vote of the Legislature. This issue is currently being litigated by taxpayers, but it is a classic example of the dishonest ends to which tax raisers are willing to go to wring ever more money from taxpayers.

Moreover, the political class has a habit of pursuing taxes that are not apparent to the general public. Almost any tax on business fits into this category. As Howard Jarvis liked to say, businesses do not pay taxes, “we do.”

As part of Obamacare, the federal government imposed a tax scheme designed to stop employers from offering top quality health plans. Backers of the Affordable Care Act included a 40 percent tax on providers of what were derisively described as “Cadillac” plans.  As these plans disappear, the uninformed will assume that it is their employer who is responsible, when, in fact, it is government.

Here, in California, a major hidden tax is cap-and-trade legislation, not approved with a two-thirds vote, that compels companies to buy carbon credits. Of course, these costs are passed on and drivers feel the impact every time they fill up with gasoline that costs, by the most conservative estimates, an additional 12 cents per gallon with more increases on the horizon. Unaware of the impact of cap-and-trade, many motorists may mistakenly assume that the high cost of gas is entirely due to the petroleum companies.

This is why taxpayers are closely watching a case just argued before the Sacramento appeals court, where opponents argue that cap-and-trade charges amount to an unconstitutional tax. The court is expected to render a decision within 90 days but, regardless of the outcome, the loser is likely to appeal to the California Supreme Court.

CoupalPubPhoto2Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.  

Property News Reports – Landlord Lessons with Kathy Fettke – Protect Yourself by Protecting Others

Written by Landlord Property Management Magazine on . Posted in Blog

Property News Reports provides you with the latest in Real Estate Investment Strategy, Market Analysis, Property Management Trends, Leasing Strategies & more for the Single Family, Multifamily & Commercial Real Estate Markets from leading industry experts and reliable sources.  ‘Subscribe‘ to stay informed!


Kathy specializes in teaching people how build multi-million dollar real estate portfolios through creative finance and planning. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn more about Kathy & the Real Wealth Network at http://www.RealWealthNetwork.com