Monday, February 19, 2007

'Value-Added' Possibilities Frequently Overlooked

"Value added's" . . . not the best grammar, but something that every property investor should consider when they are evaluating real estate for purchase. It's not just the bricks and mortar; it's not just the cash flow; it's not just the appreciation. Prospective purchasers need to look for ways to add value to a property.

It could be as simple as adding washing machines and dryers -- either coin-op in a common area or machines for each individual unit; it could be knocking down a dilapidated structure at the rear of a property, and paving it for parking -- particularly in areas where little off-street parking is available. Value-added possibilities can be found on vacant ground that is part of the property being purchased. Is the vacant area large enough to build storage units for rent? Could the ground be rented to a Christmas tree vendor in the winter months for extra income? Adding value can also come in the form of newly installed insulated windows. This saves your residents money on their utility bills, giving you another selling point for prospective renters -- and a justification for bumping rents up.

There are many, MANY more ways to add value to an investment property. But you have to think outside the box!

Wednesday, February 14, 2007

Referral Group BNA To Jump Into Blogosphere

A referral group to which I belong, Business Network Associates, has decided to jump into blogging to share information and educate the public about various types of businesses and solutions to everyday challenges. It is now under development and should be up in about a week. It will be called the "Business Network Advisory."

More than a dozen entrepreneurs and business professionals, whom I trust implicitly, will be talking about and answering questions from readers on a wide range of topics: financial planning and financial literacy, health and wellness, home mortages, commercial lending, business/personal travel and special events planning, information technology, human resources, personal business coaching, title insurance, and much, much more. Plus, I will weigh in occasionally on commercial and investment real estate issues. When it is up and running, I'll pass along the address!

Property Investment Management Arm of Prudential plc investing in 'Australasia'

A sister organization of ours has paired with another property fund manager to invest in properties in "Australasia." The open-ended pan-Asia Pacific fund is sponsored by Prupim, the property investment management arm of Prudential plc (Prudential UK), and LaSalle Investment Management. Their new Asia Property Fund has been stocked with five assets in Australia, Singapore, Hong Kong and Korea that are valued at US $600 million. Prupim says the fund will invest in real estate throughout the region in multiple property types and structures.

Yes this isn't Ohio investment property, but yet another look at how entities large and small exploit the power of real estate.

Sunday, February 11, 2007

Dash To Open New Hotels Near Columbus, Ohio Airport Adds Embassy Suites To The Mix

A central Ohio development company plans to build an Embassy Suites hotel near Port Columbus, adding to the steady inventory of rooms in the busy airport market. Local development company Core Properties has secured a 6-acre piece of ground amid a slew of hotels off Airport Drive for the 185-room property. Core Properties owner Jeff Coopersmith said Hilton Corp., which owns the Embassy Suites brand, has approved the site.
Pending a change in zoning, Core Properties hopes to break ground on the hotel in late summer and have it open near the end of 2008.

So what is special about hotels as an investment? Because it is an investment model in real estate that can make money when it is only 60 percent occupied!

Friday, February 9, 2007

New IRS Rules on "Kiddie Tax" Could Affect Many

As you are working on your taxes for 2006, make sure you are aware of some changes to the tax code regarding the so-called "kiddie tax." This applies to certain investors large and small-- not just those who are building wealth with real estate.

Congress took something away from family pocketbooks last year, raising the age at which teens are subject to the "kiddie" tax. This is the tax on the child’s investment income that must be figured at the parent’s top rate instead of the child’s generally lower rate. Before, only those younger than 14 were subject to the higher tax; now, those under 18 are included. That change may ensnare earnings on certain college funds or savings vehicles started before taxpayer-friendly 529 college plans became widely available. Recommendation? Check with your accountant!

Wednesday, February 7, 2007

Our Pru CRES Operation Profiled in Magazine Cover Story

Well, it's out! The latest issue of Buy Lease Build magazine (Ohio Edition) has as its cover story a really nice piece on Prudential CRES Commercial, the business we are building in the Midwest, and details of some exciting programs that set PruCRES apart from other commercial real estate brokerages.
The story starts on Page 7. For those of you who need startled in order to get rid of hiccups or some other malady, there is a truly dreadful picture of this blog's author on the same page.

Link: Even GOD Did Evictions!

Even God did evictions!!! This is a link to a GREAT post by another author. It first showed up on the ActiveRain network. I do not know the author, but I had to pass it on. It essentially is a reminder to people who or own or manage property that is is alright to evict a tenant. You might not want to go through an eviction because its either a hassle, or you don't like change, or you feel the need to give your renter "just one more chance." No matter your religious convictions (or lack thereof), this is an entertaining read that reminds owners and property managers that its okay to do what you need to do . . . its business -- not personal.

Here is the link:

Vornado Out; Blackstone In In EOP Bidding War

It looks like the bidding war for giant office landlord Equity Office is over. Vornado Realty Trust has pulled its name from consideration, leaving Chicago-based trust right where it was in November--and right where the EOP board wanted it to be--in the hands of Blackstone. Click on the link below for the full story.

Vornado Drops EOP Bidding, Clearing Path for Blackstone

Tuesday, February 6, 2007

People Are Perfectly Willing to Help You Pay Your Bills -- If You Let Them

I use a particular quote frequently when I give presentations on tax-deferred exchanges and the benefits of investment real estate. A reader of these posts emailed me over the past weekend, asking me to explain something I posted in another online forum. Here is the statement they were curious about:

"People are perfectly willing to help you pay your bills . . . if you let them."

First let me say I did not originate this quote. But it helps people understand how real estate pays for itself, in a manner of speaking. I first heard the phrase when I met Furman Tinon of Newark, Ohio. Furman is a nationally known expert on investment real estate. Furman and I belong to Columbus Real Estate Exchangors (CREE), an organization of Realtors who specialize in helping clients increase their holdings while avoiding capital gains taxes utilizing IRS 1031 tax-deferred exchanges. We meet weekly to inform each other of properties we have for sale, or are looking for, on behalf of our clients. We also brain-storm to help each other find solutions for the challenges our clients face. CREE is part of a larger statewide organization called OCREA, Ohio Commercial Real Estate Exchange Association. OCREA just finished up a 3-day marketing session in Columbus that attracted more than 65 agents and brokers from a six-state region, all sharing details on investment properties they either have listed for sale, or are seeking for their clients.

Anyway, Furman shared this one-line philosophy with me. And it stuck. It has gone far to help me teach people the power of real estate. It's simple really when you think about it. You purchase a property, starting with a down payment from your personal funds -- though they may not need be from your checking account, but may be proceeds from a stock sale or other liquidation of an investment that is not performing well. After you're into the deal, your residents (I try not to call renters "tenants") pay your bills for you. THEY pay the mortgage each month. THEY pay the upkeep and maintenance. THEY pay the insurance on the property. Get it?

They'll do this . . . but you have to let them.

Saturday, February 3, 2007

EOP May Accept Lower Bid

According to news reports, the Equity Office Property Trust board of trustees, besieged by two suitors flush with billions of dollars in takeover money, has met again and says it prefers the lower Blackstone offer of $54 per share, or about $38.3 billion. Vornado Realty Trust has offered $56 per share for the company, but the EOP board agreed that Blackstone’s cash offer is better than Vornado’s $31 cash, $25 in stock per share offer.

Wouldn't it be something to have companies in bidding war for your properties? EOP has been a smart player over the years, growing to become the world's largest office landlord. As I mentioned in my last post, this story is instructive. And the final chapter isn't yet written.

Friday, February 2, 2007

Equity/Blackstone/Vornado Saga Is Instructive

The Equity/Blackstone/Vornado triangle gets more and more interesting. Blackstone says it will not make a further counteroffer to purchase Equity Office Property Trust, in response to Vornado Realty Trust submitting a binding $41-billion offer on Jan. 31 to buy EOP. The new offer by Vornado is for $56 per share, $2 per share higher than Blackston'e amended offer of $54 per share, which worked out to be about $38.3 billion. Blackstone responded this morning to Vornado’s announcement by saying it has submitted its final offer.

"We do not believe that the true value of Vornado's proposal is anywhere near $56 per share and Blackstone has no intention of increasing its all cash price,” a Blackstone spokesman told business reporters. “The true value of Vornado's offer should reflect a discount for stock, the three to four month time delay before receiving it and the risk of VNO's share price declining below $115 per share. When combined with the risk to EOP shareholders that VNO shareholders could vote the deal down for any reason, we strongly believe that our binding agreement with EOP is clearly superior.” Though the EOP board said it would consider Vornado’s Jan. 31 offer, the EOP board approved Blackstone’s amended submittal of $54 per share on Jan. 25, along with a $500 million break-up fee if the Chicago-based REIT does not agree to the Blackstone acquisition by Feb. 5. In Blackstone’s most recent offer in late January, it said it would pay about $38.3 billion for EOP, in a transaction that some investors have favored because it’s a cash offer, not including stock. In today’s statement, Vornado said its offer of $56 per share includes $31 in cash and Vornado shares equal to $25, as long as its stock price remains between $115 to $135 per share.

At this point you're asking yourself, "so what?" The reason this is interesting, and instructional, is because these companies recognize the value of holding real estate. They are in a bidding war. And though you may look at the numbers and say this is just the big boys showing off, it is instructive for this reason -- the advantages of investment real estate are often far more signficant at any level than other investment tools. Whether it is hundreds of office properties being argued over, or a half dozen 4-families, or even one twin-single or duplex, the value and the returns are there.