Author Archives: Eileen

Commercial Real Estate Transaction Using Your IRA

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[photopress:pensco_trust_logo_200x150_1.jpg,thumb,alignright]For those of you who listen in on the Pensco Webinars, this week’s promises to be outstanding as Jim Wilson discusses commercial investing with Self Directed Retirement accounts. You can use your self directed IRA’s or 401K’s or the new Solo 401K to buy apartment buildings and/or take part in development projects, purchase blocks of pre-built housing developments, etc. This company produces webinars and seminars that are always top notch.

Webinar Date: Wednesday, April 4th, 2007 Webinar Time: 11 a.m. PDT / 12 p.m. MST / 1 p.m. CST / 2 p.m. EST

Topics Include:

  • How to Perform Due Diligence When Buying Investment Properties
  • How to Lend Your IRA to Developers
  • Get safety first preferred positions in development and re-development projects like small shopping centers.
  • Triple-Net Lease Considerations
  • How to Get into Larger Projects with Less Money
  • How to Get Mailbox Money for Your IRA

Directions for participating in this ‘Wednesday Webinar’:

Webinar Telephone Number: 1-212-990-8000 Participant 4-Digit PIN Code: 2090 #

This is my participant number. If you’d like to register and get your own number so you can listen, go to www.penscotrust.com and go to the webinar information on the right.

Enjoy.

I Wonder How They Practice Real Estate in China!

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[photopress:world_map.JPG,thumb,alignright]Before I tell you why I’m blogging on this subject, I first want to tell you what I’ve been doing over the last months (instead of blogging). So I have an announcement to make. As I was building LTD Real Estate I studied several business models and I knew I didn’t want to build any of the traditional models like those I’d previously been associated with (the big 3). Along the way, I studied the RE/MAX model and liked it so well and the RE/MAX agents liked it so well, I decided to join the RE/MAX family. So today, I am officially RE/MAX Connected, Connected meaning not only developing internet marketing but especially here in the Pacific NW, where we do so much business with other Pacific Rim Countries and we all have so many European and Asian clients, too, so Connected also means connected to the world.

It wasn’t until my owner training however, that I realized what being worldwide means to a business. In my class alone, there were 6 countries represented, including Slovinia, Panama, Costa Rica, Dominican Republic, and Mexico. There was even a translation room for those that were non English speaking. It’s mind boggling to me to think of practicing real estate in a previously communist country. Apparently, when Slovinia joined the EU, they had to first license professionals, like attorneys, accountants, realtors, etc. The 20 something couple that bought Slovinia bought the whole country with a population just under 2 million. Slovinia is the first country that pulled out of Yugoslavia in 1991 after the fall of the Iron Curtain and so the young kids raised without Communism are now hitting their 20’s, have grown up on MTV and The Apprentice and been exposed to international trends and thinking and, of course, capitalism

So far, RE/MAX has only franchised non Communist countries but the company is now spending the next 6 months selling 30 divisions in China! I can not imagine what it must be like to work for profit in a country whose ruling party’s supposed ideology is anti-competition, anti-capitalism, anti-private property. Practices that we agents take for granted must still all have to be hammered out. Is there escrow or attorneys. What about disclosure? Is there such a thing as anti trust? Are the agents more or less controlled by government rules and regulations and will the new RE/MAX owners be allowed to develop their businesses without being taxed excessively? I wonder how Starbucks and McDonalds are doing. There is no private property in China. It’s all owned by the government who issues lands leases for up to 75 years for residential. The government issues the contracts, too. Who is being protected, buyer or seller in a lease transfer? I wonder if the title policies are simply a thread of lessees. Since there is no fee simple estate, what does a title policy consist of, just a leasehold interest? and I wonder how complete the records are. What will happen as a lease reaches it’s 75th year? ? I would think the lease value would diminish as the lease aged and make purchasing the lease much less lucrative than home ownership. I wonder if the lease has the ability to transfer via will, etc. Maybe a situation like Hawaii will occur where the leases eventually are sold by the (original) government to the current lessee. The typical agent gets paid 2% there, as a function of the lease value. I don’t know if you multiply the one year lease income by 75 and take 2% of that or not. Since there is no multiple listing service, agents must have to sell their own listings. If there is an inspection, does the state get involved with what the person holding the lease can and can not do? They do have lenders there, but loans are typically 5-20 years with 30-60% down. I’m especially looking forward to the direct referrals from China as agents at ReMax Guizhou! (Hope they speak English!)

Two years ago when I was in China at Christmas time I was amazed that all the large stores were featuring Santa Claus and his reindeer and having Christmas sales. I’m glad I’m living in this new world where previous enemies (some say still enemies, of course) have found a way to work together. Wouldn’t it be wonderful if the whole world was like that? I couldn’t find any mention of real estate agents in Iran. Wonder if there are any McDonalds. I didn’t see any in Viet Nam although they must be there. Maybe when that happens, the world will be a safer place.

Planning for your beneficiaries

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Try Wednesday’s webinar  through Pensco Trust to learn how to protect your beneficiaries if you have taken advantage of one of the fabulous self directed IRA programs I’ve tried to introduce here.

With the stock market remaining unpredictable consider jinvesting some of your reitrements funds in real estate. I converted a SEP IRA, small Roth IRAs, and regular IRAs, rolled them all into a self directed Roth IRA, paid the tax due and began developing with the money. Now I’ve grown my net worth within a Roth IRA and all the growth is tax free. It’s well worth the rollover and paying back any Taxes you saved initially with the IRA if you know how to make your money grow.

If you want to know this great tax benefit, see the Pensco site, start taking the Pensco classes or give me a holler.  

 

The House was Smokin'

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[photopress:issaquah_highlands.jpg,thumb,alignright]Randy (husband) and I are buying a new home in Issaquah Highlands, a neighborhood I really love. Won’t we be neighbors, Robbie?  Reminds me of Queen Anne with the local community feel.  It was supposed to be the new home for Microsoft, but the company decided to stay in Redmond although Issaquah Highlands is home to many Microsofties. It didn’t seem to matter that Microsoft didn’t take up residence there as it is booming anyway.  I’m looking forward to seeing it continue developing.  I understand the shopping district will be like the U Village and that they’re just waiting for an anchor grocery store before they begin building the village. In ground internet and intranet, acres of playgrounds, in community grade school, wine restaurant, everything you need in a community.[photopress:smoking_house.JPG,thumb,alignleft]

The Highlands has several green builders and we’re buying from one of them, Specialized Homes who specializes in the Healthy Habitat approach to building. It’s educational to understand the purpose behind the eco friendly materials and systems he’s using. One of the really interesting things I’ve learned watching the home get built is the heating system.  Most heating systems lose up to 50% of the heat in leaky ducts making the 92% efficient furnaces hardly worth the extra money when the system is really only 46% efficient.  

One day, my duct work was all gunked up with a gray substance which I’d never seen before. It was applied to about 90% of the ductwork in the entire house. Bob, the builder, told us that he had conducted a ‘smoke test’ by running smoke thru the ductwork to look for leaks. The gray gunk was applied anywhere and everywhere there was smoke coming thru. They applied it until it was totally sealed and no more smoke! It improves comfort, lowers heating bills and improves air quality.  There’s also better windows, totally sealed doors, better insulation. it all adds up, but the smoke test I thought was cool and it makes sense now to spend the extra cost of the 92% efficient furnace.

These are great websites to learn about this if you’re so interested. Not only am I happy to know that the house will be healthier to live in, but I predicting a heating bill 1/2 of what I am now paying which I’ll need with the higher payments! Check out those web sites to learn more ways to improve the energy efficiency of your home.

 

Watch Out Below!

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While I-pods are a great way to catch up on the numerous webinars posted during working hours, they can be a bit dangerous when the listener removes themselves from the world around them. Let me give you a little example of what I mean by this.

Last weekend, my son and his pregnant (yes, I’m proud!) wife needed my husband’s (Randy) assistance updating his 1/2 bath prior to listing his home for sale.  Here’s the setup: 2 story bungalow with a basement. 2nd story bathroom directly above main floor bath using same waste pipe that drain straight down into waste pipe in basement floor. Becuase 2nd floor bath had pvc pipe and basement had the old cast iron, the best thing to do was replace the whole pipe at the same time. So, of course, they pulled the waste pipe out of the main floor bath, disconnecting the 2nd story bath from the waste pipe in the basement. All’s well and Randy is getting ready to reinstall from the 2nd floor waste to the basement by handing the pipe down to son Ryan in the basement. [photopress:ryan_and_randy_in_the_shit_hole.jpg,thumb,alignright]Great great plan, all is going well, but my lecture was over, I removed my headphones, and ran up the stairs to use the only operating bathroom in the house except that, you guessed it, one flush and whoosh, down thru the 1st floor bath directly into the face of my darling son Ryan, bounced off him and onto his computer and everything on the desk that he was working on!

 The moral of the story is: Don’t visit your son! 

Appalling Statistics

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Recentlyk Reba Haas wrote a post about theft of copper from new construction sites.

Today the NWMLS reports that this theft is still on the rise. Here are the appalling statistics.

The thefts since January 1st have occurred in the following areas:

  • Area 54 – Tacoma area – 1 theft reported
  • Area 72 – Edgewood area – 1 theft reported
  • Area 100 – Auburn area – 1 theft reported
  • Area 140 – West Seattle area – 1 theft reported
  • Area 500 – Newcastle and Newport Hills area – 7 thefts reported
  • Area 550 – Union Hill area – 1 theft reported
  • Area 760 – Darrington area – 1 theft reported
  • Area 730 – Meadowdale area – 1 theft reported

[photopress:snarling_dog.jpg,full,alignright]Appliances, staging furniture, copper are being stolen, by apparently opening the nwmls keybox without a keypad, since the use of a keypad would be recorded.

What do we do next? Iron gates and patrol dogs?

Amazing Access

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My husband was helping our son remodel in Portland this weekend. I had alot of work to do, keeping up with new classwork and working on business. I was going to stay home but decided it was lovely weather and I’d travel along with him so I could see my kids, too. 

Having been in college when learning programming meant using keypunch cards, (A key punch is a device for entering data into punch cards by precisely punching holes at a designated locations :)).I have to constantly remind myself to remember how mobile my work now is.  There was nothing that I had to do at the office that I couldn’t do sitting in the car with my computer on my lap, including this post!

I remember the first time I left the office with my cell phone and talked to a customer in Nordstrom.  I pretended I was in the office and that I had time to talk. I remember the feeling that I could really do almost anything as long as I had my cell phone with me and no one would even know I wasn’t at work.

The craziest was when I got an offer on a listing about 10 minutes before pulling out of Miami on a cruise. The deal came together, the seller never did know I was not in town and I handled the whole thing from the ship’s computers.  I don’t turn my business over to an associate unless I have to, and I don’t tell my clients where I am unless it’s necessary. So for a work-a-holic like me, It’s amazing how much free time I have now with mobile phones and now, the mobile office.

[photopress:Copy_of_P1010174.JPG,thumb,alignleft]So, Randy is waiting for me to get back on the road where I can get back to listening to my lecture series online and typing a blog on my laptop plugged in to the battery with my really slick sprint card.  I’ve already answered several emails, searched for a handyman in Vaughn for a client, done a CMA for another client and emailed all the results, while driving up I-5!

It may be that I never really get away from the office, but at least by bringing the office along with me, I can now even enjoy the hours I put in on the job.

BTW, my son is moving from his 1910 bungalow 2100 sq ft home in NE Portland worth $600,000 to a 3600 sf ft new home in Vancouver on 1/2 acre with more bells and whistles than I knew exsisted for $650,000. And it’s only 20 minutes away. Location, location, location.

Whose client is it, anyway

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Scenario: buyer says that they will be buying in 3 months. You say, perfect, let’s get you pre-approved so you’ll be ready by then. You believe the buyer until they call you 5 days later with the great news that they just bought new construction from a site agent! Aren’t you happy for them? 

But before you get really mad [photopress:mad_face.JPG,thumb,alignright]and start telling your clients they didn’t have representation, consider the following and you’ll see it’s not black and white. 

Most buyer’s agents hate new construction sites, especially those with site registration policies since they could lose their clients to the site agent. A few builders (notably an ex-agent on the Eastside, name will be supplied upon request!) will only pay the buyer agent 1% if the buyer goes to the site the first time without the agent (whether or not the buyer says they are working with said agent). But normally the site agent, if they are getting paid by the builder will be agent friendly and not give you a bad time and if you write it up, you’ll get paid.

The question is, can a site agent adequately represent a buyer?

The answer:  It Depends.  Here are the different models that I know about 

1. Builder can hire an in house team, where the agents work for the builder, sometimes on salary and are generally the listing agent and are privvy to all the deals that have been written.

This is the best scenario for the builder since the agent can not go elsewhere to earn money. The agent isn’t paid if the site doesn’t sell.  This agent is not able to represent a buyer. 

2. Builder can sub-contract to a marketing team, say “company A”, where the listing agent again can not pick up clients and take them off site under any circumstance. If there is a buyer for whom that product does not fit, then the listing agent is encouraged to refer that buyer to one of the team of agents who is associated with Company “A” but not a site agent. The site agent, the builder and “company A” each share in the referral portion of the commission if the referral agent sells the client. These agents are labeled buyers agents and are often on site to meet with buyers, but first the listing agent must be thoroughly convinced that their site is not a fit for this buyer. This can be a great source of buyer clients for the referral agent although there is a stiff referral fee Not as good for the builder, except for his 1/3 share of the referral fee since there’s not any incentive to sell the builder product especially if the client wants to come back to the site, the referral agent will not get the sale.  Can this work for the buyer? I’d say, maybe but there’s the big problem with going back to the original site to buy in which case the referral agent won’t get paid and may try to talk the buyer out of this.

3. Builder can sub-contract to a marketing team, say company “B”.  Here, the listing agent is not the agent that puts in time at the site. The listing agent represents the seller and hires a staff of agents out of company offices that are buyer’s agents. These agents may get a couple hundred per door, but they say they are buyer’s agents and in general are not privy to insider information.  These agents will likely have a sign, “buyer agent” on their desk and should advocate for their buyer in any discussions with the seller.  However, if this agent continues to work the seller for price considerations, etc, you can be pretty sure the builder will ask for the removal of that agent.  So, I still see a conflict of interest here.  If the agent consistently works on one builder’s site, then I’d wonder to whom loyalty is given.

4. Builder can sub-contract to a single listing agent.  In this case, the listing agent is probably too small to have much of a program in place for a team of site agents. They might casually bring other agents in to the site just to pick up buyers and to work when the listing agent doesn’t.  If the site is small, this is often the case. The listing agent in this case is often the agent that brought the builder the land. The buyer’s agent rarely know anything about inside information and are on site simply to help buyers. I call this Site fill in work:  This is a great avenue for prospecting for a buyer but I’ve never understood why a builder would want to have his site full of agents who earn an SOC either off or on site. At the first negative hint that a buyer might not like the builder product, the agent whips out the computer and starts showing buyer other properties. If I were the builder, I would be looking for 2 person listing teams to cover all shifts.  Does this work for the buyer? [photopress:j0400346.jpg,thumb,alignright]If the buyer meets the fill in buyers agent and connects, I believe this is a great situation for a buyer without an agent already, otherwise you’ll be working against the site agent for this client.  The site agent can represent the buyer possibly better than a non site agent because they know the plat and product better and presumably know new construction better. That agent owes no allegiance to the builder and can very well advocate for that buyer.  For instance,understanding how a builder addendum and limited warranty really affects a buyer isn’t something most agents are familiar with. Did you know that one very prominent builder requires the first buyer to hold the builder harmless if there is a sale before 4 years and the second buyer is part of a class action law suit? Would the average agent understand those 12 pages of builder addendum well enough to read this and have their buyer consider the repercussions? and to realize there is often an automatic removal of the financing contingency in 2 weeks?

So before buyers or other agents decide how bad it is for a buyer to choose to work with an agent they met on site, first you have to know the relationship of that agent to the seller and in some instances, I think the site agent makes a very strong buyer’s agent.  So best move is to tell your buyers ahead of time what will happen when they go to a new construction site without you and study those builder contracts.  I used to give out a blue “buyer passport” book that had a spot for my business cards and a place where the buyers could write down each site they visited. That way, you’ve gotten a step ahead of them and it makes a great opening for the “watch out for the site agent” speech. 

Beware No Trespassing (even if you do have a keybox)

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Learn something new every day. Can an agent access a vacant home with a keybox, without an appointment? What if that agent represents a buyer under contract on that home?[photopress:no_trespassing.jpg,thumb,alignright]

I had to learn this answer the hard way a couple of years ago. Here’s what happened:

I sold a vacant home in Issaquah to clients subject to inspection. During the inspection, it was noted that the furnace had a very high level of CO (92%) and needed to be replaced. Seller (an attorney) would not replace the furnace. Buyers decided to replace it themselves before they move in and waived the inspection contingency.

Given that it takes a few weeks after ordering a furnace to get it installed, I, knowing that the house was vacant, met the furnace installer (call him Bob) at the home for measurements. No, I did not make an appointment. During the measuring, the furnace guy TAKES THE FURNACE OUT OF COMMISSION! Of course, it was in the dead of winter and the weather was below freezing. Furnace guy says that by state law, he is required to decommission a furnace if it is a safety issue and considering that the furnace was burning outside of the combustion chamber, it quite obviously was a safety issue.

Now we have a vacant house with no heat, with a seller who refused to pay for a new furnace with the inspection period waived and with me and my furnace guy Bob having entered the home without an appointment. Listing agent is furious with me and calls his broker who calls his attorney who calls my broker who calls me and says that, Guess what, technically it IS considered trespassing to re-enter a home that is pending even with the pending buyers or buyer’s agent.

The solution was simple enough. Seller had the furnace installed (immediate when in an emergency situation) and buyers paid for it at escrow. And I learned a new lesson. The hard way.