VERENA DEAN AND JOE GALLAGHER COMPLETE NAR'S COMMERCIAL CERTIFICATE PROGRAM
This program is a basic training course of instruction in commercial real estate. It covers marketing, ethics, research, management and analysis. The participants have an opportunity to specialize in two fields. Joe specialized in Industrial and Office and Verena focused on Retail and Land.
CHANGES TO NORTH CAROLINA RESIDENTIAL PROPERTY DISCLOSURE ACT. The NC Real Estate Commission has been directed to develop a new form for residential property disclosures. The rules regarding buyers' rights of recision are also changing. We will let you know what the changes are when we know.
GIANT STEP FORWARD FOR THE RUSSIAN REAL ESTATE BUSINESS.
As of 1/31/98 a new law will take effect in Russia, establishing a "Unified Register" for "immovable property". Properties will first be registered at the local level. Each entry will be given a unique "cadastre," or identification number.
The lack of a standard registration procedure and laws governing real estate use and transfers has been a major impediment to investment in Russia.
There will be a fee associated with the use of the unified registration. The success of the new law will of course depend on the willingness of property owners to use it. RESIDENTIAL MARKET GAP IDENTIFIED
According to a quote in the FIABCI PRESS, October edition, the number of people living alone is increasing, and is expected to continue increasing, in the coming years. Housing provisions for this market segment are not keeping up. Is this an opportunity?
WHY DO PEOPLE BUY INCOME PROPERTIES?
(Continued from volume 1) Safety is the Second Element of an investment. Often people invest to avoid losing their capital or to avoid the erosion caused by inflation. As a general rule, the less risk you are willing to assume, the less control, leverage and yield you can obtain.
The safest form of real estate is the Net Leased property with a credit tenant. The yield on this type of property is usually low. On a long-term lease, the only ownership rights you can exercise are the rights to transfer or mortgage the property. A high degree of leverage may be possible; but the yield you are receiving may be reduced substantially.
One of the highest yielding property types one can buy is single family low income residential. Your level of involvement will be extreme. The risk is also very high, especially the credit and vacancy risk. Leverage is almost impossible without owner financing or personal guarantees.
Most of us are looking for something in between. Risk can be successfully balanced with yield, control and leverage.
The next installment in this article will be in volume #5. Volume #4 will be a special issue on doing business in the European Union..
CHECK YOUR INSURANCE POLICIES ON A REGULAR BASIS.
Especially your commercial policies. We just received a bill on one building for $3400+. A little checking around replaced the policy for about $750. Also be sure you have the kind of coverage you need and that any changes in rent have been covered if you have loss of rent coverage.
4 RULES YOU MUST BREAK If you wish your synthetic lease to qualify as an operating lease under SFAS 13, 1) The lease transfers ownership of the real estate to the company at the end of the lease term. 2) The lease contains an option to purchase the real estate at a bargain price. 3) The non-cancelable lease term is equal to or greater than 75% of the estimated economic life of the real estate. 4) The present value of rents and other minimum lease payments equal or exceed 90 % of the fair market value of the leased property.
The synthetic lease is a fantastic-planning tool. Make sure it is sharp before you use it.
NEW NC WITHHOLDING LAW COULD HAVE HIDDEN TRAPS FOR PROPERTY OWNERS. If you hire someone from outside the state (individual or corporation) to perform work on your property, you are responsible for withholding NC income tax if you pay him or her more than $600. This law will be effective January 1, 1998.