Financially, the next 18 months are the best time to buy a house that any of us will see in our lifetimes. Price to rent ratios are back to levels we haven’t seen since the 1990’s, and that’s before factoring in record-low mortgage rates.But that doesn’t mean it’s the best place for your money. Let me explain.I don’t have a real estate background. I’ve never bought a piece of property in my life. My experience is in the financial markets, where there are no bad assets, only bad prices, and every asset is just a different piece of the global capital structure, and it’s my job to figure out where the best place to be is.Sometimes that means US treasuries. Sometimes it’s investment grade or corporate bonds. Sometimes foreign bonds. Sometimes US stocks. Sometimes foreign stocks. You get the idea. The relative attractiveness of all of them depends on the safety of cash flows, their growth prospects, how much you’ll have to pay for them, and in the case of foreign assets, your view on currency movements and political stability (sorry, Europeans).Right now, with core inflation in the US running at 2.3%, and 10-year treasury notes yielding less than 2%, that means if I buy treasuries I’m locking in a negative real return. And that’s something I’d rather not do. Corporate bonds, with low risk free rates and plenty of liquidity sloshing around, aren’t a whole lot better. Equities, on the other hand, are interesting.Baby Boomers have had their nest eggs rocked over the past 15 years between the dot com bust and the 2008 financial crisis, and despite the 100% rally in the markets since early 2009 we continue to see net selling of US equities on the part of ordinary investors nearly every week. That’s created opportunity for those with a stomach for volatility and a long-term time horizon.Take a stock like Wal-Mart. Yeah, it’s boring. But despite the bear market we’ve been in for a decade or so, Wal-Mart earnings per share have risen from $1.47 in 2001 to $4.52 last year, an increase of over 200%. That’s not so boring. Will a company with revenues of nearly half a trillion (with a T) dollars a year in revenue grow as quickly going forward as it has in the past? Unlikely. But the company should continue to grow at around the same rate as the US economy, plus they’re expanding overseas. And the price for those cash flows is compelling — as of May 1st it was trading at $59.07 per share, for a price to earnings ratio of 13, or, if you’re a real estate guy, think of it as a cap rate of 7.65%. Okay, so not all the earnings are paid out to shareholders, but a large chunk of them go towards the dividend and buying back the stock, and in theory the rest is going towards growing the business so that cash flows will be even higher down the road.In the past 5 years, which hasn’t been the greatest of times for anyone, Wal-Mart earnings per share have risen over 10% per year. Let’s say growth slows going forward, and over the next 10 years averages more like 7% per annum. That means that 10 years from now Wal-Mart would be earning around $9/share. And along the way as an investor I’d be collecting dividend checks, currently $1.60/share per year for a yield of 2.7%, and probably growing at a rate of 5-10% per year if not more.So by buying today and holding for 10 years I’m collecting 2.7% per year at today’s prices and 10 years from now own an asset making $9/share per year. And who knows, maybe a decade from now people are feeling good about stocks again and Wal-Mart gets a P/E multiple of more like 15, for a price per share of $135, or a pre-tax return of 130%. Can your property put up that kind of return over the next decade? And remember, in the stock market there are no closing costs, no contracts to sign, no open houses, no leaky roofs to fix, and you can sell tomorrow if you change your mind.As a property owner looking to sell, you’re not just competing with other owners or developers, you’re competing with Wal-Mart for my hard-earned capital. You’re competing with General Motors bonds, Greek bonds, and even Facebook stock. The residential side is a bit of a different story because we all need a roof over our heads, but on the commercial side I don’t care if you’re talking about the Empire State Building or Bank of America Plaza — if I don’t think I can make as much money buying your building as I think I can owning a little slice of Bentonville, then either your asking price is too high, or you’re out of luck.
As part of an ongoing discussion about blogging and sites centered on commercial real estate, a question continues to present itself:
What makes a great blog post?
There are dozens of resources and opinions on the topic, but I want to distill my answer into what I think are the 5 most important. My answers are below.
1. Get the headline right
The headline is the first thing a visitor or searcher will see when roaming the interwebs. If your headline doesn’t tell the reader what the post is about and why they should care, they will keep skimming elsewhere. Create a line that balances the thrust of your topic with something that will grab a reader’s attention. For instance, instead of titling your article “How to Improve Cyber-Security at Your Data Center” call it “Keep Hackers Out of Your Data!” See how they both show the theme of the article but the second one makes you want to click?
2. Have images
Readers like pretty stuff. Notice the nice image at the top of this post? That isn’t an accident. Get good-looking images in your post and people will stay on the page long enough to read your content. Dry text is . . . dry. Spice it up with great imagery.
3. Be brief
Hopefully it goes without saying that you should have interesting topics on your site. I would argue that HOW you say it is almost as important as WHAT you say. Never take five words to say something you could say in two. Readers highly value their time and have a few seconds to read your junk. Be short and to-the-point. The sweet-spot for SEO and readability is 200-500 words. Aim for that.
4. Have great links
Posts are more than words and pictures. They should be connected to other posts in your site and resources outside your site. That way you are providing additional content for readers and corroborating evidence for your post. Give readers something to click and learn outside of your site and they will come back.
5. End well
Posts should end with a call to action or conversation starter. If you want someone to engage with your site, ask them what they think about your opinion. How is their experience different? What resources do they use? When is the best time to . . .? Get people commenting and they will come back to the site to see how others have responded to their comments.
Is the APJ great at all of these 5 tips? Not yet. But we know the goal and we are getting there. We learn more every day about the art and science of writing for the internet.
If you have any tips, advice for us, or general comments, please let us know in the comments below.
I have been asked several times over the last few weeks about the setup of my site and how someone else could do it. So let me take a few minutes to let you know what I did and how you can do it for yourself.
Step 1 – Choose a Name
The first step for me was choosing the name of my site. Even before I started deciding whether to use WordPress.com, WordPress.org, Blogger, Google Sites, or any one of a half dozen other website platforms, I needed to decide what to call the site. I chose AtlantaPropertyJournal.com because it was easy to remember, broad enough to cover anything that interested CRE pros, and, most importantly, available for purchase. I will take you through the specifics of domain names and hosting elsewhere, but for now I just want you to know that I chose the name of my site before I ever considered a platform.
Step 2 – Choose a host
Maybe I should have done more research into blogging platforms before this step, but I wanted to make sure I had a place to buy my domain name and host all of the security and warranty stuff. I happened to choose Bluehost for mine (they have been great), but I could just as easily gone with 1-and-1 or iPage or any of about 1000 other hosts. Almost all of them integrate well with a WordPress blog.
Step 3 – Install WordPress
The nice thing about Bluehost is that they have a control panel with software called “SimpleScripts” that allows you to customize and install things into your site. I simply ran the WordPress simple script and Bluehost installed it for me. I was then given a login page and asked to create a WordPress account. That took about 30 seconds. Once I confirmed my account through email, I was up and running with my new and secure WordPress Site.
Step 4 – Customize
This is by far the most difficult and time-consuming part of the process. I created the site in about 15 minutes. I have been customizing it for more than a year. WordPress comes with a default “theme” and some goodies, but I wanted to make mine look customized. There have been volumes written about how to customize WordPress sites and I would recommend this one as one of my favorites. But, for the scope of this post, let me just talk about themes.
A theme is basically just a way to tweak the appearance of your site. You can change the color scheme, site layout, text display, fonts, and pretty much anything else that has to do with the appearance of your site. This is extremely important because, as CRE pros know, layout and aesthetics matter. If the site is too “busy” or sloppy or confusing, no one is going to hang around and discover your brilliance. So you want to find a theme that fits your content, is nice to look at, stays simple, and displays your content well. In fact, that could be a good little checklist for you.
When looking at a theme for your WordPress CRE site ask yourself:
1) Does this site fit my content? Pink bunnies don’t jive with retail leasing trends. Make sure it is professional.
2) Is it nice to look at? Pretty straight forward. People don’t like looking at ugly stuff and if it caught your eye it will catches someone else’s.
3) Is it simple? If you throw too much on there, people will get distracted and the thrust of your content will be lost. I am guilty of this from time to time, so don’t think I’m preaching.
4) Does it display your content well? Since the content is the most important part of your site, make sure that it is well-displayed. Don’t let it be dominated by headers, links, or photographers. People will come to your site and stay there based on your content. Make it pop.
You can tear your hair out over how many columns to have, where to display your RSS feeds, and a dozen other minor tweaks. But if you get the theme right, you will have a step on the competition.
Where do you find themes? Great question.
As I get into customizing your site, I will explain more. For now, just know that there are literally thousands of themes to choose from. Some are free and some cost $20- $50. A good place to start is WordPress.org’s Free Theme Directory. There are 1500 free themes here for you to compare and answer the questions above.
My favorite paid themes (or “Premium” themes) are on ThemeForest.com and WooThemes.com. Both have thousands of great themes that make your site look more professional and improve its performance. If I had to recommend one premium theme, I would point you toward the Standard Theme by 8bit.io. I know the head of 8bit. He is a stud and so is his product. Check it out.
So that’s my quick and dirty WordPress and themes intro for all of you who are looking to build your own CRE site. I will follow up with a series of more in-depth discussions on customizing and optimizing WordPress and its themes. For now, hit me up in the comments!
Lightning struck my brain this morning (figuratively) and I had an epiphany. It’s not really all that rare since I do some of my best thinking on my morning jog. But this one has stuck with me so I thought I would share it.
The Internet is commercial real estate and commercial property deal-makers are uniquely suited to succeed in creating a web presence.
I’ll start with the first half of the idea. At its most basic level, the internet is just a collections of places where you can see, do, and buy stuff. It is a collection of places for commerce, learning, working, and interacting. Sound familiar? Define commercial real estate . . .
Do I really need to draw a comparison between a shopping mall and Amazon.com?
The point is: The entire theme of the internet is placemaking. You want to create a space where people want to be. It’s the exact same concept as commercial property.
We, as CRE geeks, ask questions like:
- How can I get traffic to my property?
- How can I make visitors want to stay on my property?
- What can I do to the layout of the property to optimize the visitor/tenant experience?
- How can I entice shoppers to spend more money in my mall?
- How can I give tenants easy access to my building from their commute?
The web geek version would be:
- How do I get traffic to my site?
- How can I make visitors stay on my page?
- What can I do to the layout of the site to optimize user experience?
- How can I get visitors to spend more money on my site?
- How can I get visitors into my site easily from their natural web-surfing patterns?
Do you see that these are the EXACT same questions that require the EXACT same mentality and need the EXACT same skill set?
We spend our entire careers figuring out how people interact with places and that is exactly what web traffic is about.
I would even go so far as to contend that there is no group of people on the planet better suited to innovate on web traffic patterns and user experience than commercial real estate professionals. It’s our entire career. It is how we have made our living for every year of our professional life.
Need further convincing? Ok.
Web addresses. Do you know why every site builder and designer wants a “.com” address? Of course you do. Same reason all of the office buildings in Atlanta want “Peachtree St” addresses. Everyone knows it and everyone goes by it.
Why is blinds.com a better web domain than woodblindsofatlanta.com? For the same reason that “Atlantic Station” is a better label than “that brownfield development on the old Atlantic Steel site off the connector.” It’s short, pithy, and people remember it.
Why do web designers spend so much time on their tags and categories? For the same reason you spend so much time studying the demographics around your retail center. You want to know what your target customer is looking for.
Is this exciting to anyone else?
Hopefully, those three examples didn’t teach you anything. You already knew the concepts because you’re a CRE pro who understands a customer or tenant’s interaction with property.
So, what I’m telling you is very simple:
If you are in Commercial Real Estate, you are ALREADY very well equipped to succeed in creating a web presence.
It’s all the more exciting because deals and properties are finite. As the saying goes “They aren’t making any more land.” Well, apparently there’s a fresh supply of internet. We may be hindered by geography, financing, capital markets, or something else in commercial property. On the web, you are limited only as far as the human mind is limited. If you can imagine it, someone can probably create it.
So, here is the real question:
What are you going to do about it?
I’ve just told you that you have an unparalleled skill set that makes you uniquely suited to succeed in a limitless environment. You have a chance to be utterly dominant at building a corporate brand, expanding your influence, growing your skill set, and yes, even making money through the web.
What are you going to do about it?
Hit me up in the comments.
Let’s take a moment to discuss pseudonyms and three reasons I use one.
I wouldn’t say I’m a huge Dave Ramsey fan. I certainly like the guy and think his mission to stop the debt-happy insanity in our country is admirable. But I’m not really his target audience. I’m a finance guy that hates debt. His messages don’t add much value.
I do love my wife. And she wanted to take Dave’s Financial Peace University before we got married. Long story short, we took FPU for 8 weeks at Wieuca Rd Baptist. As I suspected, I didn’t get much out of it in terms of financial tools, but I did get a great book recommendation.
Ramsey tells a story of talking to the wealthiest man he knows, a multi-billionaire, and asking for the man’s recommendation for “the greatest book on investing someone can read.” The billionaire’s response is one of the only things that stuck with me from those 8 weeks.
This nameless billionaire claimed that the greatest investing book of all time is . . . .
“Cool. But, Duke, why are you writing about Dave Ramsey and children’s books in a post about pseudonyms?”
Because, kind stranger, I write with a pseudonym because of The Tortoise and the Hare. The theme of tTatH is “slow and steady wins the race.” I agree with that wholeheartedly, but I would amend it slightly:
The best way to go far is to NEVER go backwards and NEVER stop.
The tortoise won the race because he never stopped, never slowed down, never deviated from his path, and never took his focus off his goal. That’s my intention for my career. A thousand small, steady, focused steps toward my goal.
A legal battle over postings on a website could fall under the category of “step backward.” A pseudonym tacked on the end of any post allows plausible deniability to any author and places any legal burden on The Atlanta Property Journal and the parent company that owns it. Both the APJ and the parent company have excellent legal counsel and can protect themselves from nasty words like libel and slander.
If you have read any posts on this site, then you know we aren’t in the business of talking smack or trashing anyone. This is a forum for ideas, discussions, book reviews, trends, and anything else interesting that affects commercial property in Atlanta. This ain’t TMZ and I’m not Perez Hilton. But I have been around long enough to know that there are plenty of unethical people and ambulance chasers who will sue you just for fun. So, I protect myself and the writers of the APJ.
I have access to every account that runs through this site and can claim that any author of the site could post under any name. So all liability comes back to the company and never to the author. It may seem like a small distinction, but it is the difference in the company paying $20,000 in legal bills and my friend paying $20,000 in legal bills. That’s a big difference to me.
So, the main reason I write under a pseudonym is to protect myself and my authors from legal liability. I never want anyone associated with me and my business to be forced to take a step backwards in their career because of some article. That’s the main reason, but there is another reason:
Writing under a pseudonym allows an author to feel more free and open in her writing. If you know that you, your family, and your employer are all protected legally from your writing, you can be totally open and honest with your work and not feel the need to pull punches or water down your content. It may just be a subconscious trigger, but people who are comfortable with writing the truth tend to write more truthfully.
And I can promise you this: More open authors are more interesting authors. And more honest content is more interesting content.
The APJ was created to foster an environment where people can come to be real and truthful about whatever vexes the CRE world. Keeping the attorneys away from everybody will help nurture that. Tip-toeing around the truth for fear of hurting anyone’s feelings leads to overly-vague and philosophical content. If you can’t get specific and detailed about something you end up sounding too general. On the other hand, if someone wants to come in and start talking noise and being terrible . . . they’re blocked. Piece of cake and I sleep like a baby.
The third and final reason I use a pseudonym is humility. Maybe I am the only one who struggles with this, but I can be a tad prideful. I like to think how smart I am or how great my accomplishments are and that gets me into trouble. (In moments of clarity I actually believe that anything I accomplish is simply because God allowed it, but that is another post for another time.) Whenever my focus starts turning to accomplishments I lose focus and become the hare.
So, I don’t want my name on this site. If this site and it’s affiliates have success, I want the success attributed to them not me. Otherwise I might start thinking how great I am and trying to “promote my personal brand.” I’m not that great. My friends and partners are great. They deserve to be lauded.
Anyway, those are my three reasons for using a pseudonym. Do they make sense? Do you think I’m crazy? Tell me in the comments.
- A peaceful spot to write something . . .
I find that I get a little push-back on writing (see: blogging) about commercial real estate. I hear excuses about “not enough time”, “nothing to write about”, “preserving intellectual property”, blah blah blah.
Ok. Maybe those are true, but I doubt it.
I won’t say that every other industry has embraced the blog as a viable form of information delivery, but several very mature industries have not only embraced but even openly encouraged blogs centered around the industry’s trends, challenges, and news.
And I would argue that the industry is the better for it. The constant flow of information and ideas from these two sites alone can change the way a person or firm operates and interacts with the financial industry.
So, let’s bring it back home.
Writing is wonderful and beneficial. Neato. But why should you write about CRE?
Here are five (not-so-obvious) reasons why (and I am going to assume that you are a commercial real estate professional):
This may be obvious to you, but when I first started writing online I didn’t realize how much I would need to connect with the online CRE community. Through research for articles and building my social media profiles, I ran across some tremendous resources. Learning from people like Coy Davidson, Duke Long, The CRE-Apps Team, and the 42 Floors guys has VASTLY increased my knowledge base on the fundamentals of global CRE. I can’t imagine any other way that I would have been able to grow my tool kit as quickly or thoroughly as I have through gaining connections with the online CRE community.
This plays heavily into Connectivity, but I want to point out that through my direct research for articles I have been forced to understand concepts that I may have glossed over in business. Just taking the time to research bankruptcy has made me decently knowledgeable on the differences between Chapters 7, 11, and 13 in US bankruptcy court. It has been both fascinating and rewarding and I’m not sure I would have taken the time to study it if I hadn’t wanted to present it clearly and concisely on my site. Maybe the best way to say it is that directed research for an article is the best way I know to gain depth (as opposed to width) of knowledge in a subject.
One concept I have come to understand is that true thought leaders on the web don’t repackage information. They aren’t just regurgitating news from the local paper. Thought leaders create new, original, and interesting content in a palatable, concise format. To do so, they have to read, interpret, and understand the news and information that crosses in front of them. They need to gain an applicable understanding of the subject in order to present it well. I think that leads to retention (it has for me). It’s very similar to school. Remember, those advanced statistical questions you had to memorize for calculus? Yeah, me neither. What I do remember is the papers I wrote and studies I did that forced me to take the info, interpret it, and bend it to my thesis. I retained that knowledge and could discuss it today. Memorization is intellectual junk food. You don’t retain knowledge that you memorize or redeliver. You retain knowledge that you interpret and apply. So I have found that creating original content will make unique concepts stick with me for substantially longer than news stories that I retweet.
This one goes hand-in-hand with brevity. Web-based articles shouldn’t be novels. They are brief, fact-filled, and to-the-point. The web isn’t a friendly place for rambling. So to create good content, you need to develop the ability to present ideas clearly in as few words as possible. That forces you to think clearly about the concept and find a creative way to present it with brevity. What you will find is that you will start forming opinions and thoughts through this process that are clear and concise. Think of the brightest people you know. Do they drone on and on about subjects they discuss with you? Probably not. They have clear, pithy truisms that they dispense quickly and sharply. I aspire to that. I want to present quick sharp thoughts eloquently and I find that the more I wrote and opine on my site, the clearer and sharper my opinions become. I want you to have that as well.
This is an open forum. Write about what you want to write about. As long as you aren’t bad-mouthing anyone or being overly profane, spread your wings. I’m not your momma. Do what you want. As long as it pertains to CRE, rock on. How many other forums in your career allow that type of freedom and creativity? Not many, I’m betting. I find it very satisfying to know that there is a forum with very few rules where I can create new ideas, projects, or concepts for my industry. It’s a lot of fun.
So, there it is. My 5 not-so-obvious reasons why you should write about CRE. Can you think of any others? Think I am off my rocker? Let me know in the comments!
photo Courtesy SXC user Ydiot
I had an epiphany about myself and (potentially) my generation this week and I want to share it with you briefly.
When I turned 8 years old, the pace of my life started picking up. That’s when I started playing football, basketball, baseball, and any other “ball” sport.
Being the son of two hard-core Christians, I also went to church at least every Sunday and Wednesday and usually had some type of youth group event every week.
I also begin reading books more regularly and began to get into a routine of nightly homework.
The point is, I did several different things in one day. On a typical day, I might get up, go to school, have an afternoon practice, have an evening church event, do my nightly homework, and then read or watch TV until bed. That’s 6 different events in 6 different environments.
High school was even more involved. Morning lifting for football, 6 periods of school, afternoon football/baseball/basketball practice, evening church or worship/FCA event, nightly homework, and then bed. Again, 6 different activities in 6 different places.
Moving on to college, the schedule looked something like this:
- Get up, fool
- Run or lift
- Class until early afternoon
- 3 hours of baseball practice
- Evening Worship Service
- Family Guy with the Roommates
So, by my count, that’s 7 or 8 things in 7 or 8 places.
Something else I would like to point out is that I went to a Liberal Arts college. So I was studying a diverse array of subjects for each of my four years. I was an Econ Major, Spanish Minor, and had a pretty serious concentration in New Testament Studies and History. That’s 4 different subjects I studied heavily almost every day and that doesn’t even include the courses I took on Galileo, Chemistry of Art, Beginners Japanese, etc. The point is, my studies in school were widely varied and diverse.
If your elementary, middle, and high schools were anything like mine, you know what this is like. First period is biology, followed by anthropology, followed by calculus, followed by English, and on and on and on. In school I jumped from subject to subject in short one hour or 90 minute bursts (and I bet you did, too). The above line-item of “Go to class” included very different experiences every hour or so.
Ok. So what’s the point?
The point is: I spent 15 of the first 22 years of my life learning how to accomplish great things through short bursts of intense focus. Since I only had 50 minutes every day to learn AP Calculus, I had to learn to adjust my temperament to an extreme and intense focus for a short period of time, then move on and do it in the next class/practice/event.
So, then I graduate from college and I am looking for a job (because that’s what you are supposed to do, right?). And guess what these employers are selling?
It goes something like this:
Duke, we want you to sit at your desk for 10 hours every day and do the same thing all day! Doesn’t that sound great?
You are basically asking me to do the exact opposite of what I have been trained to do for 15 years. That’s like telling me to 1) take the only way you know to accomplish diverse tasks, 2) forget it, 3) do it OUR way, and then 4) be grateful for this generous offer.
I’m not here to turn the business world on its ear, but can you see the lunacy is this? I understand that there are certain pre-existing constructs in every work environment, but asking someone to be productive in a manner that they have never been productive before is a little silly.
I will get into ways an employer can configure the work day to play to Gen Y’s strength and productivity, but for now I just wanted to point out the fundamental conflict between the way I was raised to accomplish and the way I am asked to accomplish at work.
Think about it this way:
What do admissions officers at universities look for in prospective students? It’s not just about the highest test scores or grades. They (allegedly) look for the proverbial “well-rounded” student, right?
How about employers? When McKinsey is scouring Ivy League campuses are they looking for the smartest nerd in the business school with the highest grade? Nope. They want a young man or woman who has demonstrated excellence in several areas at the same time. They want someone who is “well-rounded“, too.
So, Mr. Employer, let me see if I have this straight. You want me to demonstrate that I have achieved excellence in multiple areas at the same time so that I can come and do one thing for you, in the same place, all day?
Middle school was structured to get me ready for high school where a high value is placed on being well-rounded. High school gets me into a college where the admissions office heavily favors well-rounded students. College gets me ready to enter the workforce where the best employers want the most excellent students that are well-rounded. But once I enter the workforce I’m supposed to specialize at one single task all day every day and be the best at that.
Hmmm . . .
Am I the only one confused by this? Is anyone else struggling in this battle? Let me know in the comments and I’ll comment back.
I may be overestimating my own uniqueness here, but money really isn’t THAT big of a deal to me.
It’s not that I don’t appreciate the value of money and I’m not trying to imply that I am somehow above the desire for money. I just try to use money as what it is: a medium.
I don’t love money. I love travel. I love space to sprawl out in my house. I’d love to pay for my kid’s college and private high school. Money can get me those things. So I work to increase the amount of money I earn every year.
I know that distinction may seems obvious, but I am afraid I have met too many people chasing money for the sake of having more money to believe that everyone shares my perspective.
Along those lines, I wanted to share a bit of an insight into my thoughts on money. I’m not sure I have the exact same perspective as fellow Millenials, but I have heard enough to know that I’m not far off. So, I call this part of the Millenial Manifesto, but, as always, I don’t claim universality for my views.
My money isn’t mine – The first thing you should know about my relationship with my money is that I don’t believe it belongs to me. As a Christian, I believe that everything that I have been given belongs to God. I’m not trying to tell you what you should believe or where you should go to church. But, I do derive my views on money from the Biblical perspective and therefore think of myself as the money’s steward rather than its owner. I have found that thinking of myself as a steward of God’s money helps me maintain perspective on the importance of “my stuff.”
With that in mind, let me share with you my basic goals for money:
1. Provide for my wife. My wife is the (second) greatest thing that ever happened to me and I want to be able to show my affection through trips, jewelry, and any other nice things that might show her how much I cherish her. That isn’t to say I buy every pair of jeans that catch her eye or that we need to hop on a jet to Bhutan every 30 days, but I like to show her that part of the reason I work for my money is to provide for her comfort.
2. Provide for the brood. I don’t have any kids yet, but I plan to. If I am blessed enough to have little Dukes, I want to be able to send them to private school, keep them clothed and fed, and give them some life experiences before college that will shape them into great young men or women. Senior year at Westminster costs about $20k per year right now and in 20 years, with 3% inflation, that will be $35,070 per year. So, I need $35k in extra income, per child, to simply pay for a private education in Atlanta. Then . . .they go to college. Sigh.
3. Give generously. I believe in tithing. 10% of every dollar I make goes to some charitable organization or my church. I’m told that 10% of $1,000,000 is more than 10% of $50,000. Gifts can change our city for the better. I want to be in a position to change someone or some organization through focused charitable giving.
4. Save for a rainy day. My wife and I currently have 6 months of paychecks saved up in an Emergency Fund in case the worst happens. I had to bite into that a little last year when I was working for myself and we have almost completely rebuilt it. My wife and I both sleep better at night knowing that no matter what happens tomorrow (excluding Armageddon or Dec 12, 2012), we will be covered financially for a little while.
5. See some of God’s green earth. Some of the greatest memories of my life have been hiking up a trail in the Swiss Alps, strolling the shorelines of the Oregon Coast, and gazing in wonder over the edge of the Grand Canyon. To paraphrase Meet Joe Black, I want to have some nice pictures from my life when my time is up.
6. Live in the city. Fact: Living in Atlanta is more expensive than living outside Atlanta. I know that it costs more, but I will gladly pay the premium to live here instead of Cumming, Grayson, Kennesaw, or McDonough. If I had to sit in that traffic every day of my working career, I would go insane and assault defenseless kittens. I gotta live in town. If you care about kittens at all, don’t make me live in the suburbs.
7. Do what I WANT to do, not what I have to do. I want to get to a point in my career where I am doing what I love to do because I love to do it. Not because I need the money or because there are no other ways to pay the bills. I want to get paid to do what I would gladly do for free. Another off-shoot of this would be controlling my time. I want to get to a point where I can work when, where, and how I want so I have plenty of time to spend with family or coaching baseball.
8. Elbow room. You probably wouldn’t call me petite. I am 6’7″ tall and about 235 lbs. Ceiling fans and doorways are my enemies. I would love to have a point in my life where I can come home to a house where I don’t have to duck under doorways, bend down to get in the water in the shower, strain my back to bend down to the sink/counter, turn sideways to get into my bed, etc. I’d just like a little more head and elbow room in my home. That probably means I need to build my own home in town (see point 6), but so be it. I don’t think that’s an outlandish request, but we’ll see.
9. Own land. This one is pretty far down on the list because it isn’t a huge priority, but this seems to be an inherent desire of mine. I just love open space and raw land in GA. Maybe it’s because I grew up running around the pastures of my grandparents’ farm, but I love having room to roam. This is pretty similar to point 8 and may be another way of saying how I like elbow room.
BONUS*** (This one is just in case I re-invent the toilet and become a gajillionaire)
10. A Plane. This is my pie-in-the-sky, best case scenario. If I strike it rich and become wealthy beyond my dreams . . . I’m buyin’ a plane. Keep your mansions. Keep your Aston Martin. Keep your private island. I want a plane. After reading points 5, 8, and 9, you can probably guess why. I love traveling. I hate flying. I have never slept on a plane in my life and cross-continent trips are torture. In addition to being outrageously tall, I have broad shoulders. So, I am constantly touching the dude next to me. He usually smells. The whole experience is just terrible and I want to be able to control the entire experience for myself. So, you heard it here first. When Duke becomes a billionaire, he’s buying a plane. (Wakes up from dream. Looks around confused and smelling fat men on planes)
There you have it. Those are my sometimes reasonable goals for my financial future. Notice that none of them compared my wealth or status to my peers. That doesn’t matter to me. What I care about is my family and our lifestyle.
What did I miss? Do you have any of your own to add? Leave them in the comments I will comment back!
Tuesday in RealTalk, Jim Jordan discussed the idea of a marketable title for a property post-foreclosure. I found the post fascinating and think all of Jordan’s posts are interesting, thorough, and great. It struck me that some readers may not be familiar enough with the foreclosure process to get the ins-and-outs.
Some readers may not understand what a confirmation hearing is or why it affects title marketability.
So I’ll take a few minutes to walk you through the basics.
First, a note on audience. This post is meant to be a guide for those just beginning in the commercial mortgage process or those uninvolved with CRE finance. If you are a CRE attorney or an experienced creditor with years of experience in foreclosure litigation, this probably isn’t the post for you. Check out some of our other cool posts and check back tomorrow. If you are just getting to know the process or are a curious outsider, read on.
Let’s start after the creditor has foreclosed on the property.
It’s the first Tuesday of the month and the creditor just bought the property at the county courthouse in an open foreclosure auction. We will get into the foreclosure process later, but for now let’s just start after the creditor foreclosed.
Let’s assume that we’re foreclosing on an office building that currently has a market value of $500,000 which you determined through a recent appraisal and several BOVs (Broker Opinion of Value). The commercial mortgage on the property is $1,000,000.
Using those values, you foreclosed on the property and paid $500,000 at the county courthouse. Hopefully you can see that the borrower still owes you $500,000 since you exercised your right as the creditor to take the collateral at “market” value and still maintain a claim on the remaining loan balance. $1,000,000 loan, $500,000 property value, and a $500,000 shortfall to the mortgage balance.
This is the borrower’s “deficiency” as the property value was deficient in satisfying the entire mortgage amount.
Still with me? Fantastic.
So now you own the property and have a claim against the borrower of $500,000.
Now begins the confirmation process. Confirmation is simply the judicial process of “confirming” that you purchased the property at market value. This matters because creditors are often the only bidders on foreclosed properties at the county courthouse. In theory, a creditor could bid $1 for the $500,000 building, be the winning (and only) bidder, and then claim a $999,999 deficiency against the borrower. The creditor could basically rig the game to get the maximum claim against the borrower.
In cases where the borrower is disputing the creditor’s claim of deficiency, there is a confirmation hearing to determine whether the creditor paid market value for the property. These hearings are simply legal court battles where the creditor claims it paid market value and the borrower claims otherwise. Often, an appraiser will testify that the appraisal she completed 30 days ago was an accurate portrayal of market value and the creditor’s purchase price reflected that.
Back to the numbers.
Let’s say the CBRE gave an appraisal of the office building at $450,000. The creditor paid $500,000. In that scenario, the creditor and appraiser would claim that the creditor paid more than 110% of the fair market value for the property. If the borrower claimed that this was an unfair market value, the burden of proof would be on her to prove both the appraiser and creditor wrong.
Not an easy task, by the way. Borrowers don’t have much luck in that scenario (depending on the judge).
If the appraiser had appraised the property at $800,000 and the creditor paid $500,000, the borrower would have a much stronger claim that the creditor was paying below market value. The creditor may have to reforeclose and pay “true” market value.
You can see why this confirmation process is so important! It shows the creditor actually paid market value and that its subsequent claim against the borrower is legitimate. Any future legal proceedings between the creditor and borrower will then favor the creditor as it has gained a court ruling saying it has a true and valid claim against this borrower.
The creditor will file for this confirmation hearing within 30 days of the foreclose sale and this confirmation time period is what Jordan is discussing in his post. His basic question is: Can you sell the property while you’re confirming your purchase of it?
I will leave that opinion to his capable hands for now and weigh in later.
For now, let me bullet point the confirmation process to review:
- Creditor purchases property at public foreclosure auction
- Credit files for confirmation
- Borrower claims creditor paid something other than “market” value
- Creditor and borrower engage in legal hearing to determine whose claim has legal merit
- Creditor, Borrower, Appraiser, and sometimes Broker will testify in the hearing to establish the market value for the judge
- Judge weighs evidence and rules in favor of one party
- If in favor of the borrower, creditor must reforeclose the following month at market value. If in favor of the creditor, creditor has court-backed financial claim against the borrower.
Any questions on the confirmation process? Does it make sense? Can you see why it is vitally important in litigious battles between creditors and borrowers?
Leave any questions or comments in the Comment section below and I will be happy to respond.