Our goal is for you to understand how money works so you can help yourself, be of service, and be a blessing to others…
Stay tuned for James Smith next webinars and trainings coming up soon!
This means that hundreds of thousands of Americans that were underwater on their homes value vs. their mortgage value of their property were able to extend and lower their payments, putting them in a situation where they can actually save their homes and get back to a measurable normal life. This is a small step in the right direction; a positive in a sea of negatives. ~ James M Smith
The key to understanding how to profit from tax liens and tax deeds is to have a complete knowledge of the process. Join James M Smith, James M Smith, #JamesMSmith one of the world’s foremost expert real estate investor in his next webinar dedicated exclusively to how to find tax liens and tax deeds yielding high interest where your money is constantly invested and earning income.
James M Smith – Fast track to financial FREEDOM
The economy and personal responsibility on success and the future were some of the topics James’s covered in his first webinar of 2014. Check back often for the recorded version. Like James on Facebook https://www.facebook.com/jamesmsmith57 and join his group Fast Track to Financial Success – https//www.facebook.com/groups/FastTrackToFinancialFreedom/
2013 was a staging year for all of us; spiritually, relationally and financially. Without a doubt and without a question, we are now entering the era of storing up for your inevitable future.
I firmly believe that your current actions, or the lack of, will dictate your destiny. Success requires determination, dedication, focus, purpose, execution, and you can’t do that by living your life through the actions of others. No politician can do for you, what you can do for yourself.
Let’s make 2014 the year of true transformation from average to extraordinary. Get involved before is too late. Let’s take advantage of the economic opportunities now!!!
Have a Blessed and Happy New Year 2014!
Taxi Cab Advice: When I was a kid, I was told that if your taxi driver ever gave you investing advice about a particular market, then it was time to pull your money out and invest in something else.
This is obviously not a dig at taxi drivers – rather it is a statement about the herd mentality in investing. Over the past 5-years, the biggest investing herd I have seen are gold buyers. Now before you get all upset, I am not saying that gold is a terrible investment BUT gold is not the best investment for everyone, all of the time. Markets go through cycles, gold included. Depending on where the asset is in its cycle depends on whether it makes sense to buy.
Over the past 18-months, gold has under performed almost everything around. In other words, it has been a terrible investment as of recent. Also, people should pay attention to what very smart, well informed investors are doing. In 2007, 22 of the top 25 hedge fund managers were highly invested in gold. Today, many of those same managers, along with Goldman Sachs, are shorting gold (this means that they are betting that it will fall in price).
I was on a plane recently and the person sitting next to me was a staunch metals investor who equated his ownership in metals, and not stocks, bonds or investment real estate, to a badge of honor. If gold were a religion, he would have been the Pope, but even he couldn’t explain clearly why it was a good investment, why it would continue to appreciate, and it should be anything more than just a diversified fraction of his portfolio.
I have heard the arguments that gold is tangible whereas stocks aren’t… Well, most investors don’t invest in physical gold, they own contracts (aka paper). For those who have physical gold, how is that investment different than real estate, water (water rights), oil, corn and other commodities? Some say that if the US tanks, gold will be the new currency. Will it? That doesn’t make sense to me because according to the history books that I read, laborers during the great depression bartered with apples, loaves of bread, live stock and tangibles that people actually needed. I don’t know how filling gold and silver are, but if this country goes to hell in a hand basket, I would rather be a farmer invested in land and cattle, than a retiree with a safe full of metal.
Basically, people need to know that gold IS JUST ANOTHER INVESTMENT and some highly unique asset that is insulated from the greater market. It can, has been and will again, be manipulated by investors. It can, has been and will again at some point, go through a bubble.
Some people point to Chinese consumption of gold as proof that it is a universally accepted asset, but for those of you who are unfamiliar with China, you have to realize that gold is a very important part of Chinese culture. Most Chinese men and women own and wear lots of gold jewelry. Most wedding bands in China are gold only and now that China has a middle class, they are buying gold because of the culture significance, not for the purposes of an investing asset.
Be smart and understand what you are investing in before you invest. And remember, if your cab driver tells you to invest in something, its probably time to turn and run (or short it).
(CNN) — Dubai already has the world’s tallest building, the world’s largest shopping mall, and the largest man-made archipelago. So it’s no surprise that the country’s police would drive one of the world’s most extravagant and expensive cars.
The latest addition to the force’s fleet is a head-turning Lamborghini Aventador, finished in green and white — the colors of the Dubai Police force.
In a written statement, the force said the car, which bears the number 8 on a customized license plate, would be a step towards confirming the stature of Dubai as “a city of luxury in all of its facilities.”
According to recent figures, 15% of traffic fines issued in Dubai are for driving at speeds in excess of 130 mph (209 kph.)
The car, reported to be worth around $500,000, has a maximum speed of 217 mph (349kph) and can accelerate from 0-60 mph (0-97 kph) in 2.9 seconds.
Dubai police are not the first force to use Lamborghinis on the roads. The luxury sports vehicles are also used by forces in Italy and Qatar.
Summer time is nearly here. Soon kids will be out of school, families will go on vacation and memories will be created. Summer is also a period of high activity in the rental market place. For those of you who have rental properties, it is important to have your properties listed right now, because landlords not only get higher rents during the late-Spring and Summer months, they also tend to get longer leases.
New York (CNN) — The final bid for a trading card that the National Baseball Hall of Fame calls “the Holy Grail” topped $2.1 million — the highest price ever paid for a baseball card in a public auction.
The 1909 card of Pittsburgh Pirate shortstop Honus Wagner — one of only about 50 in existence — was auctioned off by Goldin Auctions in West Berlin, New Jersey. Bidding started at $500,000 on February 25.
The buyer chose to remain anonymous after the successful bid, but Ken Goldin, owner of Goldin Auctions, told CNN he is “best described as a wealthy individual investor and a baseball fan.”
Goldin said the buyer did not indicate what they planned to do with the card. A total of 15 bids were made for the prized item.
The card is in short supply because Wagner made the American Tobacco Company recall it when he discovered it had made the card without his permission. He didn’t want kids to buy cigarettes, the auction house said.
The card was released as Wagner was on his way to winning his seventh batting title and about to lead the Pirates to their first World Series win. It’s garnered such a place in baseball history that it has its own plaque at the Hall of Fame in Cooperstown, New York.
The winning bid came in at $2,105,770.50, including the buyer’s premium, according to a statement from Goldin Auctions on Saturday.
Across the nation the real estate market place is not merely coming back to life, it is alive and well. In fact, economists believe that real estate price gains will be a significant share of US citizens net worth growth this year; a reversal of a trend that lasted almost 6 years. This time is very exciting and it is a market that everyone should be aware of and if, take advantage of. But before you are off to races, make sure that you understand the difference between an appreciating asset that going up in value due to strong fundamentals and one that is based on speculation.
Below is an article that was published in Fortune magazine in 2005. It highlights all of the reasons why the market was inflationary and eventually burst. I believe that everyone should read the article because if you don’t learn from history you are doomed …
“(FORTUNE Magazine) – Zareh Tahmassebian is on the way to look at two of his houses in Phoenix. He is lost. Most people don’t get lost driving to their own residence, but then, Tahmassebian has never actually been to these particular homes. There are a few reasons for that: (1) He has no intention of ever moving into them, (2) he lives in Las Vegas, not Phoenix, and (3) he owns six other houses–and a half share of seven more–in the greater Phoenix area. “Sometimes it’s hard to keep track,” he says.
Tahmassebian, just 22, is a big, affable guy who dresses the way a budding young speculator should: black trousers, a blue-and-white-striped shirt, cuff links, a Cartier watch, black suede loafers, and rimless purple sunglasses. The son of Armenian immigrants, he has spent the past four years in Las Vegas working as a mortgage banker, a job that he says paid him $250,000 in salary and commissions last year. He has taken the day off to fly to Arizona for a “frame inspection.” The houses he’s inspecting are somewhere inside the Cholla Ranch development that’s being put up by KB Home, one of the nation’s largest builders. Right now he’s in the general area–cruising southeast down Highway 10 in a white Chrysler 300M rental car–but lacking specifics. “Is that Tempe?” he asks. “I think I have some houses there.”
After several uninterrupted miles of cactus, desert, and tumbleweed, it becomes clear that he’s missed the turn, and he exits the freeway while dialing his broker. “Papa John!” Tahmassebian says into his cellphone. “Where are my houses?” To get more help, he dials KB Home on another phone, and soon he has a gleaming silver clamshell at each ear. For a moment the car drifts dangerously across the exit ramp, until I reach over to grab the steering wheel. “It’s okay,” Tahmassebian whispers, nodding toward the place where his trousers meet the bottom of the wheel. “This knee can drive.”
When we finally arrive at the first construction site, on Paradise Lane, Tahmassebian begins his inspection. “See this wood?” he says, gesturing to the slatted frame of the unfinished house. “This wood made money for me! I don’t own it–but I own the rights. I put a 10% deposit down, I haven’t even made a mortgage payment yet, and it’s already gone up $45,000. What a country!”
THIS COUNTRY is obsessed with real estate. The number of chapters of the National Real Estate Investors Association has jumped from 44 in 2002 to 170 today. Eighty-six books on real estate investing were published last year, nearly three times as many as in 1998. Even reality TV is getting into the act: This summer the Learning Channel will air a show about people flipping real estate in San Diego, hosted by a woman who has bought and sold more than 40 properties in the past seven years.
And the appreciation! Surely you’ve heard, because real estate profits are the kind of thing that no one–your neighbor, your boss, yourself–can seem to shut up about. Since 2000 the median sales price of a single-family home has jumped 77% in New York City, 92% in Miami, and 105% in San Diego. “Nationally, all levels of real estate activity are at all-time highs,” says economist Mark Zandi at Economy.com.
Of all the phenomena that the boom has wrought, perhaps the most telling is the return of speculators like Tahmassebian. Speculators are creatures who emerge every decade or so to exploit the hot business cycle of the moment–those whose aim is to ride the wave to its highest point and then, with miraculous skill and timing, get out before it crashes on all the greater fools beneath. (They are also, like fishermen, more than willing to exaggerate the size of their catch.) Lately their numbers have been multiplying with every cocktail-party tale of a dentist, florist, or shrink buying “threesies” and “foursies” (three or four properties at a time, in speculatorese) and making a killing. In March the National Association of Realtors released a study estimating that investors represent 23% of the homebuying public. That number includes second-home buyers; mortgage lenders estimate that pure investors account for a hefty 10% of all buyers. Historically the U.S. rate has been half that.
“You’re seeing people now for whom investing in real estate is their life,” says Jay Butler, director of the Real Estate Center at Arizona State University. “They are quasi-pro and amateur investors driven by the idea of self-sufficiency: This is their way to become financially independent. It’s a move taken straight from the old day traders of the stock market.”
Comparisons to the stock market bubble of the late 1990s imply that this is a party that will be over soon. At least that’s what analysts, experts, and magazines like this one have been saying for two years now (see “Is the Housing Boom Over?” on fortune.com). Except it hasn’t turned out that way. At least not yet. The Commerce Department just announced that new-home sales in March soared 12.2%, setting a new record. Now it looks as if 2005 might be another record year.
What the hell is going on out there?
To answer that question, FORTUNE toured model homes and half-built developments, attended seminars, and stood in condo lines with dozens of real estate speculators (who would probably prefer to be called real estate investors) in Los Angeles, Las Vegas, Phoenix, Austin, and Miami. As a group, they tend to alight on a hot market, gorge themselves on property until prices skyrocket, then move on to yet another promising town. Many of them acknowledge that they are part of a bubble and that a correction is coming. But they believe it won’t hit their market–or that if it does, they’ll be able to get out in time. Despite all the warnings and a few bleats of self-doubt, most of these people are continuing to behave with all the stark raving urgency of panicked shoppers at an after-Christmas clearance sale.
To appreciate how intense the real estate craze has become, you could have done a lot worse than visit last month’s Real Estate Wealth Expo in Los Angeles (slogan: “One Weekend Can Make You a Millionaire”). A 46,000-people, two-day lovefest at the Los Angeles Convention Center, it featured the advice of Donald Trump, bestselling author Robert Kiyosaki, motivational speaker Tony Robbins, and hip-hop impresario Russell Simmons. Imagine a late-night infomercial sprung bizarrely to life, with all the hucksters and viewers mingling in the same giant room, whipping one another into a get-rich-quick frenzy.
More than 100 kiosks filled the exhibit hall, selling everything from Miami condos to massages. Inside a phone-booth-like contraption called the Money Vault, attendees grasped wildly as gusts of air blew around a mass of fluttering fake dollar bills. At the end of one seminar on commercial real estate, a speaker named Scott Scheel offered the crowd the chance to buy a “training packet” of books and DVDs for the “discounted price” of $1,620.50. A mass of people surged toward the cashiers, credit cards at the ready.
It is fitting that this hoopla took place in Los Angeles, since it was California that gave birth to the modern real estate speculator. In 1997 the average price of a California home was $186,490. Today it’s $495,400. A market experiencing that kind of rapid appreciation is the perfect breeding ground for speculation, and an impressive run of it is exactly what California got. In Los Angeles between May 2003 and May 2004, for example, the number of homes sold that had been owned for less than six months jumped 47%.
As prices ballooned, however, speculating on California real estate became more expensive. It also became harder, because developers began inserting what are known as antispeculation clauses into their sales contracts. The clauses require proof that new homes are being sold only to genuine, we-want-to-live-in-this-house buyers, and they include a litany of penalties if the home is resold within a year.
But it wasn’t very appealing to just cash out of real estate altogether. That’s because individuals can defer taxes on the sale of an investment property if they make another purchase of equal or greater value within six months. That provided a powerful incentive for speculators to invest real estate gains in yet more real estate–but not in the Golden State. If California was no longer a good option, where else was there?
Las Vegas: Leverage 101
AT THE INVESTING Get-Together at the Durango Hills Golf Club in Las Vegas, Debbie Smith, a thirtysomething blond, is grappling with one of the many dilemmas facing the modern real estate speculator: remembering exactly how many houses you have. “We have four, five, six, seven, eight–wait, let me think,” Debbie is saying.
She begins counting homes on her fingers, ticking off the names of developments. “Palmilla, Terracina, Cliff Shadows–” Mid-count, her husband, Jason Jones, with whom she hosts the monthly Get-Togethers, comes over to help. “There’s the Mount Charleston cabin,” he says. “And Mar-a-Lago,” she adds. “So what is that? Twelve properties? I’m trying to think if there are any more…” Debbie takes out a business card and begins writing down the names of the communities–in Las Vegas mostly, but also in Boise and Albuquerque–on the back. She gets 12 again. And pauses.
“Oh! We have Solana,” she says, suddenly brightening, as if a dam has burst. Her heavily mascaraed eyelashes flutter. “That just closed this week. Oh! And I have one in Mississippi too. I forgot about that. Fourteen.” (Actually the couple have 20 properties; they’re forgetting a block of apartments they picked up last winter.)
It should come as no surprise that Debbie and Jason, a former teacher and financial advisor, respectively, are from California. Though they didn’t have a stake in the California home-price bonanza, it definitely got their attention. Starting in 2002, they applied lessons they learned from well-known real estate guru Robert Allen and bought–online–five Florida houses that were in pre-foreclosure, putting just $1,000 down on each. They lost some money when the rents didn’t cover the holding costs; then they watched the values leap. They were hooked.
By the summer of 2003 they had moved to Las Vegas, a market that was just beginning to show signs of life. In 2004, prices there rose 49%, and the speculators were swarming. Debbie and Jason began snapping up properties, putting anywhere between 5% and 20% down. They bought seven of them by draining their remaining $140,000 in savings, they say.
The rest they bought by taking maximum advantage of a speculator’s favorite tool: leverage. Though they were out of cash, they managed to keep buying by borrowing some $400,000 in down-payment money from friends, family, and local lenders. Most of the properties carry adjustable-rate mortgages that are fixed at favorable rates for the next three to five years; the rents they earn from those properties just about equal their total monthly mortgage payments.
Today the couple estimate that the 20 properties they own are worth about $8 million. If that’s true–and until they sell, no one really knows–their total equity has grown to about $4 million. That amount, the couple say, represents their entire net worth. But that fact doesn’t seem to trouble them much. They plan to sell properties when they need the cash and hold on to the others to fund their retirement. “It’s a risk,” concedes Debbie, “but I really feel like it’s a lot less risky than the stock market. Even if it does crash, it’s not like it’s worth nothing–like a stock, where the value can go all the way to zero. I guess it’s much more exciting than it is scary.”
As the networking part of the Investing Get-Together winds down, a short man in an aloha shirt comes over to the couple to introduce himself. His name is Kelvin Nakasone. He has an announcement to make: He has just bought a new house with the help of his real estate–investing mentor.
His what? It turns out that Nakasone, 40, a high school sign-language teacher who invests with his sister, an accountant, is a member of Russ Whitney’s mentor program. Whitney is one of hundreds of real estate counselors currently making the rounds on late-night infomercials and at local real estate gatherings around the country. Whitney’s program supplied Nakasone with a “mentor” who gave him a weeklong crash course in real estate; “extra coaching” in the form of a weekly followup phone call; and multiple training seminars in places like Cape Coral, Fla. For that, Nakasone paid more than $35,000. (“Sheesh,” Debbie says later. “Some of those programs are really good. But his sounds like it was a little expensive.”)
Nakasone started with the program in October and bought a house in Las Vegas in December. How much did he pay for it? “I can’t remember,” he says cheerfully. Is he worried about talk of a bubble? “Well, I can foresee what will happen,” he says. “I know in the near future a lot of people who have interest-only mortgages will get in trouble.”
He’s probably right. Interest-only mortgages–which don’t pay down principal, so borrowers make lower payments than with conventional mortgages and thus can afford more expensive houses–used to be considered risky. In 2001 just 1.6% of all new U.S. mortgages were interest-only. But last year a stunning 31% were. If there’s any sign that a downturn could get loads of folks in trouble, that’s it.
So what kind of mortgage does Nakasone have? “Interest-only,” he says. “I didn’t put any money down. But for investors, it makes sense. We get lower monthly payments. In my case, I’ll be selling it for a profit, so I don’t care about the interest-only. See, I’m from Hawaii? Property values there went through the roof. I saw the same things happening here, and I just know what is going to happen.” His sister, who handles the money side of things, told him that the property has already appreciated $50,000. “I’m just waiting for the back end,” he says.
Phoenix: Working the system
TRISH DON FRANCESCO, a 55-year-old in a scarlet Asian-style shirt, is peering over her red spectacles at a map of Phoenix’s ever-expanding suburbs. Don Francesco runs Metropolitan, a real-estate-portfolio management company in the city, where business has been brisk lately. A board nearby lists names of recent buyers; some have bought more than 20 properties in the last week. It has been a long time since she took a day off. “Honey,” she says, “I never take a vacation during a boom.”
Just as the Las Vegas market was starting to sag last year, the Phoenix housing market was heating up. Having heard stories of what happened when the speculating boom hit Vegas, local real estate offices like Metropolitan began contacting California investors directly. Don Francesco sent out “millions” of direct-marketing faxes all over the state. She estimates that more than 700 California investors have visited her office in the last 18 months. More than half of them have purchased property. “We pick them up at the airport and drop them off,” she says. “Why rent a car? Sometimes they’re here maybe six hours total. Even then, a lot of them don’t need to see the houses. They get here, look at the prices, and say, ‘Two hundred and fifty grand? I’ll take two of ‘em!’ ”
In the past year the number of Phoenix homebuyers who identified themselves as investors has more than doubled, to 2,703. They bought 18% of all homes sold in the Phoenix area in 2004, according to Infocom, a local real estate research company. Phoenix builders, fearing that the speculative frenzy would damage their primary business, soon announced the same kind of antispeculation clauses that had proved largely successful in both California and Las Vegas.
By the time those measures were in place in Phoenix last fall, however, the swarm of investors descending on the city was almost too much to stop. At one of the construction sites of big builder Toll Brothers, a van full of investors from Las Vegas pulled up to a sales trailer shortly after the antispeculation measures had gone into effect. According to a Toll Brothers spokesperson, the saleswoman on call was so flustered by the group’s displeasure at being denied an opportunity to invest in such a scalding market that she had to radio headquarters for backup. “They all wanted to buy multiple properties, and they wouldn’t take no for an answer,” says the spokesperson. “They were trying to climb in and give her their deposits. She had to lock herself in the trailer.”
Today builders in Phoenix will tell you that the new antispeculation clauses in their contracts have solved the problem. However, the example of Zareh Tahmassebian–he of the multiple houses and the knee that can drive–tells a different story. He bought several of his houses in Phoenix after the rules were in effect. How did Tahmassebian manage to circumvent them? It was, to hear him tell it, relatively easy: Sales reps for some builders, including KB Home, gave him a call every time a development was in danger of not selling out. “I didn’t even care where it was,” Tahmassebian says. “You have to be ready to jump.” (When told of this breach, KB Home spokesman Derrick Hall is philosophical. “Is it a perfect system?” he says. “No, it’s not. It’s a deterrent.”)
On several occasions Tahmassebian has even found himself at the grand opening of a community–an event typically reserved for “end users,” as the builders like to refer to people who actually plan to take up residence. The openings are sales events where hopeful buyers are invited to gather with their families for a lottery in which the lucky new homeowners are selected. In oversubscribed communities the lotteries can get tense. Elsewhere, they take on the quality of a new-community pep rally. When a winner is chosen, the lucky family’s name goes up on the board. They get a button. Someone takes a picture. Everyone applauds.
To keep up appearances, builders will often insist that Tahmassebian attend, even though they know he’s an investor. When they do, he gets on a plane to Phoenix, hops in his standard 300M, and floors it to the sales office. “It’s a little uncomfortable sometimes,” he says. “I’m out there by myself eating eggs Benedict with all these families. Every time they announce a name, there’s a bunch of clappers and noisemakers going off while I’m out there pacing.”
Since last year, when the Las Vegas market began to cool off, Tahmassebian has made more than 20 trips to Phoenix to scout, buy, and inspect houses. He is obviously a quick study. At age 17 he learned about leverage from his cousin, who mapped out the principles on a napkin in a diner. (“You can buy one $200,000 house with cash, or you can buy 20 with 10% down. Which would you rather have?”) At age 18 he bought his first home for $126,000, watched it appreciate, and decided not to go to college. (He sold 2½ years later for $369,000.)
Tahmassebian bought his eight Phoenix houses with 10% down, a total investment of $150,000 including closing costs. To buy seven more houses, he entered into a limited partnership with his best friend’s dad, who lost money in the tech crash and is looking to make it back in the housing market. Each contributed half the down payments.
The houses aren’t exactly throwing off cash: Tahmassebian estimates that he loses $3,500 a month on them, since he doesn’t bother to rent out all 15. “If I’m negative on a few, that’s okay,” he says. “I’m in it for the appreciation.” In seven months, he estimates, the 15 properties have appreciated from $2 million to $3 million. He’s planning to sell in the next two to three years, but if the market does crash–which he doesn’t expect–it wouldn’t be a disaster, he says: “You just hold on till it comes right back up.”
Austin: The nomads
CERCHEERCK. I AM sitting in the back seat of a Ford Excursion with Stephen and Crystal Wong, the second of a two-car real-estate-speculation convoy that is cruising through Austin. Cercheerck. The voice of Tom Polk, the broker leading the tour from his black BMW, comes over a walkie-talkie. “Now, you know, there’s something important that separates Dallas and San Antonio from Austin,” he says, his voice crackling. “It’s a little thing called quality of life.”
Polk is laying on the hard sell because the Wongs are currently in the middle of a three-day, three-city tour of Texas–San Antonio yesterday, Austin today, Dallas tomorrow–during which they plan on picking up 15 houses. Though their permanent residence is in San Francisco, the Wongs, who run a Home Instead Senior Care franchise, have already purchased 12 houses in Phoenix over the past 18 months. In that time, they say, those properties have appreciated 47%, to $2.4 million.
Now the Wongs are starting to sell a few of their single-family homes in Phoenix and roll that money into the next market that looks primed for serious growth. Outside of Florida, there is no obvious successor, which for many has meant that now is the time for a longer-term growth play. Though most of the largest Texas cities have experienced stagnant housing markets in the past several years, many speculators have the state on their radar. The numbers are beginning to reflect that: Single-family-home sales volume in Austin jumped 38% in March over the year before.
The Wongs seem to have arrived with their minds made up. “Dude, this place is a total steal,” says Stephen, 35. “It’s like a penny stock!” He is wearing mint-colored slacks and a slate herringbone jacket with a yellow-and-blue-striped button-down shirt. A pair of dark sunglasses hangs from his collar. As Tom the Broker recites local landmarks (“And there is the bar where Jenna Bush got busted for underage drinking …”), Stephen explains his thinking. “I definitely don’t feel like America is going to be like this forever,” he says, looking out at the newly developed houses that dot the Texas hillsides. “You need to stake your claim now. It’s like the Wild West again. Actually, I’m kind of shaking right now. I feel like a Coronado or a Cortéz.”
Behind the wheel of the Excursion, 25-year-old Crystal–in a cream suit, pink shirt, pink heels, and matching pink watchband–is so eager to move the tour along that she floors it past the black BMW until Tom radios over a request that she get back in formation. “Come on, Tom,” she practically shouts when the radio is safely off. “I want to buy!”
If the Wongs and their broker are not on exactly the same page, it may be because they have never met before. As the urge to invest in properties far from one’s hometown has surged, companies have sprung up that help put buyers in touch with hot markets. The firm that matched the Wongs and Tom Polk is the ICG Group, a full-service property-management company with offices in San Francisco and Tel Aviv. Though Polk also gets many out-of-state investors independently through the Internet, his connection with ICG has changed his business. “I used to get about 20% of my business from investors,” he says. “Now it’s 80% investors and 20% homebuyers.”
As the convoy comes to a stop at the last of six largely indistinguishable developments on the tour, the other potential buyers on the trip, Scott and Lynda Hibner, emerge from Tom’s BMW. The Hibners, who live in Phoenix, have invested only in Las Vegas so far. Scott sees the property-value tidal wave moving east, so the Hibners are planning a “relo” to the Austin area. “It’s been moving from California to Nevada to Arizona,” he says. “It’s coming this way. Or it seems to be. We’re hoping to find another Vegas, but I don’t think it will happen.”
With everyone in one place, surrounded by houses in various states of completion, I ask them if they’re worried that they might be caught up in a bubble.”No, no–see, bubbles are for really high-priced areas,” Tom says. “It can’t get much lower than here. In Texas the sky’s the limit.” ”Ah, that’s all guesswork and theory anyway,” says Scott. “Nobody really knows.” “It’s certainly not here yet,” Stephen says. “Anyway,” Tom says, “that would be like your stockbroker telling you, ‘Don’t buy Dell, don’t buy Whole Foods.’ Sure, the price is high–but it’s still going up.” “Yep,” says Scott. “They said that in California five years ago, and look what happened.”
Satisfied, they let the talk wander to other subjects. The Hibners are planning to look for an existing home they could move into in a nicer area. Stephen and Crystal have decided to buy in all the areas where Tom the Broker has invested in property. (“I’m going to be piggybacking on everything you did,” Stephen says to Tom. “I’ll call you on Monday. I’m not trying to–you know the market. I like what you like.”) As we get back in the cars and part ways, another group of customers pulls into the development’s sales center behind us.
Back in the Excursion, however, Stephen keeps the subject of the bubble alive. “I love all the talk of the bubble,” he says. “It eliminates all the chickens. Then I can buy cheap when the bubble does burst. But it’s important to stay ahead of it. That’s why I’m liquidating in Phoenix to start buying in Texas. You gotta keep the money moving.”
Miami: End of the line
AT THE LAKEVIEW CLUB in Oakland Park, Fla., a former apartment complex near Fort Lauderdale that’s about to go condo, the line of wannabe buyers is some 40 strong. It is 10 A.M., and the first buyer arrived at 3 A.M. to stake out a spot. By 11 A.M., when the sales begin, the crowd outside the complex–which consists of 443 peach stucco units clustered around a rehabilitated swamp, with prices averaging about $200,000–is getting antsy. “Each year that I haven’t bought something, I’ve always said to myself, ‘Gee, I should have done it,’” says Darrell, a mid-30s hospital administrator in a faded blue T-shirt, shorts, and a buzz haircut, who is there to buy his first investment property. “It’s the only place to put your money now to be sure of getting a good return.”
Several others in the line nod in agreement. “Oh, yeah, that’s what my uncle says,” offers Cecilia Martinez, a 42-year-old billing agent dressed largely in pastels, one of the few in line actually looking for a place to live. “He says take money out of your IRA and put it in real estate.” (She hasn’t yet.) ”I’ve had retirement accounts since 2000, and I’ve watched them dwindle to almost nothing,” chimes in Randy Leonard, 46, an oncology nurse. “Had I had it in real estate, I’d be sitting pretty.”
Indeed. Since March 2004, home prices in Fort Lauderdale have jumped 31%, Port St. Lucie 39%, Cape Coral 43%. In Miami, the euphoria has reached, in many cases, truly over-the-top proportions. Consider a party thrown last month by Fortune International (no relation to this magazine), one of the largest developers in town, for a soon-to-be-constructed condo called the Ivy. White stretch Hummers carried guests between three party locations as bikini-clad models decorated with real-estate-themed body paint paraded amid massage tables and lychee martinis. Brokers and investors mingled with choice buyers and hotshot international clients.
The party was well attended, because getting in early on a Florida condo at pre-construction is the new version of scoring a spot in an Internet IPO. But while connected insiders usually get the choicest deals, most developers also host a public sale in which they release the remaining units to the masses. Those masses, many of whom are newbie investors, are piling in–in what feels like a last desperate attempt to get rich. The result is a sight that has become as much a part of Florida scenery as the palm tree: the condo line.
Because projects can sell out in a matter of hours, buyers will do nearly anything to assure themselves a piece of the action. They camp out for days in lawn chairs and beneath umbrellas in the hot sun. They bring coolers of food and drink. They bicker over who is ahead of whom. “Riots break out from time to time if the right security is not in place,” says Kim Kirschner, head of Kirschner Realty in Hollywood, Fla.
Back at the Oakland Park condo sale, a team of 30 or so Kirschner employees wearing royal-blue shirts and black pants are scurrying around shuffling buyers through “model units” and into the “map room,” where they pick remaining units from a giant aerial view of the development. As the day goes by and more condos sell, the Kirschner brain trust gathers behind closed doors to gradually raise prices for the remaining units; one unit is rumored to be up $10,000 by early afternoon. As the development fills and word of further price increases spreads, the pressure mounts for buyers toward the back of the line.
“It’s like any game. It’s the guys who get in early and in the middle that make money,” says John (he declines to give his last name), a chiropractor who is on hand with his girlfriend, a nurse in a white tank top and hot-pink lipstick who’s also in the market. He has bought three other investment condos in the area already this year. “It’s the guys at the end who are left holding the bag.”
IT’S IMPOSSIBLE TO TELL how far a mania will go before it turns. But even some diehard speculators, like Jason Mitchell, are starting to get nervous. Before graduating from Syracuse Law School in 2003, Mitchell, 31, flipped two houses in Las Vegas in one month each. “It was a gold rush,” he says. “Everyone was flipping houses as fast as they could. You would go to dinner, and the waitress had just moved from L.A. and flipped two houses in her first week.” In total, Mitchell and his wife, Connie, bought seven investment properties in Las Vegas. Today, however, they have sold all but two. “I had almost like a eureka moment,” he says. “It just hit me that I was seeing the same group of other investors at every development site. They were buying six to seven houses each. They were buying in other people’s names. I thought, ‘My God, the bottom is about to fall out of this thing.’ So I stopped.”
Further east, in Phoenix, sisters Cheryl and Carolyn Lawyer, 45 and 34, are also feeling a little wary. They both quit their jobs last year (as a marketing consultant and a manager at a semiconductor company, respectively) to rehab houses together. Now they often get calls from friends just getting in the game. “We’re worried everyone’s in denial,” says Carolyn. “There are a lot of people getting in at the top of the market, and you could hear some horror stories if it doesn’t last.”
Then there’s Eric, 39, a Wall Street banker who also declines to give his last name. He recently put a $25,000 deposit down on a $650,000 condo in Miami that he heard about from a broker friend at the Maley Group, who had recently helped him buy another condo in New York for $1.25 million. The Miami waterfront building has yet to be constructed, so he’s watching and waiting from the safety of his Manhattan office. “I read all the stories about real estate and condos in Miami,” he says. “You know, saying, ‘Everyone is a speculator,’ and ‘It’s a herd mentality.’ I see them all the time now, and I wonder: Am I one of those people?”"
REPORTER ASSOCIATES Marilyn Adamo, Elias Rodriguez, Oliver Ryan, Christopher Tkaczyk, Jia Lynn Yang
The following article by the Wall Street Journal raises some very interesting questions. Should employers be able to charge employees more money for insurance because they are fat a.k.a. higher risk for heart attack/stroke/joint diseases/diabetes? How do we discern whether someone’s health condition is the result of genetics or choices, and is this relevant in the discussion? If you are sitting in a large crowd and were forced to speak aloud, I am willing to bet that you would say “No, no its not fair! Everyone should pay the same.” Obamacare was passed on the basis of the preceding comment. Unfortunately, young people, who are healthy, are getting attacked by expenses at all angles. Their living costs are much higher than mine were 30 years ago. Their employment incomes are much lower than mine were 30 years ago. Their social security payments will never be paid back to them whereas mine will. And now they are being forced to supplement my insurance and the insurance of all baby-boomers. Is this fair. Is our society supposed to seek fairness?
Psychologists have established that people in groups tend to support social equality issues whereas people who are answering privately tend to think and respond in a more individualistic manner. The question really boils down to the following – should we charge people who are higher risk and more expensive to insure more money for their insurance? If the answer is yes, then we are taking the stance that either all people have control over their health and thus, we want to penalize people who don’t make the effort to stay healthly OR that we recognize that some people cannot control their health and we don’t care about penalizing them because healthy people saving money is the priority.
Read the article below and let me know what you think.
Are you a man with a waist measuring 40 inches or more? If you want to work at Michelin North America Inc., that spare tire could cost you.
Employees at the tire maker who have high blood pressure or certain size waistlines may have to pay as much as $1,000 more for health-care coverage starting next year.
As they fight rising health-care costs and poor results from voluntary wellness programs, companies across America are penalizing workers for a range of conditions, including high blood pressure and thick waistlines. They are also demanding that employees share personal-health information, such as body-mass index, weight and blood-sugar level, or face higher premiums or deductibles.
Corporate leaders say they can’t lower health-care costs without changing workers’ habits, and they cite the findings of behavioral economists showing that people respond more effectively to potential losses, such as penalties, than expected gains, such as rewards. With corporate spending on health care expected to reach an average of $12,136 per employee this year, according to a study by the consulting firm Towers Watson, TW +0.45% penalties may soon be the new norm.
Employers may argue that tough-love measures, such as punishing workers who evade health screenings, benefit their staff and lower health-care costs. But such steps also portend a murky future in which a chronic condition, such as hypertension, could cost workers jobs or promotions—or prevent them from being hired in the first place.
Until recently, Michelin awarded workers automatic $600 credits toward deductibles, along with extra money for completing health-assessment surveys or participating in a nonbinding “action plan” for wellness. It adopted its stricter policy after its health costs spiked in 2012.
Now, the company will reward only those workers who meet healthy standards for blood pressure, glucose, cholesterol, triglycerides and waist size—under 35 inches for women and 40 inches for men. Employees who hit baseline requirements in three or more categories will receive up to $1,000 to reduce their annual deductibles. Those who don’t qualify must sign up for a health-coaching program in order to earn a smaller credit.
Employee-rights advocates say the penalties are akin to “legal discrimination.” While companies are calling them wellness incentives, the penalties are essentially salary cuts by a different name, says Lew Maltby, president of Princeton, N.J.-based National Workrights Institute, a nonprofit advocacy group for employee rights in the workplace. “No one ever calls a bad thing what it really is,” he says. “It means millions of people are getting their pay cut for no legitimate reason.”
Companies may say they have tried softer approaches, but many haven’t exhausted their options, like putting healthier food in their cafeterias, building a fitness center or subsidizing gym memberships, he adds. “At best, these programs are giving employers an enormous amount of control over our private lives.”
Michelin denies any discrimination and says the policy is voluntary. Not participating means employees won’t get the incentives. Wayne Culbertson, Michelin’s chief human resources officer, says the old incentive programs didn’t lead to meaningful change. For example, an employee could pledge to start walking daily, he says, but never have to prove it. “It was sort of free, you know? You got $600 just for being a good employee.”
Six in 10 employers say they plan to impose penalties in the next few years on employees who don’t take action to improve their health, according to a recent study of 800 mid- to large-size firms by human-resources consultancy AonAON -0.66% Hewitt. A separate study by the National Business Group on Health and Towers Watson found that the share of employers who plan to impose penalties is likely to double to 36% in 2014.
Current law permits companies to use health-related rewards or penalties as long as the amount doesn’t exceed 20% of the cost of the employee’s health coverage. John Hancock, a veteran labor and employment attorney at Butzel Long, a Detroit-based law firm, says that while companies can’t legally dock a worker’s pay for a health issue, they can tie an employee’s health-care bill to whether the worker meets or misses health goals. As long as employers offer exemptions for workers with conditions that prevent them from meeting health goals, the firms are in the clear.
The situation is less clear if, for example, a company ends up singling out obese employees by charging them more for health coverage. If the obesity is linked to an underlying condition, the employer may be liable for discrimination, Mr. Hancock says.
Currently, most companies tie between 5% and 10% of employee premium costs to incentives, but that will likely go up, says Charlie Smith, chief medical officer for national accounts at insurer Cigna Corp. CI +0.72%
Pharmacy chain CVS CaremarkCVS +0.52% sparked outrage among employees and workers-rights advocates last month by asking staff members to report personal health metrics, including their body fat, blood sugar, blood pressure and cholesterol levels, to the company’s insurer by May or pay a $600 penalty.
How your shape can weigh on your wallet.
Additional amount that General Electric employees who self-identify as smokers must pay for health care each year.
Penalty that Honeywell is adding for workers who get certain types of surgery without seeking more input.
Annual penalty CVS employees must pay if they fail to report their weight, body fat and cholesterol levels to the company’s benefits firm.
Monthly penalty that Mohawk Industries charges employees who don’t participate in a health-risk assessment.
Maximum additional amount Michelin employees with high blood pressure or large waistlines could pay for health care.
Few workers can afford to refuse, but some aren’t happy. “It opens a Pandora’s box,” says a full-time CVS employee who works at a distribution center in Florida. “It’s none of their business.” While the 26-year-old describes himself as healthy, he says he is worried about disclosing health information that could be shared without his knowledge. He says he plans to cancel his health plan, which also covers his wife and child, and will start looking for work elsewhere.
CVS, which maintains that the change is intended to make workers aware of their health risks, says it doesn’t have access to workers’ screening results.
Mohawk Industries, MHK +3.04% a Calhoun, Ga.-based flooring company, says participation in its company’s health-risk assessment process shot up to 97% after the company imposed a $100 monthly penalty on nonparticipants. The company had previously offered rewards for participating in the assessment, but enrollment rates were low, says Phil Brown, senior vice president of human resources.
Honeywell International Inc. HON -1.04% recently introduced a $1,000 penalty—deducted from health-savings accounts—for workers who elect to get certain procedures such as knee and hip replacement and back surgery without seeking more input. The company had offered $500 for participating in a program that provides access to data and additional opinions for workers considering surgery, but less than 20% of the staff joined up. Since it flipped the incentive to a penalty, the company says, enrollment has been above 90%.
There are no new data on surgeries, but the change is projected to save at least $3 million annually, says Brian Marcotte, Honeywell’s vice president of compensation and benefits, who presented the plan at the Conference Board’s Employee Health Care Conference last month.
Typically, 20% of a company’s workforce drives 80% of health-care costs, according to Cigna’s Mr. Smith, and roughly 70% of health-care costs are related to chronic conditions brought on by lifestyle choices, such as overeating or sedentary behavior. But when employers target those conditions, employees themselves may feel targeted, especially when it comes to their weight. While companies can’t say it outright, many of their measures—such as high cholesterol and high blood pressure—are proxies for obesity.
A 2011 Gallup survey estimated obese or overweight full-time U.S. workers miss an additional 450 million days of work each year, compared with healthy workers, resulting in more than $153 billion in lost productivity.
Worse, chronic conditions could someday harm workers’ chances of getting hired, says Deborah Peel, a psychiatrist and founder of the Austin, Texas-based nonprofit Patient Privacy Rights. Patient information sometimes gets leaked, sold or stolen, she warns, noting that she has fielded complaints from job seekers claiming that employers requested health records before extending an offer. “It’s incredibly unfair,” she says. “It should be about our track record” doing our jobs.
For now, employers are trying to balance the carrot and the stick. Plenty of companies will be watching to see if inflicting a little financial pain leads to change in the long run. “What are the right pain points?” asks Paul Keckley, executive director of Deloitte LLP’s health-care research arm, the Center for Health Solutions. “Ultimately, you have to make behavior change automatic. We’ve got to make this like brushing your teeth.”
—Lauren Weber contributed to this article.
Wesley Snipes is about to be released from federal prison because of willful neglect to pay his taxes. Snipes, who formerely lived in Orlando, Fl, was part of a group of people that pronounced taxation to be illegal and oppressive. For years, despite warnings from the IRS, Snipes chose not to file a tax return, much less pay his balance. Although I am not a fan of high or oppressive taxation, I am a realist; our government needs money to run. It costs money to pave roads, provide security and regulate markets. I will also be the first to proclaim that I think the government is way too large and too inefficient, but as a citizen, you are bound to certain rules. Hopefully Snipes will be able to rebuild his life and his career after this terrible mess that he created.
NEW YORK (CNNMoney)
Since the housing bubble burst, 4.8 million borrowers have lost their homes to foreclosure, and another 2.2 million gave them up in short sales, according to RealtyTrac. While many are still struggling to recover financially, a growing number are starting to bounce back — and they are looking for a new place to call home.
Susan Edwards and her husband, Dave, lost their Palmdale, Calif., home in 2010 after Susan’s severe arthritis made it impossible for her to work her medical device sales job.
The medical bills soon piled up and the couple could no longer afford their $2,300 monthly mortgage payment. In addition, their home’s value had plunged 40% below the $325,000 mortgage balance.
“We were living under such pressure,” she said. “We looked at the numbers and knew we had to default.”
After the foreclosure, Susan’s credit score had taken a 70-point hit; Dave’s score fell even further.
By paying all of the bills on time, they nursed their credit scores back to health. And in December, two years after they lost their old home, the couple was able to buy a new home with a loan backed by the Veteran’s Administration. VA-insured loans can be obtained just two years after a foreclosure, according to the Mike Frueh, director of the VA’s Loan Guaranty Program.
The new house is a lot like the Edwards’ old one, with one big improvement: The mortgage payment is $1,150 a month — roughly half the amount they used to pay.
“[After bankruptcy], foreclosure is one of the things that hits your credit score the hardest,” said Anthony Sprauve, a spokesman for FICO.
Foreclosures and short sales usually knock about 85 to 160 points off a credit score. Scores suffer less if you pay at least the minimum on all your other bills on time and only allow your mortgage payments to go unpaid, said Jon Maddux, the CEO of YouWalkAway.com, which offers advice to defaulting mortgage borrowers.
Once the damage is done, it can take three to seven years for a score to fully recover. But some lenders are willing to work with borrowers earlier than that.
Mortgage giants Fannie Mae and Freddie Mac, for example, require defaulters to wait five years — and have a minimum credit score of 680 and put 10% down — before they can purchase a home again. If they don’t meet that criteria the wait is seven years, at which point the foreclosure is expunged from a person’s credit report.
If defaulters show that extenuating circumstances caused the foreclosure – such as a health issue that prevented them from working, a layoff, a divorce or other one-time event — the wait may be reduced to three years.
The Federal Housing Administration allows banks to issue FHA-insured loans to borrowers three years after a foreclosure or a short sale in which the borrower was in default.
Tony and Ginger Read, who live with their three kids outside of Boise, Idaho, took four years to rebuild their credit after they sold their home in a 2008 short sale. Tony had been laid off and the couple had already sold their camper and other valuables in a fruitless effort to keep their home. Eventually, a broker convinced them to sell.
“It was the hardest thing we ever had to do but we couldn’t afford the payments,” said Ginger.
Tony now has a job supervising a sand and water pumping crew for the fracking industry and the couple’s credit score has regained more than half of what it lost.
In January, they were approved for a 4% interest FHA loan on a $280,000 house in Fruitvale, Idaho. They close April 12.
Mike Edgar, the broker who worked with the Reads to sell their home and buy a new one, has worked with several clients to help them repair their credit and, when they’re ready, buy new homes.
In 2012, he worked with 15 “boomerang” buyers, about a quarter of his sales. He expects that number to double in 2013.
Tim Duy, a business manager in Verrado, Ariz., and his wife Christina, lost their house in April 2011. They’re eager to become homeowners again, but for now they’re concentrating on repairing their credit. The foreclosure, which knocked Duy’s credit score down 200 points to below 600, has since rebounded to 730.
“I could end the deficit in five minutes. You just pass a law that says that any time there’s a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for re-election.”
NEW YORK (CNNMoney)
How much does an employee really cost?
While that depends on benefits — and several layers of taxes — it typically ends up being 18% to 26% more than a worker’s base salary. It can be even higher for larger companies.
The extra costs are often cited by business owners as the biggest deterrent to hiring. Better sales might justify adding another $70,000 salary to the payroll, but in reality, that extra employee will probably cost closer to $88,000.
Anytime that Tony Knopp needs to calculate the cost of an employee, he adds another 20% to their salary. The CEO of Spotlight Ticket Management in Los Angeles said staffers “don’t understand how much we are investing in them.”
“Many see the salary and assume that is the number. It’s not,” he said.
That’s especially true for new employees who need training. They cost Knopp half a year’s salary by the time they start producing.
Here’s a breakdown of the implicit costs considered by few but the boss. Let’s assume a base annual salary of $70,000.
Social Security tax: $4,340
This is the largest portion of the payroll tax paid by employers. Business owners must pay the federal government 6.2% of every dollar their worker makes until that annual salary reaches $113,700.
Workers pay an identical tax, and those combined funds contribute to the nation’s Social Security system.
Medicare tax: $1,015
This is the second part of the employer’s payroll tax, and it contributes to the nation’s Medicare system. Bosses owe the federal government 1.45% of their workers’ earnings no matter how high those salaries are.
State unemployment insurance: $478
That cost might look small, but it can vary wildly. Unemployment insurance is mandatory, and a business pays it to cover the cost of unemployment claims made by its former workers. As for drivers who keep getting into accidents, insurance rates are higher for businesses that fire lots of workers.
The system charges a rate on a capped salary. For this exercise, CNNMoney settled on $478. That assumes the 50-state average unemployment insurance rate of 2.8% on the average wage cap of $16,488.
But the rules are different in every state. Tennessee’s unemployment insurance rate for new companies can reach as high as 9.1%, and Washington State has the highest taxable wage cap at $39,800.
Older businesses are subject to even higher unemployment rates, like Pennsylvania’s 15% or Massachusetts’ 12.3%.
Health care insurance benefits: $10,119
This is by far the highest expense for any boss, and it’s one that most small businesses don’t skimp on. Last year, 84% of small businesses covered some or all of their workers’ health care premiums for family coverage plans. In this case, small businesses are defined as those with fewer than 200 employees.
On average, employers last year contributed $10,119 to each employee’s $15,253 family coverage premium.
It’s less expensive for bosses to cover single employees. On average last year, they contributed $4,740 to each worker’s annual $5,588 single coverage premium.
The Kaiser Family Foundation examined those numbers in detail in a report last year. And whether costs go up or down with Obamacare, more small businesses will have to start offering health care coverage or face fines.
401(k) benefits: $1,750
Retirement plans are another expense that can vary depending on the business owner’s preferences and the plan they choose.
The average company contribution in 401(k) plans is 2.5% of an worker’s salary, according to researchers at the nonprofit Plan Sponsor Council of America. However, that only counts the employer’s contributions to each plan. It doesn’t include the cost of adopting the program itself, which the employer bears as well.
In reality, small businesses that offer 401(k) plans are in the minority. Only 46% of workers at small companies (fewer than 100 employees) are offered 401(k) plans to which employers contribute, according to the Bureau of Labor Statistics. Viewed another way, the vast majority of Americans with 401(k) plans, 77%, are at companies with 250 employees or more.
But small businesses are increasingly under pressure to compete with larger ones, which means they have to offer matching benefits. To top of page
First Published: February 28, 2013: 9:16 AM ET
- See more at: http://money.cnn.com/2013/02/28/smallbusiness/salary-benefits/index.html?iid=HP_LN#sthash.eUjZIJYa.dpuf