Aaron Bosshardt

Early this morning I twittered the thought:

"Thinking about the divergence between escapism and reality. NPR lays off 85 and the Yankees Sign Sabithia for 165 million."

Later this morning Reuters reported that Jobless claims have hit a 28 year high at 573,000 and that the past numbers are worse then they were previously reported. What might have been more disturbing was when ESPN reported that the Yankees will pay 75 million dollars per year to just three players on their roster Derek Jeter, Alex Rodriguez and C C Sabithia which is more then most MLB teams will pay their entire roster. Don't get me wrong good for those guys that they can cash in on their talent.

Still I have to think that at some point in the near future Sports teams are going to start feeling the crunch. If for no other reason then that Banks like Wachovia and Wells Fargo that used to have their own Box seats in nearly every professional stadium will only need one when their contracts expire right? Verizon and Alltel fit this bill to and the list goes on. Heather Doughton facebooked back to me, "Sadly, this has become common news, a glimpse at what we've done, what we've become, who we are."

Is she right? Is this who we've become as Americans? Certainly we all have to acknowledge that Leverage became so popular for all the right reasons, was misused for all the wrong reasons (New Cars, Fancy kitchens, Decadent Houses, Yachts, Jets, 2^nd and 3^rdhomes we visit twice a year). But are we out of touch with reality and eager to retreat to fantasy land?

Locally, The Gators are on their way to the BCS. We are all elated. Yet there are some serious concerns facing our local economy and government. I for one have been outraged that GRU was so actively ahead of the curve raising utility rates, and yet just so eager to keep charging us those rates as energy prices fell by historic amounts. Thanks to reporter and sometime blogger Megan Rolland, we now know that GRU just now lowered rates but they are still ahead of last year by 12%.

What about our local governments? The Tax base is declining rapidly as more and more business struggle to make it to break even and more and more I get emails about some great 20 year employee that someone had to layoff and someone couldn't hire because they just don't have room or money. Isn't government aware that government jobs come from funding in the private sector?

Yet how can we expect our leaders to be any different then the rest of America if we've come to this place where we are so consumed by escapism that perhaps we are out of touch with Reality? Well some would argue that we have a duty as leaders to rise above consensus andhave a clear view of the "grand scheme". Well I'm out of time and the disorganization of my desk is clear evidence that I've ignored the reality of my situation far too long. Maybe that's the answer. We can only control what we personally can control. So maybe I wont be going to the BCS game, because the reality is that my business and familly are struggling and some suckers are paying $1000 per ticket for a piece of escapism.

TOP 10 Terms Every First Time Home Buyer and their REALTOR Should Know.

1. Who is a first time home buyer?

Anyone who is a US Citizen that files taxes and has not owned a home within the past three years qualifies as a first time home buyer. Some non US citizens may qualify as first time home buyers.

2. State Housing Initiatives Partnership commonly known as SHIP

SHIP is state program sponsored by the Florida Housing Finance Coalition provides down payment assistance for first time home buyers who qualify. The less you make the more you will qualify for. The money is given to the local municipalities, so where the property is located will determine the rules and the source of funding. The City of Gainesville SHIP department doesn't have quite as nice a website. Alachua County ‘s Website is very informative I would recommend starting or whatever municipality you plan to buy in like Marion County, The City of Sarasota or Ocala.

3. FHFC I mentioned this before. This website is a much underutilized resource, not only for first time home buyers but buyer education in general. They have a guide to foreclosure prevention and a statewide affordable housing search.

4. Annual Percentage Rate or APR. This number is derived by a mathematical formula that calculates the fees you pay for your loan and amortizes it back into your interest rate. Don't shop Interest rates, shop APR's. Someone might quote you a low rate, but have high fees. The APR is the best indicator of the loan cost and is best used for price comparison.

5. Bond Money. That's government money used to buy down the Annual Percentage Rate which makes your payment lower! When I was selling real estate the lenders only knew who had bond money when they got it, and so the realtor and buyer only knew if they knew the lender. Now days in Florida there is First time home buyer wizard. It's sort of like a calculator. You put in where you live and how many people are in your family and it tells you all about Bond money and SHIP money in your area.

6. FHA Mortgage. This is the mortgage you will most likely get. It's a government insured mortgage and in this mortgage much better suited to first time home buyers then mortgages not insured by the government called Conventional mortgages. Right now FHA still allows buyers to put down as little as 3% down payments. You get these loans from a FHA approved lender. Which is most banks and brokers, just make sure you ask if they are an FHA lender.

7. PMI or private mortgage insurance is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80% of their new home's value. In other words, buyers with less than a 20% down payment are normally required to pay PMI. PMI will be paid by you monthly and it will be added into your Monthly Mortgage Payment. MMI for FHA Loans is a little different in that you have to pay an upfront fee as well. The fee is now scalable based on your credit score. It used to be fixed at 1.5% of the loan amount, but can be financed into the loan. I hear rumors that soon all mortgages will charge up front.

8. Escrow this one actually has two uses. First is for the Escrow Deposit you will put down when you go to contract sometimes referred to as a Binder. This money is placed in someone's trust account. Be wary of builder contracts that allow them to use your deposit towards construction. Secondly, your monthly payment will have an "Escrow" account. Your payment includes your Principal, Interest, Property Taxes and Insurance or (PITI). It doesn't include your utilities, cable, and phone bill.

9. Housing Affordability index. This is a guide put out by the National Association of Realtors (NAR). You don't really need to know this or look at it, but what you do need to ask yourself is what your personal affordability index is. Just because you are qualified up to a certain number doesn't mean you have to spend that much. Figure out what monthly payment (PITI) you're comfortable with and remember you will still have to pay for your cars, insurance, travel, utilities, groceries, TV, Cell Phones, Childcare, and Life Insurance and so on and so forth. Whatever you're comfortable with.

10. $7500 Tax Credit. That's right you get a $7500 tax credit if you close before July 1, 2009. For more info I ran across a pretty good article posted by Fred Chamberlin. This is a federal credit so the same rules apply.

As soon as people find out I run a property management business in addition to managing a sales force, the ritual comments fall along the lines of "Well that business must be booming, People still need places to live." Or "I bet everyone wants to rent right now." Well that's true everyone NEEDS a roof when it rains, and must of us are fortunate to have a place we call home. However, no one is closer to the struggling economy then REALTORS. Its just activity is so slow and we are so close to the problem and feel the pain so directly that we often become cool to the harsh symptoms. It seems a lot more good people then not, are still struggling to keep their homes and a roof over their head.

Well how does this relate to Property Management? It's true that the Property Management model when run like we are trained to run it by the fine folks at NARPM is certainly better situated for sustainability in these troubling economic times.

Business is hardly booming! In fact just about everyday we have to deal with a Landlord and tenant whose rental is in foreclosure or a potential renter that can't get qualified. Vacancy rates are soaring, rent competition is fierce and rents are be driven lower and lower every day. Rent deflation has been a way of life in Gainesville, Florida for Residential Property Managers for close to 18 months now.

Our customers and clients are feeling it on both sides and we of course are caught right in the middle. I'm going to share an email exchange we had just this past Saturday. We all need to be concerned about the economy, the markets, and of course profitability but more then that we need to stay focused on what really matters most, people.

Keep in mind our staff meeting is on Fridays where we discuss all the weeks happenings and events including the decisions we get from our third party screening company, and I know all of you property managers out there are using a third party screening company like you should, but that's another discussion. Let's cut to the chase, the team got this email this just this past Saturday:

Hi all -

In a recent issue of The Wall Street Journal, there was an advertisement for the Foster School of Business , at the University of Washington. Howard Behar, the former president of Starbucks International, who built a culture focused on the human side of business , was featured in the ad. He was quoted as stating: "Think of your staff as people, not labor costs. Think of your customers as humans, not revenue. It turns out this kind of thinking creates very successful organizations."

Tying this in to our property management business, I feel that we have to think of our rental applicants as human beings, not just names on a piece of paper. Some of you may wonder why sometimes I get so passionate about some of our applicants. The reason is that I am dealing with them on a ' one-on -one ' basis and they sometimes confide in me as to the predicaments they have encountered in their past and present lives. If we can do it with a minimum of risk to our company and to our owners , we should try to be as compassionate as possible with people going through a divorce , or faced with staggering medical bills , or with working single moms who are struggling , but are not living off of government welfare and our tax dollars. We don't know what events may cause those statistics that show up on credit reports and we don't know how many of those statistics were caused by matters beyond the control of the applicants. I have found in my long business life, that if you cut some people a break, you are most often rewarded with very surprising and satisfying results. Not always, but most of the time.

Maybe I should have saved this 'epistle ' for tomorrow, Sunday! :-)

Hope everybody has a great weekend. Go Gators!

Joe

And The response:

Joe I agree with what you have said. We've talked about this with customers for life and we have talked about everyone we deal with are actually stakeholders in the company.

When we are behind closed doors we also have to remember that people can only be fairly evaluated based on their actions. It is in that venue that we know if someone hasn't paid their rent in the past they are more likely to not pay it again in the future.

After all, we must also remember that our landlords are people too and even though their is risk in any business it is our job to make sure they never take an unnecessary risk, that might result in predicaments for them in the future.

But back to my point, when we discuss these situations behind closed doors we are weighing risk against risk. Is it better to rent to this applicant or risk staying vacant in this market? Business isn't business as so many might tell you, (How come they always tell you this when they are about to do something really bad!). Good business is good business and well bad business is bad business.

Sometimes we also have a moral obligation to let renters know they are biting of more then they can chew.

In the end we have to make good business decisions for those people paying our wages and treat all people as human beings. Compassionate, but accountable.

There you have it. I'm not sure how much interest anyone on active rain has about property management, but if you care to know we are all in the same boat.

If you're interested in the status of the Gainesville Real Estate market through October, Ill have a quick summary up by Wednesday on the company blog page. http://blog.bosshardtrealty.com/the_bosshardt_blog/

Well here is my crack at a real estate blog. I've wanted to start one for almost two years now, so in my own mind anyway I was ahead of the curve, now I'm late to the party. Feel free to comment anyhow you like. I could just as easily, and possibly will tell you the top 10 things to consider before you buy investment property in Gainesville, Florida.

Top 10 Reasons why now is the time to start buying residential homes for investment in Gainesville Florida.

1. Remember that before the big boom investing in real estate was always a marathon, not a sprint. Think 5 years out at least when buying real estate for investment.
2. Interest rates are pretty darn low, for an investor they are right around 7 percent
3. Inflation is coming in 2011. I don't really know anyone who is in the know that doesn't believe inflation will start to really drive up towards the end of 2010. That's good for real estate, bad for mortgage rates, and thus good for those who have low fixed term mortgages. Remember the cost of borrowing money will go up, so will rents and asset values.
4. Property Taxes will be going down. Next year will be the first year the rapid decline in real estate prices starts to reflect in our property taxes. The values used for our property taxes in Alachua County this year were based on home prices as of January 1, 2008. According to the Gainesville MLS home prices rose 3% from the previous January. They are already down in excess of 20% year to date.
5. The golden rule of a real real estate investor is: "Buy low, never sell" Of course you never know when the bottom is in, but in our area chances are you won't get much of a better price then you will in the next couple of months. The credit markets are frozen and it's our local off-season. There is over supply, pricing is low and negotiating power is high.
6. Warren Buffet summed it up better then I in the NEW YORK TIMES. Fear is temporary, greed is permanent.
7. Negotiating power is back. The real real estate Investors have always had to put down 15% cash or more to purchase an investment. Leverage is good, but like anything else not in excess. There is just not the same level of competition for well priced homes with the primary home buyer now facing much more stringent down payment requirements. We always felt like we we're treated so poorly by the banks in comparison. I guess in the end it was the primary home buyer that was treated poorly.
8. Every rags to riches story there is starts with real estate investments. It would be nice to jump right into the stock market like warren buffet, or buy apartments and strip malls. Very few people have the capital to do that at first. Think big, but start small and be realistic.
9. Cap on non owner occupant increased assessed value increases. In January we passed a cap that says no property's assessed value may increase more then 10% regardless of market value. Yeah long gone are the days of 10% price appreciation in the current low inflationary environment of the past 10 years, but perhaps not with respect to the return of inflation. It seems that Public policy is turning in favor of the real estate investor, Both Ammendment 3 and Ammendment 6 passed in November 2008 and both offering some value to a long term investor.
10. The insurance crisis is over, for now, Insurance rates for properties and liability have dropped, both for the individual landlord and the Condo and homeowners's associations that pass them through dues. If your rates haven't gone down the past two years you're not with the right insurance broker