Helen Oliveri

Competition in some rental markets is pushing landlords to offer increasingly creative concessions to tenants, such as free rent for a month or two, and even job-loss protection that guarantees the rent will be paid if tenants lose their jobs.

A new survey by a real estate research company confirms that landlords nationwide are being forced to lower what they charge their customers, whether through direct rent reductions or freebies and breaks on lease terms that have the same net result.

New York-based REIS, Inc. reports that half of all apartment buildings in the U.S. reduced rents in the fourth quarter of 2008 and the first quarter of this year, according to Business Week.

Rents quoted by landlords dropped by six tenths of a percent in the first three months of 2009, and effective rents -- netting out all the concessions offered by landlords -- fell by 1.1 percent.

Effective rents were down in four out of five of the 79 metropolitan markets surveyed by REIS. So if you are a landlord who lowered your rents in the past couple of months, you've got lots of company.

In San Francisco, average effective rents were down by nearly 3 percent in the first quarter. In New York City, they were down by 2. 6 percent, 2.5 percent in San Jose, by 1.3 percent in Charlotte, and by 1.2 percent in Chicago.

Only the big Texas markets -- Dallas and Houston -- saw average effective rents move up.

Landlords are cutting rents primarily because of rising job layoffs, cutbacks in working hours, and higher unemployment filings.

According to James Lewis, president of Maitland, Florida-based Charles Wayne Consulting, "more and more tenants (are) doubling up or moving back with family to better deal with the bad economy."

Cole Whitaker, a partner in Hendricks & Partners, an apartment consulting firm in Orlando, says building owners' expenses - like property taxes and insurance - continue to rise, but landlords can't pass those increases onto tenants and keep their buildings full.

"Our boys are eating (the differences)" for the time being, Whitaker told the Orlando Sentinel.

In some tough markets, landlords are adopting sales techniques used by car manufacturers. They are guaranteeing prospective tenants up to two months of free rent, even if they lose their jobs.

Cleveland-based Goldberg Co., an apartment investment firm with projects in Florida, Texas, North Carolina and Ohio, is advertising "layoff-proof" leases. After two months of unemployment and free rent, the company allows tenants who can't find a job the right to break the lease -- without paying a penalty.

K. Harney

For many people, buying their own home is still the American dream. Yet, it remains out of reach for a lot of people, even though the housing affordability index in many areas of the country is as good as it's ever been. But if you're not prepared to buy a house, then the index doesn't mean a thing to you—except, perhaps, to create a painful sting and a constant reminder that you're missing out on a good opportunity to buy real estate at lower prices. For more on affordability, see my column, Housing Most Affordable: May be Time to Move from Renting to Owning.

That's advice that many experts are giving to those who are planning to stay in the same house for a few years. The cost of buying and relocating in a short period (a couple years) can make the concept of buying not appealing or cost effective. But if it's for the long term, owning can make perfect sense. But what if you're a first-time buyer or you haven't owned a home in a while, how do you prepare for what is often the largest purchase you'll ever make? Buying a home isn't that difficult but it does require you to make sure that you're in the right financial (and emotional) position to do it. How do you get there when so many other expenses often take precedence? Simple but not necessarily easy steps can help you position to transition from renter to home owner. It starts with getting familiar with your financial picture. If you are aware of what lenders are looking for before you apply for a loan, you'll have a greater chance of getting it and it'll be helpful when you meet with your real estate agent. No time will be wasted looking at homes that aren't in your price range. You will have a clear-cut idea of what you can afford and then you can confidently look for the most suitable home.

Take a keen look at your budget. This presumes that you have a budget. If not, develop one. You can use numerous software programs to create a budget; many are free, or you can even use a basic spreadsheet. If you're self-employed, take a look at free online bookkeeping software offered by Outright.com. It can help you track your income and expenses for your business allowing you to create a better recording system to help you save time and money. Review credit history. If you have no idea how your credit looks, then it's time to give it a review. When you take a look at your credit report, you will be able to see if there are errors or dings from late payments that are negatively affecting your credit score. This gives you a chance to dispute errors or work to clean up your credit before you apply for a home loan. When I reviewed my credit cards, I found a few hundred dollars that had been automatically billed to my credit card in erroneous subscription fees. Your credit card can file a dispute with the companies and credit the funds back to your account. It pays to double check; you just never know what you'll find.

Redistribute your money. Don't think of it as cutting back, but rather as moving your money from one place to another. For example, if you're spending $3 on a specialty coffee five days a week, think about making your java at home and putting that $15 a week into an account that is going to be used to purchase your home. It all adds up and most of the time, we don't realize how much money a dollar spent here or there can accumulate.

Another way to redistribute money is to examine your insurance policies and consider raising the deductibles. A lot of people want low deductibles in case of a loss or an accident, but you can actually save money and redistribute that money into an account that is set aside for purchasing your home. But some statistics show that the average person files a claim only once every 13 years, according to insurance broker, Michael Rice of Thomas Ward Insurance Group. So raising your deductible from, say, $500 to $1,000 can give you an annual premium savings of 10 to 15 percent. Rice also recommends paying your premium in full if the insurance company offers you a discount to do so; some offer a five percent or more deduction and you won't be charged administrative fees for periodic billing.

Keep your eye on the goal. Staying focused on the goal of buying a home will help you to remember that cutting costs now will allow you to have what you want in the long run. Our society is accustomed to instantaneous gratification so delaying the reward can be very challenging but well worth it. Owning your own home and, being able to purchase it while in a down market, is an exciting win-win.

P. Chongchua

Every commercial loan broker will tell you that the banks are not making a whole lot of commercial loans these days. Surprisingly, the reason why isn't just because they are afraid to make new commercial loans.

Another important reason is that many banks are fully-invested. In plain English, they simply don't have the money to make many new commercial loans.

This lack of liquidity is not the result of loan losses associated with the subprime meltdown. Few small banks were involved in the deal-flow of subprime loans. When the music suddenly stopped, the small banks were not left holding a huge volume of unsold subprime residential loans. It is easy, therefore, to assume that the small banks should have plenty of money to lend.

In fact, the opposite is true. Banks have always preferred to make short term loans, like construction loans and bridge loans. This way they constantly have a few outstanding loans paying off every month, giving them the liquidity to make new short term loans. Unfortunately, ever since the financial crisis began, their outstanding loans have not been paying off. Borrowers with construction loans and bridge loans have been unable to refinance their loans with long-term lenders. The banks have been forced to extend these short term loans into longer term mini-perms.

To make matters worse, most small banks had a great many lines of credit extended to businesses that they served. Most of these businesses are now losing money, so the businesses are drawing down on their credit lines. This has further drained liquidity from the banks.

Lastly, this is a very difficult time for banks to attract new deposits. The prime rate is a rock-bottom 3.25% right now. The 11th District Cost of Funds Index, a fair proxy for the typical bank's cost of funds, is a whopping 2.75%. Twenty years ago a small bank could not survive on a gross interest margin of less than 6%. With sophisticated new software and ATM's, a small bank can modernly make a profit on a gross interest margin of 4%. Hello? Small banks are being forced to survive right now on a gross interest margin of just 50 basis points. They certainly cannot raise interest rates to compete for more deposits.

I feel like an early pioneer, whose wagon train is surrounded by angry Indians, and who learns that the cavalry detachment sent to relieve him is itself under siege by Indians. The small banks were one of the last sources of lending that might save this faltering economy, and it now appears they too are under siege. Yikes.

G. Blackburne

Understandably, homeowners who apply for a loan modification tend to get a little antsy and perhaps even annoyed when they apply for a loan modification and then fail to hear anything for several weeks, especially if they continue to receive late payment notices and nasty phone calls from collection agencies. Many homeowners wonder, “How long will it be before I hear anything?” and “What should I do while I’m waiting.” This article should help answer those very pressing questions.

How long will it take? The loan modification process typically takes 30 to 90 days, depending mostly on your lender and your ability to efficiently work through the process with your attorney or other loan modification representative.

Note: The loan modification timeline is not set in stone. The more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes. Borrowers with a lot of collateral issues can see their loans take longer than what has become the typical 30- to 90-day timeframe.

A professional can often reduce the amount of time required by processing your paperwork efficiently, presenting your application exactly the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to. Although each borrower’s situation is unique, knowing the measures the lender is willing to take for similarly situated borrowers can be a real time saver.

Whether you are dealing directly with your lender or through a loan modification specialist, ask several questions up front:

• How long is the process likely to take? Find out the best- and worst-case scenarios and then count out the days and mark them on your calendar.
• When can I expect to hear something about my case? Mark this date on your calendar.
• If I don’t hear anything by the specified date, whom should I contact? Get the person’s name, employee identification number (if available), phone number, and any extension you need to dial to reach the person directly.

What should I do while I’m waiting? Playing the waiting game can be agonizing, particularly when you have no idea of whether your application will be accepted or rejected or what the lender will offer in terms of a workout. It feels like your future hangs in the balance, and you remain in the dark. Knowing the standard timeline for processing a loan modification can certainly help relieve some anxiety. In addition, you can continue to make progress on your own by doing the following:

• If you hired a loan modification specialist to represent you, do not speak with your lender or lender’s representative. Refer all matters to the professional who is representing you. Anything you say to the lender could confuse things or compromise your representative’s ability to negotiate the best deal on your behalf.
• Log all phone calls and correspondence between you and your lender or representative. Write down the number you called, the person you talked with, what the person said, and what you said – not word for word, just jot down the key points.
• Keep track of important dates. If you do not hear something back on the date promised, call the next day to find out what’s going on. Lenders almost never call you back with updates. If you hired a third party representative, they will (or should) keep you posted, but the lender simply doesn’t have the time to make follow up phone calls. If you’re dealing with your lender directly, you’ll have to be the one making the calls. Mark your calendar and schedule periodic update phone calls. Consistent follow up is paramount to a successful modification.
• Explore other options. If the lender denies your request for a loan modification or presents an offer that you cannot accept, you will need a plan B (and maybe a plan C and a plan D). In addition, other options may be better for you than a loan modification. Consult a real estate agent about listing your home for sale. Talk to a mortgage broker or loan officer about refinancing. Speak with a bankruptcy attorney to find out whether filing bankruptcy would be a better choice.
• Don’t be surprised if you continue to receive delinquency notices or late payment phone calls. Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place. You should ask your lender if your attempts to negotiate a solution will stop or at least postpone other collection actions. If they do not, you should find out what that means for you. If the lender is able to foreclose in 30 days and a workout takes 60 days, there’s a slight timeline problem. Push to have all default and foreclosure actions put on hold while your workout attempts are underway.

When your fate is in someone else’s hands, 30 to 90 days can seem like an eternity. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.

We are all pre-programmed with hope. That's a good thing. We all need the hope that we can accomplish our goals and objectives; that our circumstances in life will improve; that we will achieve the position of wealth and happiness we dream about for our family and ourselves. When that hope is not connected to action, we are entrenched in the lotto mindset.

The lotto mindset is when hope and action never intersect. To experience true success in one's life, hope must intersect with action. Due to the vibrancy of the real estate market in the last few years, the lotto mindset has been more pervasive than ever. The lotto mindset tells us there is a winning ticket out there; that for a few bucks and a trip to our corner store we can win a $300 million dollar jackpot.

Studies have shown that most of the lottery winners soon lose or have spent all their money. They are unhappy a few years later because of broken relationships (the fair-weather friends who want a piece of their money) and lost or squandered money. The real reason for this outcome is that they didn't do anything to actually produce the money. They just showed up to buy a ticket! It's easy to want and pine for that easy winning ticket. As post lottery winner studies have shown, the results are disastrous.

Another example of the lotto mindset is our late night infomercials. Better than 80% of them fall into categories of get rich quick with no effort or lose weight instantly with little or no effort. This multi billion dollar industry of success without work preys upon our lotto mindset.

In the real estate industry, we have an ever-growing number of "marketing gurus", magical websites, lead generation systems, and all other shapes and sizes of paraphernalia that will magically transform our business and life. Our hope of a big lotto win drives sales for these people.

There is no one that has achieved long-term success with the lotto mindset. One might achieve a temporary level of success through a short cut or quick fix magic formula. That temporary success on the surface seems like it will be sustainable but it never is. To achieve wealth that is sustainable, we must do it through a disciplined approach to saving and investing over an extended period of time. To increase health and lose weight, we must reduce intake and increase movement. To increase sales, we must increase personal contact and separate prospects more effectively to work only with the highest probable prospects. We must also increase presentation skills to achieve a higher return. Others would have you believe that their short cut to avoid the work I outlined above is the "magic path" to success. It is however, a clear path to destruction.

In the end, success for all of us is available for anyone who really wants it. We have unlimited opportunity to acquire success. The real truth about success is that she does not care who acquires her. Success does not play favorites. She merely says, "I have a price. Are you willing to pay it?" If you are willing to pay success' price you will be successful.

D. Zeller