by Greg Hughes

What’s the #1 Question of Lease to Own Buyers?

 

Over the last couple of weeks we have been talking about how the Fiserv Case Shiller Index is forecasting a 9.3% annualized growth of appreciation in the housing market in the Reno/Sparks area.

Amazing as that seems, we will see this market increase in value again – that’s certain. Prior to the peak of the housing market, aka “The Bubble,” we had a very consistent appreciation rate of 4.1% from 1990 to 2002. Right now, I calculate that we are 36% undervalued as a housing market.

It’s pretty intriguing when one of the largest housing market research firms forecasts this huge increase in housing values. It makes you stop and reconsider what you’ve heard about the housing market lately.

As you know, we have a Lease to Own Program that allows people who have been through a short sale, foreclosure, or even a bankruptcy to get into the home of their choice. When they get financing they can purchase the property from the Investor.

We (Hughes Private Capital) use a formula that has been balanced out to not be punitive to the Lease to Own Buyer and yet give our Investor a return that is enticing enough to make the deal work. We have also formulated it so that the Realtors that become part of our program make a profit as well.

So can you guess what the #1 question from a Lease to Own Buyers is? They want to know, “What happens if the housing market has gone down by the time we are ready to purchase our home?”

I have a three part answer. First you have the option to walk away. It may not be your preferred choice but that is the advantage you have as a Lease to Own Buyer. You are not locked into having to purchase the home.

Second, maybe you are just a little off of your purchase price and may need to have to come up with a little money to make it work. It may be worth it.

Lastly, remember you always have human beings on both sides, the Investor and the Lease to Own Buyer. Everyone wants it to work out. It may come down to deciding upon a mutually beneficial plan that works for both parties at the time of exercising the option.

The point is that there are always options, even if property values were to continue to drop. However, that is not what we expect to happen and this index by Fiserv Case Shiller is only substantiating my claim.

If housing only increases by just a little bit, say 2% a year (let alone 9.3%!), everyone will be happy.  

The Investor’s asset is well protected and the Lease to Own Buyer will have made a great deal on purchasing their new home.

by Greg Hughes

Atlas Shrugged the Movie

(a.k.a. Real Life)

 We are going to move off the beaten path of real estate today and discuss the movie Atlas Shrugged, the first installment of a trilogy.  Wow is all I can say.  I think I have just seen the best superhero movie, ever!  I may be a little biased since Atlas Shrugged is one of my top 3 books of all time and I believe that Ayn Rand is one of the most eloquent and brilliant writers I have ever come across.

I know this movie didn’t get good ratings and it is not the type of movie which will appeal to the masses.  In fact, if you haven’t read the 1,200 page book, it will be difficult to follow the movie’s plot.  Unfortunately, that is where the movie falls short in doing a better job of getting the philosophy across.  Ever since reading Atlas Shrugged for the first time, almost a day can’t go by without me recognizing situations that mimic parts of the story.  And it couldn’t be truer today with the government’s intrusion into our private lives and businesses.

No system is perfect but Capitalism is as close as it gets.  Of course, it must always be followed up with an uncorrupt justice system to keep it running with the checks and balances.  It is incredible how our Founding Fathers created such an intricate system that has stood the test of time.

The scary part is that our current system continues to erode.  More and more people have the “entitlement attitude.”  This isn’t just the people on welfare or the poor, but the middle class as well.  Just look at how unions continue to operate, Social Security, Medicare, unemployment benefits (99 weeks) etc.

We live in the best country in the world and for all of our faults it doesn’t get any better than the good old United State of America.  We have so much to be proud of and thankful for.  If you need a little reminder of how lucky you are to be an American, go to www.hughescapital.com/thankful.  I have some interesting facts for you that should bring a tear to your eye to know how truly blessed we Americans are.

For the Ayn Rand fans, this movie has been a long time coming.  When the second movie of the trilogy comes out, I am going to wear my Super Hero Capitalist Cape with a huge golden dollar sign on it, so I can really feel the part!

PSSThe first 10 people that comment on my blog and who’s comments I like (because it is my blog and you are not entitled just to receive it if I don’t like it),  I will send you a beautiful bumper sticker with the American flag in the background saying “Where is John Galt?”  After you leave your comment, be sure to email me the address where I should send the bumper sticker.

 

Where is John Galt?

by Greg Hughes

A Strange Thing Happened on the Way to the Short Sale

I don’t do a lot of listings of properties other than our own properties that we buy and sell through our fund.  When we are doing our own properties, we are in control and get to call the shots to make sure everything works.

 ”Everything works” means being able to clean it, fix it, make it better than it was before and make sure it stays that way before it gets sold or set up on a Lease to Own.

 So when I listed a house the other day to help an older lady out to sell her house through a short sale (I also helped her to cross the street), I was expecting some of those same things from her.  Not even close and why would she?

 She is done!

 She is done mentally, somewhat physically in the matter of messing with that old house, and done with it all together.  She has moved out and is ready to move on with her life.

 Well so what?  Her and thousands of others like her are in the same boat.  That’s true, but here is why it gets to be a strange journey.  No one cares about the house anymore!

 It is completely without ownership or at least mentally and legally by all parties.  I don’t own it as the listing Realtor, the bank doesn’t own it, and sure, she still owns it, but like I said she is done.  In fact, so done that she informed us she was shutting off the power and “Oh, by the way there is a bunch of food left in the freezer in the garage.”

 Um, what am I supposed to do with that?

 What I did was drive up there on a Saturday night to remove the food and unfortunately just throw it all away.  Better that than some Hazmat situation taking place in the middle of the scorching July heat.

 I remember I once visited my uncle in Dallas, Texas, when I was 14 years old, in the middle of the summer.  He lived in a condo at the time and the guy next door had venison stored in his freezer out in the garage.  Turns out, this neighbor goes out of town and his freezer goes out, and the most putrid smell starts emanating from next door.  I actually arrived at my uncles three weeks after the incident and could barely hold back from throwing up every time I walked outside in the 95 degree, completely humid July heat with that lingering smell.

 Where does it go from here?

 I will keep the house listed and hope a buyer comes along that can spend a lot of money on getting it back up to a livable condition.  The bank has already rejected our offer and I think it was too high anyways.  It’s a sad state of affairs that I would have never been able to dream up as a scenario in my previous life and I don’t think my client could have either.

The good news is we are country of resilient fighters! The economy won’t stay this way forever.

 We will be back on our feet and will have forgotten about it or at least manipulated our own memories of the past to tell ourselves that it wasn’t all that bad.  It must be a survival technique.  In fact, we are so good at this, we will do it all over again sometime in the future.

by Greg Hughes

Kids Move Out, Parents Cheer

   

 

That’s right, the trend has started.  The kids are moving out of the basement.  Not out my basement because I don’t have one.  I wish I did.

It is the young people that are living with their parents and the ones with excess roommates that are starting to find their own places.  This is just part of the overall trend the housing market is experiencing and it is expected to get stronger with more and more renters in the market.

This is great news for the Supreme Ruling Landlords of America (they should make that an association).  However, I am okay with my 19 year old, Kayla, living with us while attending UNR.

She did it the opposite of most kids.  She moved out her senior year in high school.  No, I mean she really moved out … all the way to Germany.  Without speaking a lick of German, she got herself a scholarship and headed overseas at the ripe age of 16.  And I think I’m fearless because I bungee jumped once!!  Mom and Dad are glad to have her back for now.  They all grow up way too fast.

Anyways, I digress, what does this mean for Investors?

For one, vacancy rates are below 10 percent now and expected to hit the 5 percent mark in 2012.  Secondly, the market is expected to continue to tighten due to the fact that few, if any, multifamily units are being built right now.

Who says?  The Harvard Joint Center for Housing Studies, that’s who.  And if Harvard says it … it must be so.  Multifamily units don’t just get built overnight.  They need longer lead times to be completed and therefore, tighter rental markets are ahead.

Yeah, for the new Supreme Ruling Landlords of America Association.

They get to charge higher rents and have less vacancy rates.  Boo-hoo for the Kayla’s of the world because she has to move out sometime and it is going to cost her more.

Not all is bad for the Kayla’s.  It is more affordable right now than it was a few years back and when she is ready to purchase the affordability levels are the best they have been in over 40 years.

What is interesting is … it is the same for the Investors.  They have sustainable cash flow today between 7% to 15% and a huge market of people that are or will be renters for years to come.

Kayla, stay as long as you want, clean your room, be nice to your brothers, and eat your broccoli.

by Greg Hughes

Who’s Taller – Kathy Ireland or Me?

 

Kathy Ireland and Greg

 

Okay, I may not be the tallest guy you know but I look like a shrimp next to my new friend Kathy Ireland. Not to mention I look like I’m trying to run away.  I obviously don’t have the same super model stature or training as Kathy, and to be fair, I wasn’t wearing 6 inch heels either.

So why the picture?  Well, I have just returned from the Super Conference in Chicago put on by the marketing gurus of the world, Bill Glazer and Dan Kennedy, on how to grow your business.

Kathy happened to be there to talk to the attendees about how she has grown her business of fashion, furniture, jewelry, etc. to a $1.4 billion dollar business.  Yes, that’s right, with a “b” in billion.

She was just one of the many informative speakers we had during the four day long event.  The speakers are always a big part of the learning process, but the best and most productive part is the people you meet and build a relationship with at the conference.  This conference was no exception.  I met some people that really might end up being game changers for me and my business.

The coolest part of all is that I was able to bring one of my kids, Tate, who’s only 14 years old. He attended the whole conference right along with me.  He might not have understood everything that was going on but that doesn’t matter.  Can you imagine the exposure and awareness a 14-year-old could gain by seeing one of these great business events?  He skipped a week of school and received some real world schooling instead.  Plus we got to hang out together in Chicago for 10 days and do a bunch of fun stuff without any other distractions.  (One of those was taking the L train to Wrigley’s to watch my Dodgers kick the Cubs butt on a very cold day.)

So why am I telling you all this?  I have really learned something in the last year as I have studied these marketing gurus and I thought it might help you.  Here it is: “There is about nothing more important in business than knowing how to market and sell.”  It is the driving force of any business whether it is a one man operation or a huge successful business.

I wish I would have studied more about marketing and sales earlier in my life, since I was running my first business at only 15 years old.  Sure, I was always a voracious business book reader but I never took the marketing side of it seriously enough. I am now.

For all you entrepreneurs, business owners, and business people out there, get smart and increase your marketing knowledge.  Nothing will help you more than becoming more effective with your marketing.  It is far more important today than it ever was before. Especially in this economy.

To wrap this up, I would recommend getting any of Dan Kennedy’s and Bill Glazer’s books on Amazon. Then, keep searching and keep the thirst for more knowledge always there!

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