Should Investors Obtain a Real Estate License?

Whether real estate investors should get a license or not is debatable. There are arguments both in favor of and against the idea. Many investors start without a license. Some of them obtain it after working in the industry for several years. For many people, the biggest motivation to get a license is that it gives them access to MLS. It also allows them to work more closely on short sales.

The risks are relatively lower when you remain an unlicensed agent. Once you obtain a license, you will be judged by a different standard and you need to follow certain norms. If you are an investor buying a property, you will perhaps just want to remain as an anonymous individual. The risk mainly arises when you find yourself involved in representing the seller(s) in a short sale, although you want to buy the listing. Since you have to follow some fiduciary responsibilities, it is imperative that you act in your best interests. The seller should do the same. This will make the deal less complicated.

Advertising

You will probably have to include your logos and disclosures in your emails. You will also need to follow legal guidelines set by the government. This might cause your mail to land in the trash. If the recipient thinks that you are just another realtor trying to promote their listings, your efforts fail to produce the desired results.

On the other hand, if you are an unlicensed person, you can employ simpler marketing strategies that tend to get better results. That said, there are still ways to advertise your service, even if you are a licensed buyer of properties. However, you will have to ensure that your message complies with the legal regulations.

Alternative solutions

A license will get you access to MLS. However, you don't necessarily have to obtain a license just to have access to MLS. If you are lucky enough, you can connect with a generous realtor who will provide you access to the service through their portal.

If you are trying to list homes, there are several brokerage firms that charge a low fee for adding your listing to the MLS. There are also agents who will readily represent your listing for a fee.

Having a license certainly helps your business and it will not be a hindrance on any of your deals; however, your license can be a burden when you prefer anonymity. On the plus side, if you really want, you can hire another real estate agent as your listing or buyers agent.

In order to figure out whether you need a license or not, you should have a thorough understanding of your business model.  You should decide whether the licensing and accreditation will do more harm than good. Once you get a good understanding of the structure of your business model, weighing your options becomes easier.

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Energy Efficiency Homeowners Care About

Going green has become increasingly popular. Tax credits have encouraged individuals and companies to use more energy efficient products and this has created a giant industry. Add new product innovations that are both energy efficient and cost effective and it is easy to understand the appeal.

Yet consumers are often still confused by industry terms and product effectiveness. What is certain is that, according to the AARP public policy institute, energy costs have increased by over 42% since 2002. As a result consumers are very concerned about their energy costs. Utility bills include electric, gas and water. These costs are often the highest expense for homeowners, after the mortgage payment.

Cost savings are a bigger concern to consumers than saving the planet. If they can make informed decisions that provide a benefit to both, then you have the homeowner’s attention. Consumer promotions like Energy Star ratings are in place to help buyers make financial decisions and home improvements that will lessen environmental impact and save consumers money. Utility companies have even joined the throngs and often offer services that assist customers in recognizing ways to reduce utility bills.

When it comes to home purchases and home sales, energy efficient homes are thought to bring higher prices than homes without energy efficient measures. Items that include energy efficient windows and doors, upgraded insulation and energy efficient appliances top the list of upgrades homeowners find value in.

Other energy efficient measures like solar panels and solar water heaters are associated with higher costs and slower return on investments.  As a result they are less popular upgrades for homeowners. Since they are less available to the average owner, consumers do not have a good understanding about how they operate and how they will save the homeowner money. This impacts buyer interest and willingness to pay for these products.

When marketing a home, it’s important to recognize that consumers are very interested in saving money. While they like the feel good marketing that comes from going green, they are not willing to spend significantly more money in order to reduce the environmental impact. In the end green projects appear to be more about saving greenbacks than saving the environment.

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Buying Apartment Buildings: Look for Larger Units

Investing in a large apartment building is better than investing in smaller units for several reasons.

When you buy a building with a large number of units, you can expect the seller to have complete records. This makes the experience more professional and enjoyable. Also, when the size of the investment is large, you can expect the brokers to guide you through the whole process.

Buying a property can be a stressful experience especially because it involves a lot of steps that you may not be comfortable with. You have to complete several formalities and this wouldn’t be possible without expert advice.

Obvious cost benefits

When the building is large, the cost per unit is relatively low. For instance, the property management fees for larger buildings are relatively lower. Insurance costs may also be lower.

Less closing costs

When you buy a larger building, you pay less money in closing costs. Generally speaking, an appraisal may cost at least 2,500 dollars irrespective of the size of the building. In fact, you will be paying more or less the same amount for both small and large buildings.

The loan doc preparation costs may also be the same for both small and large buildings. The SEC attorney who prepares your legal documents may charge the same amount for preparing documents for units of different sizes. For a building that is worth $2M closing costs may be about 4.5 % of the value of the property. For a much smaller building, the closing costs can amount to 8.5% of sales value.

Better financing

Getting a larger loan is relatively easy. They also have lower interest rates. Better still, large loans almost never require personal guarantees probably because the down payment will be high in this case.

More profits

If you do bigger deals, you will make more profits. So, if you are a real estate investor and your goal is to do 100 units per year, doing one or two large deals is much better than doing ten small deals.

However, there are quite a few challenges that you have to overcome before you can do bigger deals.

The biggest obstacle is convincing yourself that you can do it. Bigger deals might involve more work. Sometimes finding a bigger deal itself can be difficult. But remember that one big deal is equal to several small deals. That means you will have to work many times harder to do several small deals.

You will probably also have to overcome some mental blocks. Many people are afraid of doing bigger deals despite knowing that it is more profitable.

Raising capital

Raising capital can be another problem. In order to undertake big deals, you need more money. You will probably have to borrow money. Actually, this is what discourages many investors from pursuing big deals. 

However, if you are confident and do a bit of search, raising money isn't all that difficult. Many private individuals are willing to offer hard money loans. You just need to find someone with a big enough pocket.

Investing in a bigger apartment building is definitely better than investing in a smaller building. Forget about those duplexes and penthouses. Instead, look for buildings with a large number of units. That is what smart investors do.

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The Basics of Green Building Contracts

Green building opportunities are engaging a lot of attention. This is a result of many factors, such as tax credits, greater regulatory assistance, and increased consumer awareness about environmental conservation. However, green building contracts aren’t as easy-to-understand as conventional building contracts.

What Makes Green Building Contracts Challenging?

For a long time, there was an absence of standard green-construction contracts. As a result, green-building contracts have often been vague, creating a lot of problems for contractors and other involved parties. Being relatively new and still coming to terms with different state-level and national regulations, maintaining uniformity in green-building contracts can be difficult. Recently, this issue has been addressed.

Green-building contracts addressing different types of green risks are now available. The construction industry is still familiarizing itself with this contractual format. Typically, green contracts try to address unique liabilities, responsibilities, and risks associated with green buildings.

We will talk about different aspects of comprehensive risk-management strategy in such contracts. Ideally, the contract should include anticipated/possible risks followed by different clauses and sub-clauses that clarify every aspect of the risks involved. According to the recently-introduced standards, a green-building, risk-management contract should address the following:

Designate responsibilities—establishing accountability is an essential component of building contracts as specific people/departments are designated different job responsibilities. The contract should clearly mention people or parties responsible for failure to achieve green certifications or tax credits. The contract must explain the extent of responsibilities (or risks) of the contractor. Standard and additional risks should be explained. The contract should mention parties responsible for collating and preparing documents for getting green ratings.

Clearly defining green terminology—this includes often-used terms like “green certification” and “sustainability”. These terms don’t have an established, universal definition. Therefore, the contract should define these terms, making them clear for all the concerned parties.

Disclaimer—usually, contractors like to include a disclaimer. This provides more assurance to all the concerned parties. Here, the contractor provides a guarantee for achieving the desired outcomes. The desired outcome can be a green-building certification or the intended energy-efficiency figures. Failure to achieve these outcomes can lead to substantial damages. The disclaimer should state whether the consequential damages will be waived or executed and under what circumstances.

Terms related to project delivery—the contractor should present clear estimates or defined dates by which the green building project will be completed. In the conventional building documentation, contractors often warrant their workmanship. Green contracts are slightly more challenging. Here, contractors can be held responsible for designing flaws that can ruin green-performance ratings.

Liabilities—the contract should clearly address liability in case of a green technology or product failure. The green building niche often uses experimental materials. The success rate of such entities is often not known. Green building systems might even require the collaboration of conventional and new building techniques. The contract should address these challenging issues and assign liability across all the involved parties.

Payment Provisions—the contract should include payment provisions to avoid delays or confusion over payments. Sometimes, the payment schedule is tied to completion of different stages of construction/building. For instance, some contractors might be ready to accept payments when the green certification is received. However, some contractors might not feel comfortable with this clause. It is better to have clear terms about advances, making partial payments, releasing retainage, and final payments.

It has been observed that green building projects that use visual construction often perform better. Key elements of green building modeling are weaved together and then compared with expected outcomes. This makes it easier to gauge the most probable conflicts and create possible resolutions.

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Why Custom Builders Need to Think Beyond their Business Cards

As far as marketing is concerned, word of mouth is extremely important. But if you are a custom builder, you don't really have to wait for your old clients to pass your visiting card to their friends or colleagues. Custom builders don't have model projects to show. They don't have an in-house marketing team either. As a result, most of them rely on their reputation. As for marketing, their business card is their only tool. However, a smart custom builder can use several other promotion techniques as well.

So, instead of waiting for the clients to come to you, you should reach out to them. Try to engage with your community. Understand what people want and try to offer solutions. Try to position yourself as a resource for designers and architects. They are the people who bring business to you.

Create goodwill

You should share your knowledge with people who will benefit from it. You don't necessarily have to promote yourself. Instead, grab every opportunity to share your expertise. Let people know that you are an expert and they will readily seek your service.

Conduct workshops

You should also conduct free workshops for the general public. Such events can be used to discuss topics such as building a green home or undertaking a remodel. The key is discussing a topic that might spark an interest. This requires an understanding of your audience.

Don't expect an immediate return on your investment, but over the time, these people will come back to you and give you business.

Your website

Your website is one of the most potent weapons in your arsenal. You can use your website to differentiate you from other builders. Add useful articles and how-to guides. The goal is to build a relationship with potential clients. Once you build trust, they will readily leave their contact information. Write about how you can solve their problem.

When you promote your business online, you should be willing to provide high quality photos of your products. Good photos of your past projects or computerized images can bring your project to life. 3D images allow you to create multiple angles of the property even before it is fully built.

High quality images will appeal to a buyer's imagination. The home may take one-and-a half years to build and until it is complete, the buyer has no idea how it will look. Using computer aided graphics you can show the buyer what the finished product will look like.

Offer tours

Another technique that many custom builders employ is that they let their prospects tour the project during the construction and just before the client moves in. This gives potential clients an opportunity to assess the quality of the work before hiring the builder. During these tours you can also point out how your projects differ from others.

Remember that when the work is complete, a green home doesn't look any different from other homes. So if you incorporate green features, you should encourage prospects to tour the property during the construction stage itself. This will allow you to point out the structural and functional differences that will make your home healthier and more energy-efficient.

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Unusual Real Estate: The Sleeper House in Colorado

One of the most interesting and unusual pieces of real estate in the United States is located on Genesee Mountain in Jefferson County, Colorado. It’s referred to as the Sleeper house because it was featured in Woody Allen’s science fiction flick Sleeper. It’s also known as the Sculptured House, and its design features an elliptical curve and a spaceship look:

 

Once listed as one America’s Ugliest Mansions by Forbes, this home was built in 1963 by architect Charles Deaton. The budget for building the Sleeper house ran out before the house was even finished. The home sat vacant and unfinished until 1999 when it was finally purchased. The interior was completed in 2003 by Deaton’s daughter. It was sold in 2006 to a Denver entrepreneur, and by 2010 the owner could not make the payments. The home was sold again under a foreclosure auction that same year.

Here’s a great view of the Sleeper House featuring the beautiful Front Range:

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How Technology Can Help Builders Work Smarter

More and more builders now rely on technology to run their businesses better. Technology helps builders reduce costs by organizing their information better.

Automated payment systems, for example, can eliminate costly mistakes that might arise from double paying vendors. In addition, they prevent the vendor from changing prices without your knowledge. 

There are apps for scheduling and they work really well. They can email reports to traders and contractors.

DIY Technology

Some real estate companies have built their own operating systems. When an organization has its own operating system, it will have a better control over functions such as scheduling, purchasing and customer relationship.

Paperless offices are becoming the norm. Here is how to use technology to your advantage:

Blogs and websites

Your website is a great tool to connect with your existing and potential clients. Is it fully functional? Does it provide value to the visitor?

Surveys conducted among home shoppers reveal that they prefer to search online before visiting a property. If you have a search engine optimized site, you will get targeted visitors to your homepage. Post compelling descriptions and photos of your homes on your site.

Your website is a sales center where you can showcase your homes. In addition, it allows you to capture valuable information about potential clients. Using interactive tools, you can even recommend structural changes online. Many websites offer live chat facilities, so that customers can fix appointments to visit model homes and interact with salespeople.

You may also consider adding homeowner portals to your site. They will allow the buyer the opportunity to watch their houses being built. Also include information about community areas on your site. You can also offer do-it-yourself video guides about construction topics.

Sales management

These tools can create an automated system that can manage every step involved in home buying. Besides helping you generate leads, they will also allow you to handle leads acquired from traditional and online channels. You can also generate reports that will let you know if a particular strategy is working or not.

Scheduling and purchasing

Proper estimating, scheduling, and purchasing are essential to cut costs and make profits. There are comprehensive apps that let you manage these vital processes. Since these applications allow you to share documents with every stakeholder mistakes and misunderstandings are unlikely to happen.

Warranty

When you have a Warranty system in place, you can ensure that people who bought your homes are happy with the purchase and ready to recommend your company to their friends or relatives. A comprehensive warranty system can schedule building inspections. Builders can also track warranty requests online and recommend work orders. Thanks to the reporting programs, this system also aids quality control and vendor analysis. Since it monitors inspection requests, recurring problems can be handled effectively.

Accounting

A sophisticated accounting system will keep your processes in order. It can handle automated payments, payroll and trade invoicing. In addition, it can generate reports which will keep your budget on track.

Even if you are not willing to spend lots of money on an integrated OS, there are several tools that allow you to work smarter and quicker. For example, Skype and FaceTime enable video conferencing in real time. Dropbox, another open source app, is used by several builders to share photos and documents.

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