Archive for category Real estate
Credit and equity prices and volatility
Posted by admin in Real estate, Save Money, Taxes, revenue, short-term income, understanding finances, variable costs on October 30th, 2009
Generally, equity-based models for credits have to be analyzed in the context of the leverage cycle. When the level of debt remains constant, equity as well as credit investors both benefit from rising equity prices, driven, for example, by increasing earnings estimates. When leverage is rising like, for instance, between 1997 and 2000, equities tend to perform well while credit spreads widen at the same time. Conversely, deleveraging through rights issues or asset disposals, cost cutting and dividend cuts provide a favorable environment for credit, but not for equities. As Figure 3.24 shows, there is undoubtedly a relationship between equity prices and credit spreads. Yet, this relationship varies over time, depending on the current and the expected fundamental environment in the future.
Models that only relate credit spreads to equity prices therefore need to be interpreted cautiously. Assume, for example that the management of a company signals its willingness to concentrate on the creation of shareholder value. Then the probability of leveraging increases substantially. If there has been no decoupling, credit investors should take that as a sign to be rather bearish.
Drafting a Budget
Posted by admin in Real estate, production cycles, profit margin, profit projections, short-term income on August 2nd, 2009
So what does a budget look like? There are numerous variations, but the goal of any budget is to clearly communicate revenue and cost centers so that profit statements can be drafted and management of resources, including income, can be better accomplished. To that degree, all budgets tend to look the same.
For the sake of this lesson, let’s assume our unit maker described earlier has been in business several years and is charged with budgeting for next year. That means he will have budgets from previous years from which to draft future business plans. The operational budget, then, likely will break revenue and expense components down to three columns:
1. The current year’s budget, or what he originally projected his income and expenses to be.
2. The current year’s projected year-end actual expenses and revenues. Even if it’s a guess, which it tends to be, it must be as accurate a guess as possible.
3. The next year’s budget, which tends to be a hybrid between the actual budget, the year-end projected actuals, and a best guess for what the new year will bring.
Business Plan Shortfalls – part 1
Posted by admin in Business plans, Money Tips, Real estate, management skills on July 29th, 2009
Every good business plan consists of certain elements. But there’s also a list of things that should be avoided when creating a plan:
Inaccuracies will kill any plan. People won’t give money to companies that can’t count. It should go without saying that you need to be absolutely accurate in everything from addition to spelling. (Yes, even spelling, because some people may believe that inattention to accuracy in spelling might be symptomatic of inattention to accuracy elsewhere.)
More is not always better! Plans must be complete but succinct. Plans that run on for pages, with attachments from every financial document generated, generally turn off people who don’t have the time to read them—and today that’s most of us. Answer the questions that likely will be asked, clearly and succinctly. Good move!
Don’t underplay management team skills. The number one reason investors walk away from companies is concern over management. Plans should showcase the strengths of your managers and tie their skills directly to both the needs and solutions for the company. After all, the success of a company cannot be predicted from figures alone. Who is behind those figures? Who will be leading the company toward its goals?
Don’t editorialize. Or, as a colleague liked to put it, “Tell, don’t sell.” Keep the tone of the plan factual and professional. As soon as the plan becomes familiar or promo tional in its flavor, investors are likely to smell a sales pitch and walk.
Don’t just write your plan and shelve it. Use your annual plan to improve company per formance and involve as many of the appropriate staff as possible in developing it.
Business Plan Objectives
Posted by admin in Business plans, Investment Opportunities, Money Tips, Real estate on July 29th, 2009
The first step in developing a business plan is to define its key objective. Is it an annual plan used to drive business operations? Or is it a financial plan designed to attract investors and/or lenders? Is it both? It often is—and that’s not at all bad…if the plan meets everyone’s needs and if the language and goals don’t conflict.
Business plans can take as many forms as necessary and include as many financial addenda as required. Balance sheets and financial reports are usually critical components in a business plan. Some companies seem to attach virtually every financial document available.
Assuming the numbers support the text, however, the real area of interest for most executives, financiers, and even staff will be the assumptions behind the plan. Why is the company expected to sell 150,000 units this year after selling only 50,000 last year? The assumption will make or break the success of the business plan. Show the thinking behind your figures.
How Bad is it?
Posted by admin in Global Markets, Investment Opportunities, Money Tips, Real estate on July 20th, 2009
When it comes to eliminating your debt, we’ve arrived at that point. It’s time for you to pull back the sheet and see how ugly this thing really is. It’s time to grab pen, paper, and calculator and get the numbers on paper.
For now I just want you to break down your debts between long- and short-term debt. If you’ll recall from Chapters 2 and 3, long-term debt includes your mortgage and student loans, while short-term debt includes credit cards, car loans, medical bills, and everything else.
Add everything up and record the numbers here:
Total short-term debt: $___________
Total long-term debt: $___________
Cross-fertilization of ideas in investing abroad
Posted by admin in Money Tips, Real estate, Save Money, Taxes on June 12th, 2009
By investing abroad, not only can you get the benefit of a cross-fertilization of ideas, but you can also benefit from a cross-fertilization of projects. In New Zealand I am involved with a boutique hotel and a small vineyard. To many people, this may just be of passing interest, but my colleague and friend Rich Lamphere recognized a tremendous opportunity to link the New Zealand operation to his extensive project in northern California that also includes a vineyard and boutique hotel.
Rich is a true visionary with a big heart, and is living proof of Zig Ziglar’s maxim that “You can get whatever you want, so long as you help enough other people get what they want.” By offering guests in either country wines from both projects, reciprocal hotel perks, combined frequent-user benefits, and an excuse and incentives to use the other country’s facilities, both projects benefit.
As for the claim that real estate is so complex, and the laws so involved, that it is difficult to keep up with the regulations in your own turf, let alone a foreign country, these critics need to get a passport (I would put money on it that they do not have one), jump on a plane, and go somewhere where they have never been before. Of course real estate is complex, even at home. In fact, it is so complex that even at home you should barely do any of it yourself.
Real Estate and Opportunities of Investing abroad
Posted by admin in Financial Advice, Investment Opportunities, Real estate, Taxes on April 30th, 2009
Bear in mind that one of the tremendous advantages of real estate is that you do not need most of the money required to buy a property—banks willingly provide those funds in the form of a mortgage. In general, banks will not lend money on real estate purchased abroad,1 so if you were to buy a NZ$10 million property in New Zealand, you may only need NZ$1 million or less as a down payment from your own country—the rest is financed locally.
If the value of this investment over time goes from NZ$10 million to NZ$20 million, then not only have you made a 1,000 percent return on your cash investment of NZ$1 million, but the NZ$10 million profit, expressed in U.S. dollars, will also have gone up (or down) according to the change in exchange rate.
Secondly, many people claim that investing overseas is unpatriotic, as it diverts resources away from your home country to other countries. This is pure nonsense for two reasons. As we have just been reminded, when you invest in real estate in a foreign country, most of the funds required for an acquisition are provided by a locally sourced mortgage. Furthermore, claiming that investing abroad diverts funds away from your own country ignores the fact that the explicit purpose of any investment is to generate a return and (should you ever sell) a capital profit, both of which will eventually be brought back to your country.
Panama Real Estate Possession Rights: Buyer Beware
Posted by admin in Global Markets, Investment Opportunities, Real estate, Save Money on April 27th, 2009
Not all properties in Panama are in the private domain. Many beachfront properties, islands, and real estate in special tourism zones and historically protected areas are owned and managed by the national or local municipal governments. In those areas, possession rights are granted for a determined period of time. Two such protected areas are the archipelago of Bocas del Toro (mouth of the bull), which to many visitors fits the description of tropical paradise, and Portobelo, a beautiful harbor on the Caribbean visited by Columbus and the final resting place of Sir Francis Drake. Some beachfront property is available for purchase but is subject to the law that all beaches are public. All beachfront properties must provide a right of way starting twenty-two lineal meters from the highest tide to the property line.
Because of the lack of uniformity regarding the granting of possession rights, possession rights should be approached with caution.
When considering properties located in such areas, you should ensure that the possession right has in fact been granted by the relevant national or local government authorities and that the length of the time right is adequate for the purpose of the investment. The possession right should also contain a complete description of the property, including boundaries, encumbrances, and any other significant features or details (with an accompanying complete blueprint drawn and approved). You should make sure that any anticipated construction, activity, or improvement is acceptable by the national or local government. Transferring a possession right can take up to six months, depending on many factors, such as the date of recognition of the possession right and inspection by the granting entity.