With interest rates rising rapidly, it is more important than ever to make the most of every loan. As refinances begin to dry up and you begin to deal more with purchases, you will undoubtedly encounter new roadblocks and hurdles on the way to the closing table. It’s a fact–purchase loans are far more time consuming and stressful than their refinance counterparts.

Borrowers are emotional, erratic, demanding, panicky, unsure, deliriously happy or sad and a whole host of many other emotions. In their minds, they’ve picked out the carpeting and wallpaper and have mentally already moved in! Geesh! Try dealing with a person who thinks they’re the landlord and they don’t even have the keys yet!!!

Keeping this in mind, here are some tips when dealing with purchase loans. These come from my years of experience and many number of loans (I’ve lost count.)…

1. Don’t show your hand too early (meaning the interest rate you can offer). Explain to the borrower that it is up to them when they decide to actually “lock-in” the interest rate. If they press you for an actual rate, tell them what today’s rate is you can offer, and that you will watch the interest rates for them. If they drop, you will call them at the first moment. What you really want to do here is knock the borrower off their “rate” short-sightedness. Say something like, “Well, as you know, the interest rates change every day. With purchase loans, time is critical. What we can do is get the process started, so that you don’t lose the house, and when the interest rates get to a point you feel comfortable with, we can lock it in for you. We will be working hand-in-hand through the entire process. Now, how do you spell your last name?”.

2. Explain the difference between a pre-qualification and a commitment letter. Borrowers think just because they have been pre-qualified somewhere, that it guarantees them the loan. This isn’t the case. As you know, the underwriter has the final say. If the property does not appraise for the correct value, the borrowers’ situation changes, or the seller pulls out, the deal is dead. These are things entirely out of your control. What I tell borrowers, is that we are going to go one step further than a simple pre-qual letter. We want to give them an advantage with their loan, and get them a full commitment letter from a lender as soon as possible. This lessons the chance of them getting their expectations set too high and not getting the loan in the end.

3. Phone the real estate agents early on and explain you are in control of the process. Call them BEFORE they call you. You want to show that YOU are in control—NOT them. Doing this, puts you at a higher level and they will respect you for it. Believe me.

4. Set expectations with the borrower upfront. Explain the entire loan process from start to end. First-time homebuyers just simply don’t know. Emphasize to them, if they have any questions, to call you first—NOT the realtor.

5. Make it known that you are the point of contact for all parties involved in the transaction. This includes the seller and buyer agent, appraiser, lawyer, title companies, etc. Usually, the realtor thinks they are in control for the whole process, but remember the sale is mostly out of their hands after the purchase and sales contract is signed. Then it is entirely up to you—the loan officer—to succeed! By being the “driver” in the process, you can minimize any confusion or crossed signals that may arise.

6. If you get a sales call from a borrower looking to purchase a home, ask if they have already been pre-qualified elsewhere. Most of the time they have been and are simply shopping around for the lowest rate. (In other words, go back to rule number one above… don’t show your hand too early). If the borrower shops behind the other loan officer, they will certainly do it to you too.

7. Explain to the borrower whether you are acting as a direct lender or broker. Each has pluses and minuses. Explain what you are and the role you play. Sell yourself. For example, you can say “As a lender, we have direct control of the process, we make the final decision and can tell you upfront whether you qualify.” or “As a broker, if you get denied by a lender, we can easily shop you to another lender, saving you time and effort. This will help you ensure you get the house you want and not jeopardize the process”. Sell your advantages…don’t mention your weaknesses.

8. Factor in all payments for the borrower, including the full principal, interest, taxes and insurance and be certain that the borrower is well aware of these entire costs upfront. If they can’t afford the house, you want to know as soon as possible. Or you’ll be left with nothing!!! I always say, it’s best early on to kill ‘em or keep ‘em. Don’t let timewasters run away with your income.

9. Watch critical dates, especially rate lock expirations and underwriting turn-times. Be well aware of the “commitment letter” date as stated in the purchase and sales contract on the property. Oftentimes, borrowers wait until far too late in the process before deciding to move ahead and these contract deadlines can be impossible to meet. Get an extension on this ASAP with the seller’s agent on the property.

10. Finesse your way through the process. Don’t lie. Only tell each individual party involved in the process what they need to know. Don’t share too much information…it creates confusion. And don’t tell someone something unless you are absolutely certain. It always comes back to bite you in the rear!

11. Stop the shopping. Make the borrower understand that once they decide to move ahead with the process, they risk losing the home, if they decide to leave you. Another broker/lender will be unable to meet the tight deadlines in the contract. They have to make a decision and stick to it.

12. Stop the shopping—part two. If the borrower is qualifying for a home based on a special program that your company is offering, tell them the criteria upfront. Not every loan officer has what you can offer. In other words, you have a specialized program and are making an “exception” just for them. Not all rates are created equal. The other “competitors” for the loan may not have all the correct information upfront, to be able to properly quote them an accurate interest rate. Let me emphasize that again—an ACCURATE INTEREST RATE. Educate the borrower on this, show them you’ve done your homework, and are quoting accurately. Ask qualifying questions that others don’t.

By keeping these tips in mind, it should make your next purchase loan go a lot smoother.

If you are looking for a firm step-by-step process to help you get your purchase loans to the table faster, please…please…please…take a minute to read about my Sink or Swim Loan Closing System at http://www.loanclosingsystem.com

And, as always, best of luck in your business. This is STILL a wonderful industry to be in! Stop being discouraged and go get ‘em!!! I know it’s tougher out there, but you can do it!



Passive Income

Generating customer referrals is one of the golden keys to building a successful restaurant business. In this aspect, your restaurant business is identical to every single other kind of business.

So, to understand the importance of customer referrals, take a moment to read this story about James. He’s a realtor, but he could just as easily be a restaurateur, just like you! You and James have precisely the same need and desire - to grow your business.

Remember, the VERY best way to grow a business is to turn your existing clients/customers into RAVING FANS, who will tell THEIR friends about YOUR business.

Read how James does it, faithfully copy what he does, and you’ll get the same stunning results…

James is an extraordinarily successful realtor. Some years ago he found a house for us, did a good job of organising the whole deal and we went our separate ways.

At least for a while!

Every three months, regular as clockwork, James sends us a handwritten greeting card. I’m sure he sends pretty much the same cards to everyone, but that’s not the point.

He actually sends them - THAT’s the point!

And while most other realtors are sucking their thumbs and whining about how bad life is, James keeps on selling, selling, selling.

I had a coffee with him a couple weeks ago and I asked him how his business was doing, in a flat market.

“What flat market?” he said. Business is getting better and better, year after year. In fact for James, every single year was better then the previous year.

So what’s James’ secret?

“It’s the cards”, he said.

“I remember Tom Hopkins saying how within 3 years of becoming a realtor, ALL of his business came from referrals. And the vast majority of those referrals came because he religiously sent out handwritten cards. Thank you cards, birthday cards. New Year’s cards. Cards for ANY reason. He just kept on sending ‘em. So I do too, and I get exactly the same results.”

Pretty simple!

So, when I’m standing around a barbecue with a beer and a friend asks if I know a good realtor, guess who I recommend? And remember, we only ever had one transaction with James, but I, along with many other people, send him constant business.

Why? Because James is ALWAYS top-of-mind when it comes to real estate. Because he sends us cards!

AND, James could be in any business, and he’d have the same success. Finance broker, lawn mowing contractor, hairdresser, accountant, restaurateur, mortgage broker. Doesn’t matter - the principle’s identical. Keep top-of-mind by sending heartfelt greeting cards, over and over.

So if this is such a bright idea, why don’t more businesses and sales people do this?

Well, primary reason is that most business owners and sales people are lazy and wouldn’t know a smart idea if it jumped up and bit them!

But for people like yourself, who aren’t, probably the main reason is that it’s too hard, too expensive and too complicated. But not any more. Sending custom written cards, with your own handwriting, sent in an envelope with a real stamp, straight from your computer, is now possible. And you don’t have to handle, or even see, the cards!

So, no more excuses - find a computer system which will generate, print and post REAL greeting cards in REAL envelopes with REAL stamps (not those lame emailed ones), and just DO IT!



Quick House Sale

 

The first time you look at the www.fashion-replica.com website, you will realize that you are somewhere different. Not just because the site layout is different, but because the site straight away announces to you that we only sell the best of the best replica watches, and does not stop there; it proves to you that the watches sold on the site are truly the best quality, lowest prices and without hidden costs!

These features make sure that the top replica buyers from around the world make a straight line to the Fashion-replica.com website. Since the inception of the site, we have ensured that we do not have any real competition. Yes, there are other sites selling replicas, but no real competition in the sense that we are always one step ahead of the market in making our customer feel like a king!

It is not just individual customers who place so much trust in our site. A lot of retailers come to us to buy wholesale, so that they can in turn take the product to their own customers. And one of the primary reasons they come to us is because of the exceptional  Cartier Replica  wholesale collection on the site. The Replica Cartier wholesale range is undoubtedly one of the best in the world and each wholesale Replica Cartier Watch is exactly the same one we sell retail on the site. Unlike other sites, we do not distinguish between our wholesale and retail replica watches, and that is the reason the Replica Cartier Watches on sale usually go out in bulk numbers.

After you look at the collection, you certainly will not feel like buying one Replica Cartier . You will remember your friends, relatives, colleagues and others and after you see the price, you will pick up one for each of them! Hence, the Cartier Tank Replica   wholesale collection. All the ranges of Replica Cartier for sale on the site have been rechecked for consistency as per 2008 standards and all necessary modifications are in place. Including the latest markings, latest technologies and the latest features, each watch exactly matches the original watch in all aspects possible.

And it is not just replica Cartier watches. We have every known brand of watches available as the best replicas ?and a few that you might not yet have heard of! Apart from the Cartier Tank Americaine Replica  range, you will find exceptional Rolex , Breitling, Jaeger  LeCoultre, Patek Philippe, Audemars Piguet, Vacheron Constantin and other internationally famous brands on sale right now.

Another USP of the site would be the no hidden fee policy. We firmly believe that whatever we show our customer should be final and there should be no add ons on the billing page, leading to a sour taste in the customer experience of shopping. We simply want to offer you the best deal possible!

Feel free to browse around and look up the tremendous new range of watches, avail of our free shipping and fast delivery offers and get rolling!



Repossession

The Indian A-Grade leasehold office space markets in India are currently at an all time high; both in terms of the quantum of space leased per annum and the prevailing rental values. A study conducted by global property advisers DTZ, reveals that while demand for the A-Grade leasehold office space in India continues to remain healthy, most cities in India, are seeing the beginning of an oversupply situation of office space that will continue in the short to medium term.

This study is a first of its kind in the Indian context – an objective, data-led demand supply analysis of the current state of A-Grade leasehold office space markets in India in the top seven Indian cities (Bangalore, Delhi NCR, Chennai, Hyderabad, Kolkata, Mumbai and Pune).

According to Ankur Srivastava, Managing Director, DTZ India, “Our city-level demand supply analysis, seen in conjunction with the macro-economic fundamentals, clearly indicates that office space rentals in India are likely to hit a plateau in the next six to twelve months. Barring a few exceptions (primarily the CBDs), the oversupply situation will lead to a correction in office space rental in India values. Or very simply, this correction in A-Grade office space rental values will not be driven by a lack of demand but due to the oversupply build-up.”

- The IT/ITES sector will continue to be the primary driver behind A-Grade leasehold office space sector, comprising around 70% of office space demand. Financial services, biosciences and pharmaceuticals will be the other significant contributors to the forecasted demand for AGrade leasehold office space

There are various factors that will define the degree and timing of this rental value correction For e.g. the threshold for this correction has been brought closer by the two recent interest rate hikes. DTZ has, therefore, deliberately refrained from commenting on either the extent or timing of this forecasted correction in A-Grade office space rentals in India.

That notwithstanding, DTZ firmly believes that the real estate India markets are entering their next phase/wave of evolution. The Indian real estate cycle saw its last crest in 1995-96 and the following years saw real estate values come down across the country. This correction also marked the first wave of evolution of the Indian real estate markets. The prime drivers of this change were the large foreign occupiers / corporates and IT firms that were establishing their presence in India and the most pronounced impact of this wave was a complete redefinition of what constituted A-Grade office space in India.



Quick Property Sale

The greatest advantage to owning a SMALL business is you can change quickly. If your customers suddenly decide they want some other product or service, you can offer that item to them within a few hours or days.

That usually isn’t the case for big businesses. Just take a look at the awful situation the American auto industry is currently in. Detroit made big bucks selling hefty pickups and SUV’s during the past decade.

But when gas prices soared and financing become difficult, those makers of gas guzzling automobiles were left in the dust. There was no way they could QUICKLY start offering smaller, cheaper, more fuel-efficient autos.

Factories would have to be retooled, thousands of employees retrained, billions in old stock liquidated, and a fortune in marketing spent to advertise the change.

Changing a big business like the auto industry takes years and billions of dollars. No matter how much they want to change quickly, the fact of the matter is, they can’t.

Not so with YOU! If your car repair service finds customers need engine work instead of mufflers, you can make the change and be ready to offer the new service in a matter of days.

If your accounting service finds fewer customers need payroll help and more want tax assistance, you can start offering the new service this afternoon.

One of the industries I currently work with is the restaurant business. Your favorite BIG corporate restaurant probably specializes in a niche — offering certain kinds of food, prepared in specific styles, and surrounded by a carefully crafted decor.

It costs the owners hundreds of thousands to several million to get their restaurant up and running. If they find out tomorrow the local clientele doesn’t want another Italian restaurant, but wants Mexican food instead, the owners have a BIG problem.

Changing their decor, developing a new style of food, and retraining or replacing staff is very expensive. Even more costly, the restaurant has to change their image in the minds of the public through massive advertising.

Many large restaurants simply shut down, then later start up under a different name offering the food the market desires. None of this is cheap or fast.

Using the “small is flexible” principle outlined above, I have instead developed a restaurant delivery service. This service offers the one PROFITABLE feature most restaurants don’t or can’t offer — the ability to DELIVER their food to customers.

These days consumers are busier than ever. Not only are they too busy to cook, they are often too busy to take an hour or more off to visit a restaurant. Restaurant delivery is the answer for the consumer as well as restaurants.

The beauty of this service is it is incredibly flexible. A restaurant delivery service can work with 50 restaurants. I’m not the least bit concerned if demand decreases for restaurant A, because I’m also offering the menus of restaurants B, C, D and E.

When tastes change, I change with them — quickly, effortlessly, and with no additional cost.

That’s flexibility. And these days, flexibility leads to BIG profits.



Passive Income

Most people get scared when they hear the term Hard Money Commercial Loans. 15 years ago, they were not as common and very hard to get, but in the modern age, they are much more common. However before you get a loan like this, there are certain dynamics you must be made aware of before you go on the net and offline searching for your angel investor or lender.

Why Would Someone Want Hard Money Commercial Loans?

The main reasons are that these types of money financing solutions are so honored is the pliability. I’ve heard of companies proposing this type of business loan collectively unsecured, with zero collateral. But these loans are under 500k. Business Cash Loans of 500k to One Billion are most often backed by Real Estate.

People tend to use these Hard Money Commercial Loans as Procurement or “Bridge Loans”. They want to close the hole meaning they will tend to use this commercial finance loan while they wait for their traditional financing kicks in. The issue with these loans is that they start at rates of 11-16%. This is approximately 5 points higher than a conventional loan.

What Types of Hard Money Loans are out there?

You can acquire a loan like this for commercial property. This can be anything from a Strip Mall to a Grocery Store to a small office suite. You can also use them for a residential investment such as a tract home development. I’ve heard of loans $100,000,000 and more just for one loan of this type. The Industrial Hard Money Commercial Loan is also very popular.

Hard Money Commercial Loans cover everything from Office Land to Technology Parks. Technology parks are becoming more popular in urban and suburban areas. These are basically warehouses and factories. If you’ve ever been in an area where you’ll see a computer warehouse, next to it a warehouse selling motorcycle parts, then next to that a carpet warehouse, that’s a technology park.

Hard Money Commercial Loans also go by special factors such as a Favorable Credit Score, Preferable Proceeds and other determinants. This obviously affects rates as well. The higher your score, the higher your LTV. LTV stands for Loan to Value Ratio which is the combination of the value of the property the bank is assenting to loan on. When applying for a exorbitant loan of this type your Credit Score and tangible history isn’t weighted as much as how long you’ve been in business. Is your organization is victorious, massively victorious or failing?

The reason the rates on Hard Money Commercial Loans are so heavy is because they have to entertain the possibility of the borrower going into default. These financial loans don’t shield the Investor or the Banks from the large failure rates on behalf of the borrower.

But it’s important to note that these types of loans are closed everyday. Business moves on and the world moves on accordingly. When attempting to find a lender that will help you acquire money financing of this type, make sure you at least setup an conference. This doesn’t have to be an in person interview, since many lenders are nationwide now. A telephone interview should be adequate in most cases.

Before you make the final decision, there are a couple more things you need to consider. Number one before you contact your first lender, work the profit numbers on paper first. If they are adequate for you, then contact a lender that will help you get what you want and that will help you get the best rates. An over the phone interview should be adequate since many lenders these days are nationwide.

Whether you’re looking for Hard Money Loans or Money Financing there is definitely a viable solution for you.



Passive Income

Before you buy a restaurant you may want to see if you are suited to be a restaurant owner. If you are willing to do what it takes to run a business, and not just indulge a hobby, you may want to buy a restaurant. You will need to have experience in the restaurant business before you can successfully buy a restaurant and run it on your own.

That is not to say that you can’t hire employees who know a great deal about the business before you buy a restaurant. Of course you will want to learn as much as you can about the restaurant business so that you have more than a little knowledge of how your restaurant operates.

You will need to consider the competition in the trade. If you have several Italian restaurants in the area where you want to buy a restaurant, you may want to think about another type of restaurant to open. Obtain a demographic survey to see what type of people live in and around the area, their income and ethnic backgrounds, etc.. To help determine what type of restaurant you should open.

Not only do you need to check out the location and the competition, but you will need to possess good marketing skills . While research will teach you what type of restaurant to buy and open, you will need to advertise to let people know you are there and what you offer. You also need a great location for your restaurant, you need to be in the thick of things, have ample parking, and be convenient to visit.

When you decide to buy a restaurant, you will be facing a mountain of regulations you will need to abide by. Your kitchen must be kept up to State hygiene standards. The FDA sets these standards and all establishments preparing and selling food need to adhere to them.

Mechanical and electrical ventilation systems are mandatory, and you will need licenses for food handling and liquor licenses before you open. All refrigeration systems need to be digitally controlled.

The electrical equipment and wiring system required in most restaurants needs to be up to a certain code. When you buy a restaurant the kitchen will also need to be a reasonable size to handle the business volume of the restaurant.

If you are planning to buy an existing building and turn it into a restaurant, you will need to apply for permits and should consult your county clerk to see what permits you will need and how much they will cost. You will need to make changes to bring everything up to par according to the rules of your city, county, and state. You will also need to provide access for the disabled.

Not only will there be initial health inspections on your dining establishment, you will also have periodic inspections on your premises. My experience with this sort of thing is that the inspectors will usually give warning before a visit.



Passive Income

Just like traditional shoppers online shoppers should carefully compare online retailers before choosing to make purchases from one of these retailers. This is important because not all retailers are created equal. The same product offered from two different online retailers may be more expensive from one retailer, have a higher shipping cost from one retailer and may be subject to different return policies. All of these factors can contribute to the consumer’s overall satisfaction with the product even when we are discussing identical products because these factors influence the purchasing experience. Additionally, the reputation of the online retailer can also help to influence the consumer’s decision of whether or not to make a purchase from a particular consumer. This article will discuss comparing online retailers using factors such as price, shipping and return policies.



Using Price to Make Comparisons

Price is one of the obvious factors which consumers often use to compare retailers whether they are considering shopping online or in traditional stores. This is a very important consideration because not all retailers sell the same products for the same price. While, in general, the prices will often be similar simply because retailers are in direct competition with each other for a consumer’s business there are occasions in which one particular retailer may be offering a product at a discounted price. These price deviations typically occur when a retailer is attempting to reduce inventory to either make room for new products or because the retailer is closing its operations. Regardless of the reason for the price reductions, consumers can benefit by purchasing items from this retailer and a lower price than they would pay with other retailers.

Consumers who are relying on price to decide between two online retailers should also verify the reputation of the online retailer before making the purchase. This is usually not an issue when the consumer is making a purchase from a nationally known chain of stores. However, when the consumer does not know much about the online retailer it is wise to investigate the retailer to ensure it is a legitimate and reputable company. Consulting the Better Business Bureau is one way the consumer can learn more about the reputation of the company.

Considering Shipping in the Comparison

Although cost is often one of the first factors consumers consider when comparing online retailers or even traditional retailers, shipping must also be considered carefully when comparing two or more online retailers. This is because the cost of shipping as well as the shipping options can both influence the consumer’s decision. Two retailers may offer products for the same price but the shipping prices may differ from one online retailer to the next. In some cases this difference may substantially change the total price of purchasing the item. Consumers in a traditional store do not have to worry about shipping because they simply drive to the store and leave with the item. However, online shoppers have items shipped directly to their home or another location so the cost of shipping is an important consideration.

Online retailers also sometimes have to consider the shipping methods available. This is especially important if the consumer needs to have an item arrive quickly. In these cases a consumer may opt to choose one online retailer over another if only one of the retailers offers express shipping options such as overnight shipping or two day shipping.

When the Return Policy is Important

Online shoppers should also always be aware of the return policies when they are making purchases online. This is important because the cost of returning an item can be expensive in some cases especially if it is a large or a heavy item. While some online retailers will bear the cost of shipping when they make mistakes or items are defective, returns for other reasons may result in the consumer being responsible for shipping charges. For these reasons consumers should always carefully review the return policies when comparing two or more online retailers.



Passive Income

The UKs second city has shopping opportunities rivalled only by the capital, London. In recent years Birmingham has completely re-invigorated its city centre shopping areas and boasts over 1000 shops all within 20 minutes of each other. If that doesn’t sound impressive to you please bear in mind that it includes a recently opened Selfridges that is the size of many DIY warehouse stores. The city has several main shopping centres or malls, retail and whole-sale markets, Victorian arcades as well as a wealth of street shopping. The three main shopping streets are New Street, which runs from the Council House to the Rotunda; the High Street which starts at the Rotunda and Corporation Street, which is off New Street. Major shops found on these streets include; Boots - High Street, Marks & Spencer - High Street, Waterstones - New Street and House of Fraser - Corporation Street. With a history as a draper store going back to 1851, The House of Fraser on Corporation Street is still known locally by its original name of Rackhams.

In terms of shopping in Birmingham the jewel in the crown has to be the new Bullring Shopping Centre. Once an area derided even by local residents the new Bullring, which opened in 2003, has been completely modernised into a glass enclosed shopping centre to rival any in the world. Here you can shop in over 140 stores, with all the fashion, jewellery, electrical and house-hold names imaginable represented, in this shopping centre that is big enough to accommodate 26 football pitches over its four floors. The two largest occupants are Selfridges and Dabenham’s whose stores spread over all four floors of the centre. Approaching the Bullring you can see the shape and size of Selfridges by its iconic 21st century design and construction. Finding the Bullring is easy, simply look for the Rotunda tower block on New Street and then the bronze bull statue that’s where it starts. The centre opens daily at 09:30 (09:00 on Saturdays) and closes at 20:00, except Sundays when it is open 11:00 to 17:00.

As the city has developed over the last ten years several other smaller shopping centres have opened around the city. The Mailbox was once the city’s mail sorting depot, on Royal Mail Street. Transformed and opened in 2000 it is now the home to a select 50 outlets of the very highest quality. It not only contains designer fashion shops but also; bars, restaurants, hotels and a complex of flats, or rather urban living. Names that you’ll find here include; Armani, Ralph Lauren and Harvey Nichols. The Mailbox is not on the main shopping routes in the city, to get to it walk along Navigation Street, which is to the east side of New Street railway station.

Two older shopping centres in Birmingham are the Pallasades and the Pavilions. The Pallasades was originally opened in the 1960s and was part of the New Street Railway Station re-development. As such for many people arriving at New Street station by train they have to pass through the Pallasades to get out on to New Street itself. The only large stores located here is a branch of Argos and the main Woolworths for the city. The Pavilions is on the High Street and has some forty stores in it. The two largest stores here are HMV and Virgin which dominate the entrance to this shopping centre. There are also entrances from the centre into Waterstones and Marks and Spencer’s, which join on to the centre. Other shopping centres include, Priory Square which is between the High Street and Corporation Street at Bull Street. This has many small and funky independent stores alongside a few market stalls selling mainly clothes. The only major retailer here is Argos. City Plaza is between the cathedral and Corporation Street. It has a few designer shops alongside several hair and beauty salons.

Birmingham has several Victorian and Edwardian arcades which are worth visiting if only to see the splendour with which they were built, never mind the shops inside them. The main one not to miss is Great Western Arcade. Built in 1876, its design was influenced by the Crystal Palace in the Great Exhibition of 1851. With 40 retail outlets the arcade is between Colmore Row and Temple Row. The south Eastern Arcade leads on to Martineau Place, which is a small, out-door area, in between Corporation Street and the High Street. Here there are entrances to the main Birmingham branches of W H Smiths, Boots and BHS as well as a selection of smaller shops.

Apart from Farmers’ Markets and the licensed street traders in the city centre, Birmingham has four markets. The Wholesale Market covers an area of 31 hectares and has over 200 trading units. The market mainly supplies local retailers with horticulture, fish, meat and poultry. Along with the redevelopment of the Bullring shopping centre, the Bullring markets were also re-developed; all of the Bullring markets are located around the shopping centre. The Indoor Market - has 140 stalls and whilst being famous for selling fish, you can buy just about anything here for the home or yourself. The Indoor market is open daily from 09:00 to 17:30 except Sundays. The Rag Market, as the name implies, comprises 350 stalls and a few shops selling all manner of materials and clothes making accessories. The Rag market is open Tuesday, Thursday, Friday and Saturdays at the same times as the Open Market. Birmingham was first granted a market charter in 1166, since when the Open Market in the Bull Ring has been a permanent fixture. Like the nearby indoor market it sells a range of goods to meet everyone’s needs in its 130 stalls. The market works Tuesday to Saturday 09:00 to 17:00.



Rent Back Fast

LEASEHOLD INTEREST INVESTMENTS

 

 

Can one entity serve as the landlord and the tenant, without actually owning the land or occupying the building?  The answer is yes, and the legal structure is commonly known as a leasehold interest.  Leasehold interest properties have been long viewed as the unknown and unfamiliar within the net lease arena.  Ironically, this unknown and often misunderstood investment structure is neither new nor unique.  Leaseholds originated from the feudal system of the United Kingdom where it is still widely used today, even in the residential market.  While the pace of investments around the world has pushed capitalization rates to record low levels, leasehold interests consistently trade at higher cap rates.  The yield is further enhanced by allowing for the depreciation of improvements to the leased property.

 

In its simplest form, a leasehold investment requires three separate parties; a land owner, a building owner, and a tenant.  The leasehold interest is ownership of the building.  This entity will have a long term ground lease arrangement with the land owner, and in order to generate a profit, must have a tenant in the building paying a higher rental rate than the underlying ground lease.  The return is then created from the difference of the rent paid by the tenant and the ground rent paid to the land owner.

 

In the competitive market for US based investment real estate, there is a never ending search for quality properties in strong locations yielding acceptable returns measured both from a cash-on-cash basis and over the ownership period of the investment.  The seemingly endless supply of capital originating from the institutional investors has handicapped the private markets by significantly compressing cap rates and thus returns.  According to Real Capital Analytics, retail cap rates have fallen nearly 200 basis points since 2003; levels some feel are unreasonable and unaffordable.

 

In an effort to secure a higher yield, investors have been diversifying geographically and as to the creditworthiness of the tenant.  The overall determination of investors to find desirable yields has expanded the demand for properties into secondary and tertiary markets often with leases guaranteed by an unrated company.  While initially these investments provided investors with greater returns, the yield has been narrowed to levels often found in primary markets regardless of the higher risk of the location and quality of the tenant. While non-investment grade tenants still offer some additional return based on the associated risk, tenants falling at or below the S&P rated BBB- investment grade threshold can still demand a premium based upon current press and positive outlooks from industry analysts. For these reasons, a leasehold interest may in fact be an alternative worth considering.

 

As an example, in the highly competitive market of California, an Albertsons leasehold interest has been recently marketed at a 7.25% cap rate.  Conversely, an Albertsons featuring fee simple ownership has been advertised at a 5.25% cap rate.  While comparing each of these two investments would need additional analysis as to location and financial benefits, the example shows how a quality and well known tenant can provide an investor a 200 basis point spread between a fee simple and leasehold interest investment.

 

In most properties, the cost of improvements constitutes a significant portion of the property value.  Leasehold interest owners benefit from owning the structure, creating additional return through tax savings generated from depreciation.  As with all non-residential buildings, depreciation is calculated on a straight line method over 39 years, providing for over $25,000 in depreciation per year for a one million dollar building.  This helps to reduce the taxable income, further growing the after tax yield of the investment.  In addition to this annual depreciation, upon disposition of the building, a taxable loss may be recognized.  The loss, whether classified as a capital or ordinary loss, will be equal to the adjusted basis in the property.  This amount is calculated as the amount the property was acquired for, plus any capital improvements, minus depreciation taken1.

 

The net income for a leasehold interest is the difference between rents paid by the tenant and the ground lease payments made to the land owner.  As a result of this structure, the cash flow provided in a leasehold is typically small when compared to the income generated in a fee simple arrangement.  Capitalizing this income amount assuming the higher cap rate noted above can result in prices for leasehold interest properties such that they can be acquired for as little as a few hundred thousand dollars.  This pricing threshold allows the smaller investor an opportunity to reap benefits often limited to the more affluent investor.

 

Ultimately, the decision of what asset class or lease structure offers the best investment is a business decision each investor must make for themselves.  Leaseholds are not for everyone, and may be best understood as a form of a bond or cash annuity than a real property asset, but in the endless chase for enhancing returns, the investor willing to consider these types of offerings may be rewarded with a wonderful return on their investment.



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