FIN 180 Real Estate Principles: Updates

Exam 2 is on Wednesday, April 11th.  Exam 2 will cover chapters 8, 9, and 10 (as much as we cover in Monday, April 9th class).  Also, don't forget that Exam 2 will have a full blown investment problem.  You may use a hand held calculator, pencils, Scan-tron, and a 3" x 5" index card for notes, only, on Exam 2.

Blog post 2 is due April 9th, but I will give until April 11th because the syllabus reads "Wednesday, April 9th" which is a typo (April 9th is Monday).  Information on blog post 2 can be found on our website: https://sites.google.com/site/diazhansz/home/blog-post-assignments?pli=1.  Basically, you can choose any topic that is brought up in chapters 6 through 14, do additional research on the topic (yes, you must have citations), write a paper in our 5-paragraph format, and post it to our class blog (http://diazhansz.blogspot.com).

Also, don't forget the class assignment (see the blog post below) for Wednesday, March 28th.  We have a fix for the video problem which is explained in the blog post below.

Class on Monday, March 19th and Wednesday, March 28th

We will not be meeting in the classroom on Monday, March 19th and Wednesday, March 28th.  During our scheduled class time, please watch the following two videos.*

March 19:

Beck Technology - DProfiler Introduction to Craig School of Business California State University Fresno – Part 1

March 28th

Beck Technology - DProfiler Introduction to Craig School of Business California State University Fresno – Part 2

*Special instructions for viewing these video.  First,you must us a PC and NOT a Mac computer.  Second, before you download the above clips, you must install a TCSS encoder on your PC.You can download and install a TCSS encoder by visiting the following website: http://www.techsmith.com/download.html  (Scroll down to the free download for the "TCSS Codec").

These session with Doug Maiden of Beck Technology are very interesting.  The clips show the use of Dprofiler to model and estimate the value of a distribution warehouse facility in South Fresno.

Mari Peña
RE 180 MW 2:00
Interview date: Feb. 17, 2012
Industry Interview
I met with Peter, a construction contractor. Unlike a broker, RE agent, or loan officer, whom we frequent a lot during the home buying process, an inspector such as he, definitely plays an important role behind the scene or in some cases under. Like many, he found himself looking for alternative work after the housing market drop. Fortunately with his skills and knowledge set, he has found a fit with-in the industry that suits well. Peter also sub-contracts for Terminix where many jobs require thorough home inspections, some of which require crawling under homes. I narrowed some questions down and posted a few I thought were interesting.

1. How did you get started in the Real Estate industry?
Long story short; I was born in the U.S. but raised in Mexico. My mother, the English teacher, raised us (siblings) speaking only English to us. Every so often a contractor came to visit our small town. When he found out that I spoke English and was a U.S. citizen as well, he immediately offered me a job here. This was at age 16, I came every summer after that.

2. What is a typical day like for you?
You mean other than crawling under houses? I set up the days schedule, line up my work. I have an assistant who often does the dirty work for me. Although I spend a good amount of time on the job-site, I spend just as much in front of the computer or with paperwork.

3. What have you found to be a major weakness of new hires?
Lack of experience, but more so the unwillingness to get out there and learn.

4. What is the biggest drawback to what you do?
Can I ask the same question? “Other than crawling under houses?” It depends, for myself (as an independent contractor) financial backing or lack there of.

5. Describe your biggest challenge.
Inspectors with a different opinion often put you in a bind. If you want to last in this industry you have to stick to what you believe in.

6.What words of advise would you give someone looking to get into the industry?
Do internships, find out if it’s the right fit for you. Hands on experience is a very valuable tool. Be open minded and available for change. Most importantly pay attention to the future needs of the industry such as LEED and BIM, be ready for new methods of construction.

Blog Post 1: Interview

Rashad Evans

3/4/2012

                                                         Industry Interview

For this project I decided to interview: Sean Beattie, real estate agent located in Vallejo, CA.

First off, what do you like most about your job of being a real estate agent?

I like the rewarding feeling you get when you know that you have helped someone find the right home for them and they are really happy with it. I like helping people achieve things that they otherwise couldn’t do on their own because they simply don’t know where to start and I also love learning about people’s different personalities, you can really learn about someone when you ask them what they are looking for in a house.

What do you think is the best schooling or tools that one should acquire to take up this field?

Taking classes in economics is really important because it teaches you a lot about the business side of the real estate world. Getting a doctorate in real estate in something that I really recommend if you know for sure that this is a career that is right for you.

If you had to do it all over again, would you choose this career and why?

I would pick this career again because it is something that I enjoy doing and there is so many different things that go on behind the scenes with real estate it isn’t just about finding houses for people, there is quite a bit math and research that is involved.

Do you think being a people person is important in this job, being outspoken and really relatable, does that help at all?

You almost have to be a people person to do this because so much of what goes into this is talking with the client and reading what they like and want in a future home. It’s always nice when you read someone so well that you find something in a home that you know they will enjoy and they hadn’t even thought of it, it shows I was paying attention to their personalities.

Have you ever had difficult clients to work with or you lost a client because they felt you didn’t understand them?

I haven’t ever lost a client in the way that there was this big blow up and they left. Some people feel that you just might not be the right fit for them. I have gotten clients that have come to me from other realtors because they felt like they were not connecting with their agent. People look for an agent that they can relate to, that has the same values as them because they are more likely to understand the setting you want to be in and accepting that you simply aren’t what a client is looking for is also part of the job.

Do your jobs responsibilities go over into your personal life, a life you have outside of work?

Well if you have a bad day obviously that will probably follow you home, but the great thing about my job is that I love it so anything that comes up while I am out of the office is usually something I am happy to help with. But being on-call is important because it is very common to have clients drive by a house that is for sale and want to call me and tell me about it right away.

And for those clients like that, that call on a Sunday what do you say to them?

I ask them to give me the address and the company the home is listed under and tell that when I get into the office Monday morning I will look up that house and see if it has the qualities you are looking for and if we can go take a look.

What is the longest you have ever worked with a client for one job in particular?

I do have clients that are really urgent to leave their current home but know they will move someday and like to get a head start on looking to see what is out there. A couple came in and gave me a very specific wish list of what they wanted in a house and admitted that they know it will take time and are willing to wait. Two years later I finally found the home that they were looking for. I called them probably every two weeks for two years and went over what had just came on the market that had qualities they were interested in. It is those types of clients where patience is very important.

Is there any advice you would give to someone like me that is studying real estate in undergraduate school right now?

I would just recommend to take in everything that your teacher is telling you but also be prepared that there are a lot of things you will have to learn first hand on the job site. That sometime situations you hear about in the classroom are not the worst cases you will probably hear and to learn patience now.

What do you think is the best way to find a job in real estate after graduating?

Going to any sort of job fair and looking at any announcements in your department at school. Asking teachers is another good resource. And sometimes I find that just walking into a real estate office with your resume is the best way also and volunteering to start at the bottom and you are willing to learn, real estate firms really like to hear that.

In your opinion what should I expect when I am first starting out in the business?

Expect like every other career to pay your dues before you can rise to the top, just remember that all of us started on the bottom and took work to get to where we are now. A lot of clients come by recommendation so getting your cliental will take a little while to establish. I recommend that if someone is giving you advice that is from the business that you really take it to heart and keep it in mind.

My last question is with being a real estate agent; have you found your dream house yet?

I have an idea in my head of what I want my dream house to look like and sometimes I’ll get on and look at houses with myself in mind but most of the time if I find something I really like I think, “oh this client will love this house too, I’ll give them a call.” And then it never works out to me so no I guess I am still looking.

Chapter 9 Investing Activity

by: Mario Jauregui

 

True or False

Once you have commit funds to an investment, your opportunity cost is the highest relative return of other investment alternatives.

T

True or False

The liquidity of real estate as an investment is not an issue at all for potential investors.

F: Real estate is not easily liquefied when desired

Multiple Choice

Which of the following are potential risks that a real estate investor might face when looking into investing their money into a new development?

(A) Business or Market Risk

(B) Opportunity Cost

(C) Management Risk

(D) Inflation Risk

(E) All of the above

E

Multiple Choice

A ___________________ is used to account for the periodic replacement of the improvement’s short-lived components, for example, the roof, HVAC system, appliances, paint, and carpeting.

(A) Tax Shelter

(B) Cash Flow

(C) Reserve Account

(D) Replacement Cash Flow

(E) Non of the above

C: Replacements for reserve or replacement reserves

True or False

A tax shelter is a reduction, usually mortgage interest and tax depreciation for real estate investments, in taxable investment income.

T

True or False

Economic depreciation is the annual allowance, set by Congress and collected and enforced by the IRS, used to recover or recapture capital investment in long-term assets.

F: Tax, is the term used for the annual allowance set by Congress and collected by the IRS.

Multiple Choice

When you participate in different forms of financial investments you are using ________________.

(A) Inflation

(B) Diversification

(C) Spread

(D) Leverage

B

True or False

If Ro (return generated by the asset) is greater then Rm (the cost of borrowing), then Re (rate of return to the equity investor) is greater than Ro (return generated by the asset.

T: This means that the investor has positive leverage over the asset   

Interview

Interview of Doug Carnation

By Matt Mann

Doug Carnation is a resident of Fresno CA.  He was born and raised in Santa Rosa CA.  Doug is currently a member of the Santa Rosa Sports Hall of Fame, for his outstanding high school wrestling career.  After high school Doug spent some time as a bodyguard for Gomer Pile in Hawaii.  He has lived in Fresno since 1980 when he came to Fresno State to study Criminology and wrestle.   When he moved to Fresno he bought his first house with his college money.  While attending Fresno State he worked as a sheriff for Fresno County. After graduating college he quit the sheriffs department and became a Farmers insurance agent.  While, most guys were out playing golf on their free time, Doug spent his putting sweat equity into his real estate investments.  Doug now owns many single-family homes and apartment complexes outright without mortgages.  Besides the real estate he owns he has also bought and sold (flipped) many others.  He has even bought a piece of land, sub-divided it, built new homes on the sites and, sold them.  Doug does not limit his investments to real estate, he will invest in anything that can be profitable with his skill sets.  He buys and sells cars (antique), farm equipment, horses, and building material; he also owns 3 hair salons.  I met Doug about 14 years ago when we both played rugby for the Fresno Rugby Club. 

Question-              How did you get started in real estate?

Answer-          I was going to Fresno State and I needed a place to stay, so instead of renting I put money down on an old 3-bedroom house that needed a lot of work.  I moved a bunch of the wrestlers in and I lived in the garage.  All of the rent I collected paid for the mortgage and then some.  Before long I had enough money saved to by another house and I moved some more wrestlers in.  It was the same thing; I collected more in rent than the mortgage.   I did this over and over.  Before long I was making more money from my real estate investments than my job at the Sheriffs department.  I had a friend whose dad was a Farmers agent, I noticed that he had a lot of free time and it appeared that he made a good income.  After I graduated from Fresno State, I became a Farmers agent.

Question-            Does being a Farmers agent helped you with real estate?

Answer-          As an agent you are your own boss.  I have my own office and set my own hours.  I can make appointments around my schedule so; it gives me the flexibility to fix up properties.  A lot of the other agents I know spend a lot of time on the golf course.  I spend my spare time making deals, or fixing up properties.  Insurance is a lot like owning rental properties they are both residual income. 

Question-            Do you have a specific model you follow?

Answer-          It is just like any investment “buy low and sell high”.  For the most part I like to buy single-family properties that need a lot of work; I fix them up and rent them out.  From time to time I will sell the house but I like to keep them and collect rent.  I like to buy the houses that need more work than some new paint.  Most people are afraid to buy properties that need a new air conditioner or a new roof.  The more work that needs to be done, the cheaper I can get it for.  Since, I have been doing this for so long, I can do most everything myself. I have a lot of good contacts in the construction field if I ever get in over my head.  I am also able to keep my costs down by buying construction materials at a discounted rate.  I buy stuff from Habitat for Humanity, off Craig’s-list, by word of mouth, or bulk.  I have multiple properties so I always need materials.  If I see something for a really good price, I buy it, even if I do not need it right away.   I have bought truckloads of construction material for pennies on the dollar.  I have a warehouse that I can store all of my stuff.  A few years ago I bought a plumbing companies whole inventory when they were going out of business.  All of my rental properties have the same tile, roofs, paint, counters, sinks, lights, toilets, carpet, and so on.  I keep it really simple nothing fancy.  That way if someone moves out I go in and I have all the things I need to get it cleaned up and rented again; I do not have to try to match the paint or figure out where to find a certain tile to replace a broken one.

Question-           Do you have a specific price range you like to be in?

Answer-          I like medium to low price rental properties. If, the same house as mine rents for $900.00 per month, I like my house to rent for around $850.00 per month.  That’s because the renters will be less likely to move out because they find a cheaper place.  Some landlords try to get the highest price for their rentals but they have a large turnover.  If the rent is around $1400.00 per month or higher the people can usually afford to buy a house. So in that case they may have had some credit problems or they might be buying a house soon.  I want long-term renters.  I have one lady that has been in one of my houses for 28 years.  The nicer the property the more expensive it is to replace or repair something.

I would like to thanks Doug Carnation for taking the time to allow me to interview him.

interview

Gabriel Galiothe

My interview is with my father Fritzner Galiothe. He buy and sales residential houses. He recently brought a house last summer and currently renting out a house, bought in the by area. I want to ask him what made him start in this business, how he likes it, what are the cons and pros of the business, and a couple of other things.

How did you get started in selling houses, and renting house? What made you think about this career path?

The first time I ever brought houses was in 1980s, around 1985. Living in California you have a lot of opportunity to buy and sale residents. I really just started buying houses for myself. Then I took classes at night for real estate. My first idea was to just do it as a side job, for a little extra money for the family. Because I still had a full time job during evening a nights, I went to classes during the day. When I recently stop working full time, I started to move more into real estate and now that is my main source of income.

You say that you are currently rented a house out, what are the pros and cons of rented out house?

When you rent an apartment, house, or building, you really are at a risk of who is living in you place. No matter what background check, credit check you do, you do not know the people who are living in your place. You will not really know how they are until they actually live there and you experience it yourself. Just because they pay rent on time, pay all the deposit and fees don’t mean they are going to be a good tenant either. They might break something in the house every week. I can remember a time I was renting out a house in Oakland, ca. it was a family that pay rent on time. Didn’t have no problem like that. But the neighbors will contact me, because they are family friends, and say they always have people walking in and out of the house at all time of night. They would smoke outside, they would have about 4 to 5 cars parked outside and so sometime in front of others house. The police would always be at the house also. All of the sudden the house has became a hotspot to the police. That became a problem. Then on the other hand I will have great tenants, quiet, the neighbors love them, but I wont get the rent until the 15 if I get it at all that month.

You said that you pick this path as a career after you stop working in your first career. If you can do it all over again, would you choose this as your first career to start off with?

Being in real estate is not the easiest thing in the world at all. You can’t really be in control of as much as you want to. When I first started my car I had (vladimir) in 1979 and (Marilyn) in 1982. So the little kids running around the house, you need a source of income on a consist basic. Now that you are in college and Marilyn and vlad is grown and been out of college for some years, I can take a little risk and I can afford a risk like this. Having a full time job, the more you work in hours the more you check will be. Real estate its on the market. When people are buying. If I would have done it and had some money save before the kids I think I could have done it. But if not I don’t think I would be still at it. Once it got slow I can see my wife telling me that we need money and I would change my job. So really I don’t know if I would be successful or not

As you know I am getting into this field of work. What is something you can tell me about real estate?

Real estate is something you either are going to love a lot, or it is going to eat you alive. But you have been around me and know what it is and was with me buying my last house. You have to be all in. you cant just do it half way and expect to became rich being lazy. Another thing is that put money away in you first you for taxes. Vacations anything just save when you first start. Because I know a lot of people who went into this business and wasn’t in it after a year once you had to pay taxes and didn’t save correctly. Because the government is not taking money out of your check. You need to be on top of that. But real estate has no top. You will be as big as you want to be and as hard as you work. So you are what you make yourself.

Interview

Interview with Ken Nycum

By: Nathan Nycum

Ken Nycum is a former owner of a small construction company based out of Visalia, CA. He opened his business at the age of thirty three after quitting a job as a camp director for the YMCA at Sequoia Lake. He went on to run his business for more than twenty years until recently when he closed his business in order to become the director of the YMCA camp at Big Bear, CA.

Q: How did you get started with your business? Why did you choose this industry?  What was your educational background and work experience?

A: I started as a laborer for a stucco contractor named Rick when I was 23 and just worked for him for a couple of years. Soon after that I found a job as a camp director for the YMCA which was a much better fit for my education.

I have a B.A. in recreational science so I have no formal training in either the real estate or construction fields. The only aspect of my formal education that was helpful in running my business was an understanding of different organizational structures and process planning.

After being a camp director for a few years I had my first child and decided that my income would not support a family in the way I wanted. The housing market was also on the rise and I saw it as a natural fit. I began working for a contractor named Carl and eventually became his partner. From there I split off to open my own business.

Q: What was the most rewarding aspect of having your own business, least rewarding?  If you could go back would you choose this path again? 

A: By far the best thing about owning my own business was being able to make my own schedule. In the beginning I also really enjoyed seeing my work go through the process and come out as a finished product. My least favorite part was being responsible for everything but in particular all mistakes made by my employees.

If I could go back I would have chosen to stay out of the construction industry. The cyclical nature of the market creates a lot of opportunity but it is difficult to cope with the market when it becomes volatile. I would have stayed in the camp management field.

Q: What was a “typical” day like for you?

A: I would wake up early in the morning to meet with my crews and assign them to the job sites we would be working on for the day. Most days I would go out to the job sites and work hard all day. Occasionally there were days when I would be putting together bids for new jobs.

Q: What are some lifestyle considerations for this career?

A: The most noticeable lifestyle affects for owning a small business are the vacations I could and couldn’t take. It was very easy to have long weekends or take short periods off but extended vacations weren’t an option.

Q: What were the most important factors that drove your decisions about what other businesses to work with? I.e. vendors and suppliers.  What are the most important factors used when hiring new employees?

A: Price was the most important factor. In order to remain competitive in the bidding process I had to keep my costs down. Second most important was service. I had to be comfortable doing business with others. Thirdly was reliability. I had to be able to rely on getting my supplies and my payments from the companies I worked with. A job candidate had to be physically fit and motivated to work hard. They had to be able to keep up with an experienced crew and know when to ask questions to avoid making mistakes.

Q: What is the best educational preparation for a career in this filed?  Which classes and experiences would be most helpful to obtain while still in college?

A: My ability to do math, or lack of ability really held me back at the beginning. Math is in so many different aspects of the job from something as complicated as a bid to something as simple as knowing how many bags of cement to take for the day. Also a more formal training of the construction process is helpful to people in all fields of the real estate market.

Q: How high is the turnover?

A: Turnover was high at first when I was very new to the business. Eventually it slowed as my network into the labor force grew because I was able to find the employees that would work consistently.

Q: What is the future outlook for this career?  What are the areas of potential growth and decline?  How do you see jobs changing in the future?

A: The market has a cyclical nature and will continue to be for as long as anyone can foresee. I believe that the jobs in this industry will remain almost entirely unchanged into the future.

Q: Why did you choose to leave the industry when you did?

A: The cycle went to low this time around and the business was so slow that it was a natural and easy step out of the business. I am also getting older and no longer find the hard work as rewarding as when I began. I was presented with a new job as the director of a camp which I feel suits me much better at this stage of my life.

Informational Interview

Informational Interview

With Anna Ochoa

By Gonzalo Manriquez

   Anna Ochoa is a real estate agent who specializes in commercial real estate which includes office buildings, industrial properties, malls, so mostly everything besides residential. She specializes in leasing and sales, and explained her job as a mediator almost between the buyer and seller in order to write a contract for the sale.

Q: Why did you choose commercial real estate, and how did you get started in this field?

Anna explained that she believed commercial real estate was most beneficial in her opinion, as well as already having multiple contacts in the industry and a possible job before graduation.

Q: What was your first job in this industry?

Anna’s first career opportunity was with a company in the valley mediating between owners and potential clients. She is not working for the same employer now but gained the necessary skills and experience to convert to self-employed.

Q: What type of individual skills or personality is best for this field?

“ You have to be social, diligent, and be willing to hear many no’s before a yes.” Anna explained how in this field hard work pays off. Also how adaptation and cleverness are equally as important as the knowledge and experience because of how specific every sale is. She explained in one case a restaurant owner had a much higher price in mind that the potential buyer. What she came up with was the restaurant owner leaves some of the equipment behind for the buyer, which narrowed the gap between the two and a deal was made.

Q: What are major responsibilities and rewards of a career in commercial real estate?

One of the responsibilities is mediation, as mentioned above, and writing contracts once an agreement is arranged. Anna’s answer to the question on career rewards was mostly the contribution to a better commercial setting in the valley. An example she used here to explain this to me was a project she is working on now, where there are three potential buyers of a lot and depending on her, it may be; an office building, a gas station, or a veterinarian’s office.

Q: Does your work put obligations on you outside the job?

“ Definitely, you have to be ready at all times to be professional and jump on any opportunities that wont be there for a long time.” However she did add that since the market is at a slow down right now the responsibilities are manageable and not too bearing on her life at home.  

Q: Have you had difficult decisions to make, and how did you base the decision?

Anna’s approach here was to trust the gut feeling, and also be creative with innovative ways to arrange sales, such as the restaurant case. She also mentioned you cannot be afraid to bring up a proposal, you never know it may work.

Q: Any advice for new coming commercial real estate students?

Her advice was to talk to professionals in the field with experience, that will teach you the ropes and allow you to job shadow. That would be the most beneficial from what I understood because the people skills and experience is key.

Q: Has the real estate crash affected you at all?

She answered with a definite yes, with an example of a specific property, which was valued at 10 million dollars in 2006, and now the same land is being sold for 1.6 million. However she added that it all depends on the work you pit in, and reverted to the hard work pays off motto, which I believe is her view of her profession.