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Author Archives: admin
Safe Travel Tips On Mean Streets
The best way to avoid any possible dangers during your travels is to keep your head about you at all times. Here are some travel tips to help keep any inconveniences at bay.1) When it comes to belongings, your passport and your money are the most valuable possessions you have while traveling. Always know where they are wherever you are.2) Always have a photocopy of your passport secure in a bag different from that which your passport is in. Should you lose your passport, you will at least have something to show.3) Never get on a taxi ( or any other transportation for that matter except when you know the prices are fixed by law ) without asking how much you’re paying for the ride. Or insist on using the meter.4) Always have passport size photos in your wallet. You’ll never know when you need them.5) Invest in a quality money belt which is attached to your waist or hanging on your neck.. Make sure it’s not visible and that it’s strong.6) As much as possible, don’t wear expensive jewelry. Or if you really need to wear some, don’t flaunt it.7) When a cab driver sets a price for the trip, always ask if the price is for a one way trip, round trip, per person, per taxi, etc.8) Always have the address and phone number of the hotel you’re staying in. If you’re traveling with a tour guide, have his number as well.9) When in public places, always have your luggage in view.10) When departing a country that’s known for drug trafficking, be doubly careful with your bags and belongings. They’re not that difficult to tamper with. And if this very nice old man should ask you to hold the teddy bear as you go through customs, don’t! Harsh I know, but better than you ending up in jail.11) Always remember the golden rule. If it sounds too good to be true, it must be.12) When in your hotel or other public buildings, always check where emergency exits are.13) If someone unexpectedly knocks on your hotel door, don’t just open the door. Look through the peep hole and see that you know who the person is. Never let a stranger in.
Is High School Preparing Students for College?
The struggles of youth without college degrees constitute a labor-market crisis as they move from one dead-end job to another, unable to develop skills, status, and earnings. Employers complain that these employees lack basic skills, which must be provided on the job. Growing shortages of skilled workers suggest that educational reform must address improving the abilities and opportunities of high-school graduates. This article shows that schools have misunderstood work-entry problems by focusing on college entry and that students have misunderstood incentives for achievement. Moreover, many other nations communicate incentives effectively, and American schools could improve incentives and job entry.
Schools View Students’ Problems Too Narrowly
High schools have responded to the poor labor market primarily by encouraging college-for-all policies, leading the majority of seniors to plan college degrees, even those who perform poorly. However, their expectations will be largely disappointed, since only 37.6% of those planning a degree receive one in the 10 years following graduation; and of those graduates with high-school Cs or lower planning bachelor’s degrees, only 16.1% attain the degree after 10 years. Despite good intentions, high-school counselors underinform students about the effort required to graduate college, encouraging unrealistic expectations without exploring well-paid careers in trades that would be more realistic options for many.
Furthermore, school policies focus too narrowly on academic achievement, overlooking soft skills like motivation, dependability, attention to quality, and social interaction, which many employers value above academic skills. Even such a basic skill as effort remains unexercised, since students believe that academic effort bears little relation to their futures. Moreover, behaviors like absenteeism, insubordination, and incomplete work are tolerated in high schools, while employers value the opposite behaviors in young workers.
Students Need Clearer Incentives
Educational policies also fail to give students a clear understanding of incentives for mastery of both academic and soft skills. Teachers are exhorted to increase students’ motivation, but the rewards for such efforts remain obscure. Institutions need mechanisms for communicating the value of students’ actions for college and career goals. Instead, schools often indicate that school behavior is irrelevant to immediate goals, since colleges’ open-admissions policies allow even weak students to enroll. Further, employers ignore high-school performance records in hiring, partly because they do not consider them trustworthy or cannot obtain them. Instead of using high-school performance in hiring decisions, they limit graduates to entry-level work until they prove themselves. As a result, students cannot tell if or how their goals are attainable.
Incentives in Other Nations
Many other nations provide clearer incentives for achievement that Americans could use as policy models. Foreign educational systems clearly link school performance and career outcomes. In Germany, for example, work-bound students strive for apprenticeships that lead to respected occupations, knowing that secondary-school grades affect selection for those opportunities. Afterwards, apprentice certification gives German youth a sense of accomplishment rare for U.S. youth. Unlike our unemployed graduates, unemployed German apprentices feel unlucky, not incompetent. Similarly, in Japan, high-school grades are linked to entry into respected occupations for the work-bound. If their achievement is too low for their goals, Japanese students know it in advance and can increase effort or lower expectations.
Improving Labor-Market Entry Policies
Schools in the United States already have a system linking academic achievement to goals on the foreign model, but it only extends to the minority of students aspiring to selective colleges. Test results inform high-achieving students well before graduation of the likelihood of admission and of the need for increased effort. Low-achieving students, who typically aspire only to less selective institutions, lack such incentives, which apprenticeships or more rigorous college admissions standards could provide. The perceived gap between high-school performance and job success could also be bridged by educating students about research showing that better high-school grades and soft skills predict better earnings. For example, a rise of one letter grade (from C to B) is associated with a 12% earnings gain 9 years after high school.
Further, high schools could link job-finding aid to achievement and inform students about research that indicates that job entry through a school contact increases nine-year earnings potential by 17%. Counselors and other educators should stop keeping students in the dark about the consequences of their performance, even if they withhold information only to be kind to students or to placate parents.
Improving College And Employer Contacts
Improved student contacts with colleges and employers can clarify incentives for achievement. Two reforms have been promising, despite difficulties aligning these high-school experiences with later demands. First, tech-prep programs articulate junior and senior year curriculum with community-college technology programs, teaching students about college and occupational demands and making for a seamless college transition. Tech-prep success indicates that a student is prepared for college, and failure motivates efforts to improve and to adjust goals. Unfortunately, existing tech-prep programs often have below-standard requirements, leaving students ignorant of college-level demands and relegated to remedial classes in college. Further reform should focus on integrating those demands into the preparatory curriculum.
Second, youth apprenticeship and cooperative learning programs give some students the work experiences they need to improve their chances for success in the labor market. Apprenticeships coordinate school and workplace learning under close supervision. However, they are so expensive that few U.S. employers are willing to pay for them. In co-ops, sometimes seen as inexpensive apprenticeships, students are released from some classes to work in positions that ideally provide more training than average youth jobs. In practice, however, too many co-ops are average youth jobs with little training and few postgraduation opportunities. While apprenticeships increase a student’s earning potential, co-ops often do not, unless students are able to secure jobs at the same company that provides their co-op experience. These potentially useful programs could be improved through expansion, increased quality, better training, and improved communication of a given student’s job readiness.
Improving Signals Of Student Value
Unlike Germany’s and Japan’s, our high schools do not clearly convey graduates’ readiness for college or employment. Several policies could begin to solve that problem. First, colleges involved in tech-prep could adopt standardized tests of college readiness. Well before graduation, these tests could indicate academic quality clearly to students themselves, allowing time for backup plans. Second, high schools could provide employers with better signals of soft skills. Indeed, by reflecting attendance, discipline, and motivation, grades already do this to some extent, and further signals of student qualities could be developed. Some high schools have already created employability ratings tailored to employers’ needs, and these schools have reported increased student motivation. Further research on the effects of such ratings is needed. Third, high schools could build more trustworthy employer relationships, for instance through vocational teachers, so that the best qualified students could more easily be hired. Employers indicate that such relationships aid hiring and give them dependable information. However, connections between schools and employers are still rare; only 8% of seniors get jobs through school contacts, despite the clear advantages. Hiring through contacts may limit the applicant pool, but large applicant pools do not help employers if they cannot assess applicants’ quality. Hiring selectively is preferable to hiring randomly. Teachers can build relationships through trade experience, careful applicant screening, and candor.
Employers and teachers should establish reciprocity so that both parties value the relationship for meeting mutual needs and not for extrinsic benefits, such as teachers pleasing administrators by placing weak students or businesses improving public relations by extensive co-op hiring. When extrinsic benefits are central, teacher-employer relationships have little reason to develop. In such cases, sacrifices for reciprocity’s sake, like better student screening despite administrators’ demands and more intensive yet less visible apprenticeships, could establish the trust needed to foster the relationship.
Conclusion
Regrettably, current policies work against improved school-employer contacts, since vocational programs and their well-connected teachers are being curtailed in favor of college-for-all policies. To reverse this trend, vocational education should expand in high schools and community colleges. Teachers with good trade contacts should be retained and rewarded for making good placements in industry. Teachers and counselors should also be encouraged to give employers candid information about students and to be forthright with students about their abilities and opportunities. These policies could encourage employers to see high schools as valuable sources of hiring information. Other steps could include acquainting counselors with noncollege options and evaluating students’ college and career abilities more accurately and consistently. The underlying conditions for such policies are present; the key is making the institutional actors aware of the importance of improving students’ opportunities for job-entry success.
Real Estate Investing – Part III
A Bit of Valuable Theory First: Vince Lombardi Would Approve!!
Cause and Effect Relationships
We are familiar with “cause and effect” relationships. A particular “cause” or action will result in a predictable “effect”, reaction or response.
That is an example of a “cause and effect” relationship within earth’s gravitational fields.
Further, if you change the “angle of incidence” (the angle at which a thrown ball hits the wall) then, you can accurately predict the direction that the ball will take as it bounces off of the wall.
The angle of incidence equals the angle of reflection, and predictability exists.
If I don’t wish to receive that type of negative response, then I should be careful not to use hurtful words and actions toward you. We call that human nature.
While Laws of Human Response may be less predictable than the Laws of Physics (people can develop good acting skills), a good real estate negotiator learns to control his or her emotions in order to guide the negotiations to a desired result.
If demand for a scare commodity increases, but the supply or availability of that commodity decreases, you can anticipate an increase in it market price.
Qualifying Demand Factors:
1.Demand is influenced by purchasing capacity. When dealing with “demand”, only those with purchasing capacity should be considered. Point: If I would love to own one, but can not afford to buy one, my vote does not count as part of “effective demand”.
2.Demand is influenced by availability of financing. If I could afford to buy one with a loan with an interest rate at 5%, but interest rates just increased to 6%, then my “desire to own” remains strong, but only at a lower price that would allow me to finance its purchase within my capacity to service debt. Restated: My “demand” no longer counts at the previous price.
3.Demand for real estate is influenced by the attractiveness of the stock and bond markets. A large part of demand for real estate that caused the “Real Estate Boom of 2004 through 2007″ was due to the wholesale rejection of the stock market and the bond market.
Point: Many people lost 40% or more of their retirement account that was invested in the stock market. Many flocked to real estate for fear of continued losses in those other markets. A “feeding frenzy” pushed prices up rapidly. Too many dollars were blindly chasing too few attractive properties.
Qualifying Supply Factors:
1. Supply Responds Slowly. It takes a while for supply for real estate to respond to an increase in demand. You can’t just leave the printing press going over the weekend at the US Mint to create more money. That is an option that is only available to the federal government.
Point One: Observation: To create a new apartment complex, it takes a year or so to acquire the right property, get plans approved as a building permit, build the complex, then rent it out until it’s full. It does not happen over night. This can cause a substantial increase in market price for an existing good looking apartment complex.
Point Two: My prediction: When the market finally stabilizes for apartment complexes, we will see a horrendous increase in “cost” of generating that new complex. Systems development charges, cost of building materials, and financing costs will boost the “finished price” of that property.
Suggestion: Consider buying existing “pre-owned” apartment complexes right now. You will look like a hero later!
2.Political Considerations Influence Financing. The federal government has the capacity to regulate interest rates. The easier it is to finance the acquisition of an income property, the more appeal it will have.
Question: Why isn’t this a “supply-side” factor?
Answer: It is. The easier it becomes to buy a property, the more available property becomes to buy.
However, it is also a demand-side issue in that it is now possible to obtain a new mortgage with ten year fixed interest rate.
Observation: Ten year fixed rate financing allows the investor to neutralize the “cost of capital” issue during a recession.
Suggestion: Take advantage of available new financing.
3.Tax Law Changes Influence Appeal. Recently the federal government provided real estate investors with the opportunity to increase their tax shelter from real estate. Cost Segregation depreciation allows such an opportunity.
Understanding Changes in the Real Estate Financial Markets
These “Laws” or financial cause and effect relationships have recently become substantially altered, and thus have become far less predictable.
- Change One: Artificial Supply-Side Pricing. Real estate prices are being adversely impacted by a large number of “forced sales” caused by defaulting borrowers being forced to sell under pressure to sell, and foreclosure sales by lenders in need of a quick sale.
- Situation: A borrower is unable to make the mortgage payment, and has attempted to sell the property.
- He discovers that it will not sell for enough to pay off the existing loan. He then notifies the lender of the situation.
- The lender must then decide which course of action to take.
- If the borrower has not been declared to be in default, the lender frequently ignores the borrower’s plea for relief.
- If the borrower has been declared to be in default, then the lender will either:1. agree to accept less than the full loan balance in satisfying the loan (a “short sale”); or,2. take steps to foreclose on the property, then resell it quickly to recoup the amount of the loan.
- Result: Discounted sale prices resulting from “short sales” and “foreclosure sales” impact all property values and force prices down. You will have difficulty attracting a buyer who would pay more for yours than they could pay to acquire a very similar property offered through a short sale or foreclosure priced property. Even if you are successful in seemingly avoiding the impact of “forced sale” discounts, the appraiser who the buyer’s lender will use to value the property for loan purposes will include those low priced forced sale. The buyer will not be allowed to borrow as much, and your sale may be in jeopardy of closing.
- Observation: Until the lenders sell off all of their REO and the number of short sales is substantially reduced, the value of real estate will continue to be adversely impacted.
“Real Estate Foreclosures 101″
What is a “Short Sale”? A “short sale” occurs when the lender agrees to accept less than the full loan balance as repayment of the existing debt.
Why Would The Lender Agree To Accept Less? Once a borrower defaults on a loan, the lender must form a course of action that would result in the least loss to the lender.
Would the short sale be less costly than a foreclosure resale of the property on the open market? If so, agree to the short sale and be done with it.
Observation Concerning Short Sales: As a buyer offering on what will be a “short sale”, there is never a quick decision to allow the deal by the lender.
The lender’s decision making process causes the potential transaction to travel through several departments of the lending entity before a decision to accept the short sale is reached.
It has been known to take months for the lender to finally agree to a short sale. By that time, the buyer lost interest in the property, and has walked away by the time that the lender approves the short sale.
Lenders are slow to agree to lose money, even if money is being lost with each passing day.
What Happens to the Lender When the Lender Forecloses? The lender’s financial statement will be immediately and substantially altered. The previously performing loan (an asset held as a “Loan Receivable”) is converted to a less liquid asset known as “Real Estate Owned” or “REO”.
Lender’s Financial Consequence of the Foreclosure: The lender will experience several negative consequences as a result of the foreclosure.
- The lender is often the only bidder to show up at the foreclosure sale.
- At the foreclosure sale, the lender makes a bid equal to the balance of the debt. If no other bidders bid higher, then the lender receives title to the property.
- If the lender receives title to the property, then the dollar amount of the previously performing loan is subtracted from “Loans Receivable” and the value of the property acquired through foreclosure is added to a category known as “Real Estate Owned” or “REO”.
- The lender is well equipped to make loans, but much less equipped to hold real estate in lieu of a Loan Receivable.
- In order for the lender to get out of real estate ownership and back into the lending business, the lender must resell the foreclosed property on the open market.
- Probable Result: If the prior borrower could not escape foreclosure by selling the property, then the lender probably can’t do any better. This is where the lender’s bigger problems begin.
1. “Mark to Market” While the previous “Loan Receivable” and the “Real Estate Owned” are both “assets” owned by the lender, the bank auditors will soon require the lender to periodically mark down or reduce the reported value of the REO to reflect what it would sell for in a quick cash sale. Any action that reduces the value of the bank’s assets will directly reduce the lender’s “Shareholder’s Equity” (the bank’s net worth).
2. “REO Reserves”. In addition, the auditor will require the bank to create a “Reserve for REO” or a cash fund set aside to cover the performance of the REO asset.
This reduces the amount of available funds that could be used to create new loans and generate more revenue for the bank.
Summary: Both of the above actions will reduce the bank’s ability to generate more revenue and increase Shareholders Equity.
Lender’s Decision Point: Consequently, the lender may conclude that it is less expensive to avoid a foreclosure and to accept less than the full repayment of the loan balance by taking a short sale, and being done with it.
Foreclosure Sales: What Happens
Nature of Sale: An All Cash Auction: The trust deed foreclosure sale is an all cash auction conducted by the trustee at a published date and time at a specified public place. Typically, the only all cash buyer to show up at the foreclosure sale is the lender who brought about the foreclosure. The lender bids in the amount of the loan, and receives title to the property.
- As the lender starts to convert more of its performing asset base (performing “mortgages receivable” on the asset side of the balance sheet) to “REO” or real estate owned, the bank auditors will force the bank to set aside available cash (that could have been used to make another loan), and hold it as a reserve to cover the REO portion of the bank portfolio.
- A double hit has just occurred:
- 1. The bank’s Operating Statement no longer has a performing mortgage loan, and now has instead a piece of real estate “REO”(Hint: banks are good at making loans and collecting monthly payments, but are not very good at holding real estate that must be managed and tenanted to prevent damage and further loss of value to the property); and,
- 2. The bank has to use a portion of their available cash to set up a cash reserve to cover the REO.
- Too much of that action, and bank auditors will write down the value of the REO property and increase the size of the REO reserve…both actions will reduce the “Stockholder’s Equity” (net worth of the bank). If it gets too thin, the Federal Reserve could close the bank.
- Example Two: The bank-owned foreclosed properties are soon sold at substantially reduced prices compared to other “non-foreclosure” properties in the same neighborhood.
- The reduced sale price creates lower neighborhood values. Those most recent low sale prices form the “comparable sales” data base that the appraiser will use when appraising your “for sale” property for a buyer’s lender.
- Your appraised value is reduced, and the entire process will continue to spiral so long as there is a bank-owned REO that is there to compete for the limited number of buyers for your property.
- SOLUTION: Only when the last REO is finally sold will the artificial reduced prices cease to exist. Buyers may love this environment, but everyone else is perplexed by artificially lowered prices.
FINALLY… Part Three
THE QUESTION: WHAT SHOULD I DO NOW?
THE ANSWER: If you can complete the following steps, then I may be able to help you sort out a course of action that you should take.
Part One: Where Am I Now?
Define your current position in terms of money
1.Complete a detailed “Financial Statement” of your current position.
a.The Asset Side:
i.What assets do you own?
ii.What is the current value of each of those assets? (ignore debts owed on each asset, since they will appear on the Liability Side of the financial statement)
Note: Organize the Asset Side of the financial statement in the sequence of “most liquid or cash-like assets” at the top of the list, and “lease liquid or hard to liquidate assets” at the bottom of the list.
Now total the value of assets listed on the Asset Side.
b.The Liability Side:
i.To whom do you owe money?
ii.How much do you owe each creditor?
Note: Organize the Liability Side of the financial statement is sequence of “shortest term debt” like short credit lines at the top and “longest term debts” like mortgages at the bottom.
c.Your Net Worth – The difference between what you own and what you owe is your Net Worth.
2.Complete a current “Income Statement”
a.List all incomes that you receive
Note: Separate various incomes by category: Vocational Incomes, Investment Incomes, other incomes
b.List all expenses that you incur
Note: Separate various expenses by category: Vocational expenses, Investment Expenses, and Living Expenses
c.The difference between Total Incomes per Year and Total Expenses per Year is the Surplus Available For Investment
Part Two: Where Do I Need to Be? (a retirement goal)
Project your living expenses to your desired date of Financial Independence
1.What will be your Survival Number?
This is the minimum monthly income required to cover all living expenses. ALWAYS KNOW YOUR SURVIVAL NUMBER!!!
2.How much of that Survival Number will be covered with “other Retirement Funds”? (e.g.: Social Security, pension fund distributions, etc.)
3.How much of a Short Fall appears to exist?
a.This is the amount that your real estate portfolio much cover on a dependable monthly basis.
Part Three: How Long Will I Be Willing to Work to Get There?
1.How long am I willing to work to amass my retirement portfolio?
2.Does it appear that my vocational employment will continue that long?
3.What happens if it doesn’t?
Part Four: What is My Surest Course to the Goal Line?
THIS WILL BECOME YOUR REAL ESTATE INVESTMENT STRATEGY