C.A.R. Scholarship Available

Real Estate Students -

California Association of Realtors - Scholarship Available

Please follow the link below to print the application and guidelines...

https://docs.google.com/open?id=1MHaixE2gt-yXtZ0FCZ8pLrcQfi9fyEvlp-4cMKKOcI9u9QZBj7W39Ict9GR2

Good Luck!

Job Opportunity in Demographics and Statistics

The California State Census Data Center within the Demographic Research Unit, Department of Finance has an opening for a Research Program Specialist I or II (Demography).   

 

PLEASE NOTE:  Applications will be accepted ONLY from current State employees at the Research Program Specialist I/II level, those within transfer range, or individuals who have list eligibility. 

 

We are seeking a motivated individual who has a college degree with any major and with extensive course work in demography, economics, sociology, or a related research-oriented field.  This must include or be supplemented by at least six semester units in statistics.  They should have extensive knowledge of demographic principles and concepts in a research and statistical setting; have a working knowledge of statistical software (ie. SAS) and relational databases (ie. Access, SQL); exercise a high degree of initiative and independence of action; possess strong written skills; communicate effectively; able to work on multiple projects and meet deadlines; and develop and maintain effective and cooperative working relationships.

 

A link to the job announcement, including how to apply, is online athttp://www.dof.ca.gov/career_opportunities/current/view.php 

 

Please share this message as appropriate.

 

Demographic Research Unit

Department of Finance

915 L Street, 8th Floor

Sacramento, CA  95814

(916) 323-4086

www.dof.ca.gov/research/demographic/

HUD Employment Opportunities

HOUSING AUTHORITIES CITY AND COUNTY OF FRESNO

EMPLOYMENT OPPORTUNITIES

Procurement Administrator

The Procurement Administrator supports all of the Fresno Housing Authority (“Agency”) operating departments by providing procurement oversight. This position functions as the subject matter expert for the solicitation process, Requests for Proposal (RFPs), Requests for Qualifications (RFQs) and Invitations for Bid (IFBs) and is responsible for handling negotiations, drafting contract language, developing evaluation criteria, coordinating the review and selection process for the awarding of contracts, and ordering department-specific purchases. The incumbent is also responsible for contract oversight and aligning departmental procurement requests with federal, state and local rules and regulations.

Administrative Services Manager

Under the general direction of the Chief Administrative Officer (CAO), the incumbent coordinates and directs the day to day administrative functions and activities within the Policy & Operations (P&O) Department; assists in establishing department goals, objectives, strategies, policies, and procedures regarding P&O issues; continuously evaluates, plans, strategizes, assesses, and monitors all aspects of the division to ensure maximum efficiency; and works in close collaboration with others (internal and external partners) to maximize team strength to carry out the goals of the department and the Fresno Housing Authority (“Agency”). The Administrative Services Manager primarily concentrates on providing strategic oversight of the budgeting function, facilities management, fleet management, and procurement functions.

Evaluation and Accountability Manager

The Evaluation & Accountability Manager coordinates, oversees and performs professional, technical and analytical work in one or more assigned areas including coordinating and leading major and challenging projects to expand practices proven to increase Agency effectiveness. Provides timely delivery of high quality services; serves in a lead capacity and creates innovative approaches to meet the needs of the Agency.

Housing Analyst:

Under direction of the Senior Manager – Housing Management, the Housing Analyst develops, analyzes and delivers program reports for the purposes of program compliance monitoring and financial forecasting. The Housing Analyst also oversees leasing, waitlist and application processing for Housing Management developments, and assists in employee training.

Accountant

Under direction of the Senior Manager of Accounting & Finance, the Accountant performs a variety of professional and technical accounting duties involving the maintenance of multiple programs, general ledger within the accounting system, financial reporting, cash receipt and transfer accounts, and payroll functions. The Accountant also provides technical assistance to Fresno Housing Authority staff.

If interested – follow this link to the HUD employment opportunity page and download the job description and application:

http://www2.hafresno.org/default_sub.asp?page=employment_listing

FIN 180 & 183 Students: The Writing Center...

The Writing Center is open for your students to use its services M-TH 9-4 and F 10-2.  It it located in the Ed Bldg 184.  Tel.278-0334. www.csufresno.edu/writingcenter.

Twenty-five well-trained tutors are available this semester to help student writers at any stage of the writing process:

 -understanding and getting started on assignments: Students can come even before they have done any writing. Tutors will help them understand the demands of an assignment, review the knowledge they have, brainstorm and set them on the way of writing a draft
 -expanding, clarifying and re-organizing drafts: Once they have a draft (no matter how skimpy or provisional or rough), tutors will give writers feedback on what works and what doesn't, and will help them negotiate revision
 -correcting and polishing final drafts: At the last stage of the writing process, tutors will prioritize and point out patterns of grammatical or mechanical errors and help writers learn how to correct and avoid them.

The Writing Center has three kinds of services:

1.    semester-long group tutorials—for those students who will have a lot of writing assginemnts and/or who want to learn in small groups how to read and evaluate drafts, give and receive feedback, take their drafts through multiple revisions, etc. These tutorial groups provide deep, semester-long learning that affects students’ behaviors and knowledge as writers and readers. The time to sign up for these is during the first weeks of the semester (before 2/13)
2.    walk-in and by-appointement one-on-one tutorials—these are offered throughout the semester and help students with particular assignments
3.    on-line tutorials—students submit their drafts and receive comprehensive feedback via email

Employment Opportunity

Job Description – Development Team Position
1/9/12

Fresno, CA based real estate development and finance company with a 25 year history and large portfolio, consisting of multi-family housing statewide, is seeking a highly motivated individual interested in real estate development. Individual is preferred to have a four (4) year college degree and experience in project management, financial analysis, real estate development, real estate finance and/or affordable and public housing. This position has great growth opportunity as the organization is highly structured and well positioned for growth. This individual should be highly organized, capable of multi tasking, have proficient computer skills (i.e. Microsoft Office, Word, Excel, PowerPoint, etc.) and most importantly be a team player. This is a full time position with benefits. If you are interested, please forward your resume by January 27, 2012 to resumes@ahdcinc.com.

Clovis Valuation Study Published

A valuation study of property values in Clovis, California was recently published in the Journal of Sustainable Real Estate.  The paper examines the relationship between property age, dual pane windows, and property values.

For the full paper, please visit: http://www.costar.com/uploadedFiles/JOSRE/JournalPdfs/08.142_161.pdf

FIN 181 & MBA 289T Office Hours Tomorrow

FIN 181 and MBA 289T students.  I have final exams graded and will have office hours tomorrow from 8 AM to 2 PM if you would like to see your final exam.  Just call or email me before you stop by the office.

I am still working on grading papers and projects and do not have final course grades at this time.

FIN 181 Mark Massie Appraisal

Massie Appraisal Report

By Jackie Perkins & Andrew Vera

For our Mark Massie appraisal report we found that our subject property and the information contained within the report was extremely interesting. During the first day when we were handed the assignment, we looked through a detailed report cluttered with information. Many students would have probably passed this off as useless information, however we looked at it and were fascinated with the structure and detailed information that was in it. Not only was this report organized with a vast amount of information, there was something great about being able to get inside the mind of a great appraiser like Mark Massie.

Our subject property was located on the Southwest corner of Fresno & “B” Street. The property, at the time, consisted of three old and poorly maintained small residences. Along with a garage in back of the first home, and a shed behind and between home two and three. A more detailed description of the property states that the subject property is “Improved lot in West Fresno that has 150 feet frontage on the southeasterly side of Fresno Street, and is 100 feet deep (with frontage on “B” Street). All city services and utilities are available to the site, which has curbs, gutters and paved street. The lot is approximately 12 inches above street grade, and soil characteristics are favorable for foundation purposes”. This is one example with how elaborate Mr. Massie was with his work. He seemed to put down every single detail when it came to putting his appraisals together.

In the report it is stated that during 1962, when the appraisal was taken, the “property is located in an area in West Fresno which is in a gradual transition from residential to commercial and light industrial land uses. There has been relatively little real estate activity; a search of the Official Records of Fresno County revealed only two recent sales of roughly comparable properties”. In the report Mr. Massie used two properties to compare with the subject property to get a general idea of a highest and best use analysis. Site one was a Shell gas station on the southeasterly corner of Fresno and “C” Street. The second property was adjacent to the first, it was an inside lot improved with a single story brick store building. Given that both of these properties were being used as commercial sites, Mr. Massie believed the subject property would best serve as commercial use. In the report he states that the homes on the subject property are poorly maintained and would have little or no salvage value. He also took into account the cost of moving them, which would be great and any renovation would cost a lot more as well.

Mr. Massie concludes that the best use of this property would be to use it as a commercial property. Using the comparable units in and around the market at the time, he felt this would be its best use. He appraised the value of the subject property to be $25,000 in 1962. Today, using market comparable units, similar commercial properties are selling anywhere between $750,000 and $2,000,000 in and around the Fresno area. Currently the property is in fact being used as a commercial site. It now holds a Rite Aid Pharmacy, Panda Express, and a Burger King. One struggle we found was trying to figure out the exact location using the maps and pictures. None the less we found it and were able to get the current status of the location.

All in all, it was an enjoyable task completing this assignment. We consider it a great honor to be able to look at another appraisers work and see the passion he had for his work. Our report, in particular, was organized in such detail, which worked towards our benefit. We would like to thank Mr. Massie for all his hard work and his wife for allowing us to use his work on this assignment. Thank You.

Market Watch: Best Place for Business

Market Watch released their list of best to worst places for business in the United States.  Washington DC was at the number 1 spot this year.  Fresno was at 100, up two places from last year.  For the story and complete list, please see http://www.marketwatch.com/story/california-florida-ohio-cities-in-bottom-10-2011-12-13. 

Fresno Least Expensive Commercial Real Estate Market According to BOMA

Fresno was selected the least expensive commercial real estate market, considering operating costs, in the country by BOMA International.  New York City was the most expensive market.

For the story, please visit http://www.mortgageorb.com/e107_plugins/content/content.php?content.10439.

Fresno Real Estate Investment Opportunities

In the book “Rich Dad’s, the Case for Real Estate” the authors talk about the benefits of owning real estate and what risks come with it. Specifically Real Estate can be used as passive income and in the long haul possibly for capital gains as well. In fact the books argument leans towards getting into real estate just as the title implies. The reader is cautioned to consider 3 sides to real estate: Finance, Management and Liability.

First and foremost for the book’s theory to work a profitability test must be met. That is after considering all the costs involved in owning an investment property will there be an acceptable profit? In my research, being a humble beginner that I am, office or retail space was excluded from consideration. Instead I focused on single family homes, duplexes and small apartment buildings.

Assumptions:

Home owner warranty (per unit) - $30 / month (6) (this money is not recoverable)

Property Management fee (per unit) – $ 90 / month (7) – Require 12 month contracts

APR for 30 year fixed business property – 5.5% (with my credit/ per Chase bank)

Down-payment – 20%

Improvement to Land Ratio – 80/20

Other Tax Deductions – (i.e. Renting myself space in my own house for office use to run my real estate business and other expenses associated with it: 25% of debt service, utilities and maintenance = $287.50)

Personal Income Tax: 28%

Vacancy Rate: 1.44% (Assuming Worst Case Scenario 5%)

As a small investor I do not have a required IRR or a set cost of capital. My requirement is simple: Rent covers all monthly expenses, however the Payback period should not exceed 10 years.

Business Assumption: Most Properties purchased in this area were priced higher than my purchase price which means higher debt service and thus higher rent requirement. (I can be the low cost market entrant).

The Market:

Single Family Homes: In Fresno a typical 3 bedroom 2 bath single family home may go between $800 - $1400 (1) rent/month. It seemed that if the house was located west of Route 41 and closer to Route 99 then the rent was cheaper while rentals further north or east of Route 41 were more expensive. These houses were in various conditions ranging from poor to acceptable (based on appearance).  

Looking at similar properties for sale (i.e. 3 bedroom 2 baths) in the same area yielded various results. My focus was on those selling for less than $100,000 (2, 3, and 4). With 20% down the debt service is $413 with insurance and taxes an additional $150. That is the total monthly outflow would be $683 (including assumed expenses listed above). Yearly depreciation is $2909.10 (80,000/27.5). This particular property was 8 miles north of route 99, right off 41. My research shows that similar properties in the same area currently rent for $1,200 (2). I would only charge $950 to ensure quick fill rate and to overcome any defects the property may have that I did not notice on the picture.

Calculating Yearly Cash flow and the Payback Period:  

Profit before Taxes= ((950*.95) – 683)12 = 2,634

Profit After Taxes = 2,634*.72 = 1896.48

Tax Benefit = (2909.10+ (287.50*12))*.28= 1,780.55

Cash Flow = 1896.48+1780.55 = $2075.03

Payback = 20,000/2075.03 = 9.64 years

Though the payback period seems a long time away I am satisfied because I own an asset and someone else (i.e. Renter) is paying for it. At the same time I have a benefit of passive cash flow. I feel my business assumption is valid in that monthly rate is competitive. Also I hedge by going with a property manager who prescreens potential renters and by requiring a 12 month contract.

Multi-Family Units: This proposition seems even more lucrative due to the financials. Specifically there were several (3-to-4) 1 bedroom, 1 bath unit buildings at a going rate of $120,000 – $160,000 (5). The rent is between $600-$800/unit, depending on the area (1). While the rent depends on the neighborhood and conditions, it seems that these prices are reasonable for Fresno. That is on paper this is a great investment, however I would need to see the actual state of the properties as well as the types of tenants that occupy that space. Again I would charge $550 which is 10% lower than the competition. Debt Service would be 635.92, (given a value of $140,000) an additional $213.00 for insurance and property taxes and management and maintenance costs at 480 ((30+90)4). Yearly depreciation 4072.72 and other tax deductions at $287.50.

For now let’s assume that everything is as is at face value. So what is the math?

Calculating Yearly Cash flow and the Payback Period:  

Profit before Taxes= ((4(550*.95)) – 848.92-480)12 = 9,132.96

Profit After Taxes = 9,132*.72 = 6,575.73

Tax Benefit = (4072.72+ (287.50*12))*.28= 2,106.36

Cash Flow = 6,575.73+2,106.36 = $8,682.10

Payback = 28,000/2075.03 = 3.23 years

Both properties meet the profitability test. The conclusion seems obvious, Multi-Family dwellings are the way to go, but both properties yield income. The money is good and we are paying a property manager to take care of it all. The final hold up than, is in the liability aspect. As the calculations stand now we are looking at a sole proprietorship which has unlimited liability. To start an LLC would require an additional $800/year, which I believe would be worth it in the multi-family case.

In the end the financials certainly make sense, however it is the last 2 components, management and liability exposure, that are difficult to predict. There is only one way to really see how these investment properties will pan out, is to buy them and let renters in.  I believe the last two components are a matter of experience and that the book makes  a valid case. Investing into real estate seems a good source for additional passive income and route towards better retirement.

Bibliography

1.       http://www.mynewplace.com/search?back=T&q=Fresno%2C+CA – Rentals comparison

2.       http://www.realtor.com/realestateandhomes-detail/8701-Highway-41_Fresno_CA_93720_M17829-30921?source=web – Buying an investment property

3.       http://www.realtor.com/realestateandhomes-detail/8701-Highway-41_Fresno_CA_93720_M17829-30921?source=web – Mortgage Opportunities (single Family)

4.       http://www.californiamoves.com/property/details/1604148/MLS-12158321/3274-Acacia-Ave-Fresno-CA-93726.aspx?SearchID=13161728&RowNum=9&StateID=9&RegionID=5&IsRegularPS=True&IsSold=False- More Mortgage Opportunities (Single Family)

5.       http://www.fresnoincomeproperties.com/listings.html - (2-5 apartments)

6.       http://home-warranty.firstam.com/?code=BM51 -Appliance Insurance

7.       http://www.oaktreepropertymgmt.com/services.php (Property Management)

8.       http://www.thebusinessjournal.com/real-estate/3513-recession-impact-on-fresno-less-severe (Vacancy Rates In Fresno)

The Fresno Brain Drain

The Fresno Brain Drain

By

Brock Lechowicz

The city of Fresno is a very interesting city; it is one of the largest cities in a state with the largest economy in the country, but what does Fresno really have to offer? With such a prestigious university in the heart of a city with roughly half a million residents, one would assume that Fresno would be a hotbed of innovation. Unfortunately the opposite is mostly true, Fresno is not known for its innovation or societal achievements, but is in fact known as one of the dumbest areas in the nations. How is this possible? How is an area that has so much potential and seems to have all of the right tools to be successful fall short in almost all categories that involve intellectual achievement? The Fresno “brain drain” as it is so commonly called is an interesting phenomenon that has plagued the city and its residents for years (Ganga, 2005).

In the book that I had previously read called “The Great Stagnation” by Tyler Cowen, one of the main points of the book was about society today always going after low hanging fruit (Cowen, 2010). When he explains this, the idea basically breaks down into the idea that society has sculpted us into a race that likes to the take the easy way out and use whatever resources are easiest for us to obtain. I feel that this relates very well to this whole idea of the brain drain in the Fresno area because of the ease of finding a job or creating a job (Ganga, 2005). Due to the large number of current Fresno residents that are in the process of obtaining an upper level education, one would think that it would be easy to find a job in the Fresno area. However the Fresno area is one of the highest ranking areas in the country for unemployment and thus good jobs are fairly scarce (Ganga, 2005).

It seems that upon graduation from some of the academic facilities in the Fresno area that there is somewhat of a mass exodus to more lucrative markets. The majority of educated Fresno residents are fleeing to larger more metropolitan areas to find employment, such as Los Angeles or San Francisco. “Between the years of 1995 to 2000 Fresno lost one sixth of its single college educated residents, while Los Angeles saw the same demographic grow by 10% and San Francisco saw a 20% growth as well (Ganga, 2005).” This is a perfect example of the populous moving to where more low hanging fruit is available, instead of working hard to find a good career or to start your own career in the Fresno area. The educated Fresno workforce is moving to where they can more easily find occupation or low hanging fruit.

There are many factors that are encouraging this exodus of the educated Fresno workforce. The most prominent of these factors is the job market, not just the availability of good jobs, but the regular wages of those jobs. “For example, a computer programmer in Fresno earned an annual salary of $56,210 in 2004, according to the U.S. Bureau of Labor Statistics, while that same programmer in Los Angeles made $72,740, and in San Francisco $87,120 (Ganga, 2005).” The numbers seem to speak for themselves, cost of living is one reason for the increase in wages, but is not the whole factor. When considering this, one must ask themselves; why would I want to live in a smaller town with virtually no room for advancement and virtually no culture and make less money than a city with those things? I think in looking at that question one would find the answer to why Fresno has such a problem with brain drain and how this problem is going to continue in the future.

The Fresno community must realize this overwhelming problem to fully understand how it is affecting the local economy and local community. With the mass exodus of educated Fresno residents, it has left the town with an almost unemployable workforce and an almost stagnant economy. Fresno must realize that a revitalizing the economy of the town is going to the most important aspect of slowing this increasing problem. Until Fresno is able to find a way to combat the increasing number of educated residents leaving for greener pastures, it is always going to cause numerous economic problems in the future.

Works Citied

Cowen, Tyler. “The Great Stagnation.” New York; Dutton Publishing, 2010. Print.

Ganga, Maria, “Fresnos Brain Drain Has Left The Town Smarting.” New York Times, 2005.

Uncontrolled Growth

In The Big Short, Michael Lewis delves into the overextension of credit and the poor management of real estate. The overbuilding of houses and overextension of credit to less worthy borrowers is highly evident in Fresno. The Sunnyside area of Fresno, which holds many acres of agricultural land, was a great example of overbuilding and what happens when residential demand outpaces demand for all other uses. With high foreclosures and a customer base that mirrors some of Lewis’ examples, Fresno was obviously not insulated from the crash. The end of the real estate boom left many areas deserted with developers leaving in droves just as fast as they came in. The Sunnyside area of Fresno is no stranger to these developments.

Financial bubbles have occurred since the beginning of financial markets. In the past 30 years we have seen history repeat itself several times but our memory remains very short-term. When demand skyrockets and optimism abounds, things can get out of hand. This is very evident in Fresno where developers began to take large lots of land, often agricultural areas, and build housing developments.

The Sunnyside area of Fresno, which was mostly comprised of agricultural land, transformed quite a bit during the real estate craze. Bounded by Chestnut Avenue on the west, most of the area is considered County land. When the general real estate market began to heat up, so did the public’s need for more residential land. In southeast Fresno this meant replacing farm land with new housing development. Builders clamored to convert lots for residential use. The extension of highway 180 also helped boost demand for these homes. The Sunnyside area that once contained large lots with spacious backyards began to see the typical traits of new housing where lots are smaller and neighbors are closer together. Population density essentially increased by 50 percent (Advameg, 2010).

A big issue with real estate booms is the inherent risk involved with mortgage loans. Lengthy terms, borrower creditworthiness and fluctuating economic conditions can all affect real estate markets. As a lagging economic base, Fresno’s markets tend to experience the effects a bit later than northern and southern parts of California. Fresno’s agricultural base also creates employment that is very sensitive to changing prices as well as seasonal trends.

In The Big Short, Lewis cites many cases where banks did not do their due diligence in screening borrowers. He writes about a strawberry picker who made $14,000 a year and was approved for a $700,000 mortgage (Lewis, 2010). For many new developers in the Sunnyside area, this scenario could have very well been true. First-time buyers with low or seasonal wages soon became viable borrowers for an industry that began to run out of truly qualified participants. In this situation the Sunnyside area saw an influx of builders coming in and capturing these untapped borrowers in an area that was largely undeveloped (Fresno, 2008). Unfortunately, many were simply too late to the game.

Michael Lewis paints a picture of uncertainty and desolation in the aftermath of the real estate boom and bust. He points to areas like Bakersfield that were once beacons of hope and now are largely abandoned. A quick drive to the Sunnyside area a few years ago likely evoked those same emotions. Unlike more developed areas that simply have “for sale” signs dispersed throughout a neighborhood, many of the housing developments in the Sunnyside area were left unfinished and essentially abandoned in hopes of a better time when the market was able to recover.

The Fresno residential market had overextended itself and in the process perpetuated urban sprawl and left agricultural land unusable for the foreseeable future. Real estate generally lags behind in demand and the central valley lags behind other expensive markets and thus unfinished developments were the outcome for the Sunnyside area. For an area that once had mostly older housing mixed with large lots of crops, the undeveloped lots were a big eyesore.

Michael Lewis rails against those banks and investment firms that perpetuated the idea of the American Dream. Individuals were led to believe that they could somehow own homes that were far beyond their means. Cities and communities were driven to accept this idea as well. The Sunnyside area of Fresno, a once harmonious mix of agriculture and older but classic housing, succumbed to these same market pressures. Overbuilding and urban sprawl created a desolate landscape that disrupted the once scenic area. The area will recover but it will be interesting to see if history will repeat itself in another 20 years as has been the pattern that Lewis explains in his book.

Works Cited

Advameg, Inc. (2010). City Data - 93727. Retrieved December 2, 2011, from City-Data: http://www.city-data.com/zips/93727.html

City of Fresno. (2008, July 8). Fresno Southeast Growth Area. Retrieved December 1, 2011, from City of Fresno Web Site: http://www.fresno.gov/Government/DepartmentDirectory/PlanningandDevelopment/Planning/SEGA/default.htm

Lewis, M. (2010). The Big Short. M. Lewis, The Big Short. New York: W.W. Norton & Company.

High-Speed Rail in Fresno

Many people wonder what the high-speed rail system will do for Fresno. Do the benefits outweigh the costs, which according to a recent Fresno Bee article, are estimated at a whopping $98 billion for the statewide project, more than double the previous projections of $43 billion (Siders, 2011)? In the book, The Great Reset, the author dedicates one of his chapters to explain the significance that new infrastructure, namely the high-speed rail system, will play to “reset” the economy in times of crisis. Florida states, “Just as in the past, infrastructure provides a critical platform for growth and a framework on which to build a new kind of economy. “ (p 170).

This youtube video shows a conceptual design of the growth and development that will occur in Downtown Fresno with the high-speed rail. Not only will the Central Valley experience growth, but job creation as well. According to the California High Speed Rail Authority, this project anticipates 16,500 construction-related jobs for Fresno-Merced section alone.

In addition to those jobs, the California High-Speed Authority expects the project to create hundreds more for the high-speed rail system and businesses along the statewide route, which includes Fresno.

There are also environmental benefits that come from the high-speed rail system. Air pollution and smog will be reduced as a result of electric-powered trains. Air quality will be improved, also. The high-speed rail system will also reduce gas emissions by 12 billion pounds per year. For example, this interactive map picture, available on the California High-Speed Rail Authority's website, shows a route starting in Fresno and ending in San Francisco. It shows trip stats - travel time is estimated to be 1 hour and 20 minutes and CO2 emissions saved is 141 pounds for the trip.

Over the years, there have been several failed attempts to revitalize Downtown Fresno. the high-speed rail system will definitely benefit this community. With this system, we can expect economic development and revitalization to occur. Florida would also agree with this idea. In his book, he compares past economic crises with regard to transportation infrastructure development and what we can expect to see occur in the future. Denser, more concentrated areas will develop along the routes. This will help revitalize struggling cities that are along those lines (p. 169).

When you consider the US highway system costing the equivalent of $429 billion in current dollars (p. 166), I believe that the high-speed rail system is essential to help spur the economic development that our community desperately needs. By improving the movement of people, goods, and services, you are increasing economic opportunities while at the same time, improving our environment. I vote yes for the high-speed rail system.

Sources:

California High-Speed Rail Authority. http://www.cahighspeedrail.ca.gov/

Florida, Richard. 2011. The Great Reset: How the Post-Crash Economy will Change the Way We Live and Work. New York, NY.

Siders, David. (October 2011). High-speed rail cost projected at $98.5 billion. http://www.fresnobee.com/2011/10/31/2598092/high-speed-rail-cost-is-rising.html

Taking Advantage

The aspect of renting out versus buying a home is a dilemma that every aspiring homeowner must face sometime in their life. A potential home buyer will weigh his or her options of whether or not it is a wise investment to either purchase a home or continue renting. The fear that most, if not all, of us experience is if we will receive a return on our investment in purchasing a new home or if the home’s value will go belly-up and cause us to lose a fortune. The book “Why Smart People Make Big Money Mistakes” (Belsky&Gilovich) focuses on enlightening people on how we “psych” ourselves out of making investments that will eventually benefit ourselves in the long run.

The most recent market crash of 2007 and 2008 has left a glaring scar on the housing market with many homeowners (both now and at the time of the crash) seeing red over the fact that their home’s value dropped so significantly that their mortgage payments were being paid for more than what their home was actually worth. The housing market crash, coupled with harsh economic times (most notably the loss of jobs), has deterred many potential home buyers from following through with their dreams of buying a home. Unfortunately, this has also caused many of the large, national banks to stiffen up on their qualifications for people who are looking to receive a home loan.

The authors of the book “Why People Make Big Money Mistakes” (Belsky&Gilovich) discuss many different instances where we, as investors, have created a certain mindset that prevents us from making a sound financial decision. This is mostly due to the fact that we don’t always conduct our own research in regards to a specific type of investment and then resort to relying on the actions of the entire investing community in order to persuade ourselves to move in one direction or the other. The authors refer to this as “following the herd” (Belsky&Gilovich). The authors warn against falling into the “herd” since the “herd” is mostly made up of people moving their funds around based on the combination of emotion and lack of knowledge. This can be applied in to the scenario of deciding to continue to rent a home or to step out and purchase a home.

According to the blog the “Economix” from the New York Times’ website, now is an opportune time to make a home purchase if you are capable of doing so (most notably if you have a steady job and your credit is in check). The blog presents a graph that displays the average monthly mortgage payment versus the average rental payment.

As you can see from the graph, the average monthly mortgage payment is about the same as the average rental payment. Of course, this graph does not take into effect of upfront costs from either scenario (i.e. down payment, security deposit). Notice how the monthly rental payments have continued to increase steadily over time, while the average monthly mortgage payments have experienced significant volatility over the same time period. This graph is an indicator that the monthly payment of renting a home will continue to steadily increase as time progresses. Although this may be mostly true for the average mortgage payment as well, home prices (along with mortgage payments) will continue to fluctuate over time.

The purpose of this blog is to encourage those of us who are looking to invest in buying a new home to reevaluate their current living situation and ask themselves “do I really want to continue to pay rent every month?” We should all strive to become a property owner and increase our own personal equity instead of paying somebody else every month and losing out on such an opportunity. The first step in doing so is to refuse to be a part of the “herd” and go against our mindset of being “safe” and “conservative”. Succumbing to this mindset of playing it safe will prevent us from receiving the potential benefits of owning a home as well as taking advantage of the current market situation which has made available to us record-low monthly mortgage payments as low as four percent!! Breaking our current investing mindsets will allow us to achieve great returns on our investments and allow us to live without regret over the long run.

Written by: Kyle McDonald

Sources:

Belsky, G. &Gilovich, T. (1999).Why Smart People Make Big Money Mistakes-And How to Correct Them. New York: Simon & Schuster.

Rampell, C. (2011, October 13). Rent vs. Buy.The New York Times.Retrieved December 5, 2011.http://economix.blogs.nytimes.com/2011/10/13/rent-vs-buy/

Fresno's Real Estate and Unemployment Dilemma

The City of Fresno is much like many of the other communities in the Central San Joaquin Valley in that they face tough economic times, tightening budget constraints and high unemployment. In Fresno County alone the unemployment rate in 2011 is estimated at 15.8% according to the San Joaquin Valley Regional Planning Agencies Policy Council. With such a high unemployment rate and tight budgets, one of areas of the local economy that suffers is the real estate industry. How can the lessons of Rich Dad, Poor Dad help in such a difficult time? Well it will take investment in the community and it will take individuals with the capacity to provide the necessary capital to step up to the plate.

It is without a doubt that the unemployment rate for Fresno County has contributed to the number of foreclosed homes. The inventory of foreclosures in the City of Fresno as recently as October 2011 was between 1,500 and 1,600 homes. Those who lose their homes need a place to stay. It is typical for those who have lost their home because of foreclosure to go to the rental market. That is where Robert Kiyosaki and others come into play. Kiyosaki, the author of the book and self made millionaire, described techniques on how to take control of one’s financial life. One of Kiyosaki’s biggest wealth builders is real estate. He has used his business savvy to buy and sell real estate and it has subsequently allowed him to retire early. Kiyosaki and others with available capital and their business acumen can go into these distressed communities and find some great deals on foreclosed homes. They can then fix up these homes as necessary and rent them out to those in need of housing. The homes are better for the community and neighborhood with people occupying them. Those that are without occupants tend to get run down and lead to a decreased sense of pride in the neighborhood.

Driving around town, I have noticed that there are many small retail developments that seem to be empty and they tend to be around the neighborhoods that are distressed. Getting people back into homes also provides a boost to the local economy due to the fact that people need to maintain their homes and the goods and services that surround the distressed neighborhoods come back to life. When people need goods and services, there is demand that has to be met. With that demand, retailers tend to enter these markets. By entering these markets, personnel are needed to staff these new developments. This leads to people working and providing benefits to the local economy. This has had a ripple effect that has spread to different sectors of the economy.

Relating another theme of Rich Dad, Poor Dad to the real estate market is the idea that the poor tend to purchase items that take money out of their pocket while the rich purchase assets that provide a continuous positive cash flow into their pockets. Not only does this idea apply to humans, but it also applies to local governments. These entities have to reassess how they do business and realize that they need to look at areas where they are losing money and determine how to better manage them. Although governments are not in the business of turning a profit, they are also not supposed to be in the business of wasting taxpayer money. The local governments should provide incentives for residential and commercial development. I am not advocating reducing their standards, because once that is done; it is hard to come back from that. I do think that maximizing the opportunities for job creation and residential and commercial real estate is key to getting people back working and reducing unemployment rates.

Getting out of the economic crisis will not be easy. We have been in the downturn for a few years now and it is hard to see the light at the end of the tunnel. Recent national unemployment figures that indicated the rate below 9% for the first time in a long time is a step in the right direction, but as the chart above indicates, the San Joaquin Valley is lagging behind badly. Reinvestment in the local communities is vital to kick starting the recovery process. Kiyosaki and others like him need to have opportunities that allow them to reinvest in their community. These successful individuals have a proven track record of revitalizing communities and making them better. Local governments also need to reassess their business practices and identify areas where taxpayer money is being wasted and look for areas to reinvest in the community as well. In the City of Fresno, the Granite Park Development for the most part has been a disaster. But, there have been some bright spots including the very successful Me ‘N Eds Victory Grill pizzeria as well as a local night club and a brand new rock climbing facility. These private industry organizations are working to revitalize this area and turn it around to make it a success. The local government needs to be a champion for this effort. Doing so will get all of us back on the right path.

References:

Kiyosaki, Robert. Rich Dad, Poor Dad. New York, NY. Warner Books, 1997

San Joaquin Regional Agencies Policy Council, Valley Voice Sacramento 2011

http://www.foreclosureradar.com/, December 2011

Central Valley Prospects

College living is truly an experience all unto itself. The dormitories of on-campus living provide a solid beginning for freshmen just starting out while off-campus apartments provide a broad array of possibilities for those who don’t want the on-campus style. Each comes with distinct advantages and disadvantages with prices that, until recently, reflect the cost of moderate accommodations. With several large universities in California, the Central Valley provides an interesting consideration for those looking for a school with a quality reputation and reasonable living arrangements.

Coldwell Banker, a prominent national real estate brand recently released its “College Home Listing Report” that arranges data for 117 of the 120 schools in the Football Bowl Subdivision (MarketWatch). The data is a compilation of the market listings for the past year for 3 bedroom, 2 bathroom homes, is arranged by city, and can be used to see valuable trends in key cities across the nation. A look at either end of the list (highest average listing price, or lowest average listing price) we can see the cities with either a high cost of living (generally a function of the median cost of a listed home) or those where it may be more affordable to attend a major university.

Of particular importance for this conversation is that five of the top 10 most expensive markets are within California:

UCLA $1,271,428

Stanford $1,232,070

USC $733,473

UC Berkeley $695,520

San Jose State $541,231

Fresno ranks number 34 in order of most affordable at $157,311.

A little further north in the central valley, a similar situation of affordability has occurred somewhat by accident as speculative investors have found themselves upside down. Merced, which in 2005 received the first new UC school in 40 years, promised to give outside investors a quick return, many purchasing land with a hope that prices would rise given the projected market demand related to the new university (Kinchen). Unfortunately, that isn’t the way things played out which has worked out pretty well for those students! With the downturn of the real estate market in recent years many of those investors and planned communities went underwater. Students have seen the opportunities and are flocking to purchase and share these seeming mansions for only $200-350 each for a private bedroom, shared pool, Jacuzzis, etc. (Brown). The accommodations are a true bargain for ~$7,000 per year compared to $13,720 a year for a dorm room (Brown).

The apartment market in Fresno has also benefited from the market downturn with an increased number of families and students turning to renting over ownership. Robin Kane, an expert on multi-family housing said “…more families are renting apartments rather than buying houses like they would have in years past,” (Kincheloe). The apartment and rental market took large hits with the recession and just in the past year has regained some significant ground against those losses. Again from Mr. Kane, “At the end of this year, we should be at about 35 percent over where we were last year,” (Kincheloe). One secret benefit to these gains is that it serves to coerce investors to bring money to the central valley in the form of apartment complex purchases and construction while providing affordable and attainable housing to those that need it, particularly of the college and university age.

Despite a bad rap for being expensive, California still has many affordable opportunities in the central valley. Students and young families alike, all of whom are generally unable to afford a place of their own as they start out, can find great prospects in the central valley despite the reputation and expense of California’s more urban cities. A low median housing cost, underwater and foreclosure opportunities, and rental properties all provide a wide range of possibilities for those seeking the warm California sun on a budget – whether they are buying or renting for themselves, or simply intend to invest. Investors and potential buyers alike truly should not overlook the central valley on the same assumptions made to Los Angeles and the bay area as we have many possibilities to contribute to California real estate.

Kincheloe, Michael. “Expert: Apartment sales to rise 35% this year.” The Business Journal. 2 December 2011. http://www.thebusinessjournal.com/real-estate/12341-expert-apartment-sales-to-rise-35-this-year

“Coldwell Banker Real Estate Report Finds Incredible Value in College Town Living.” MarketWatch. 2 December 2011. http://www.marketwatch.com/story/coldwell-banker-real-estate-report-finds-incredible-value-in-college-town-living-2011-11-15

Kinchen, David. “PARALLEL UNIVERSE: College Students in Merced, CA Rent Underwater McMansions, Saving Money, Annoying Neighbors.” HuntingtonNews.net. 2 December 2011. http://www.huntingtonnews.net/13351

Brown, Patricia Leigh. “Animal McMansion: Students Trade Dorm for Suburban Luxury.” The New York Times. 2 December 2011. http://www.nytimes.com/2011/11/13/us/homework-and-jacuzzis-as-dorms-move-to-mcmansions-in-california.html?_r=1&nl=todaysheadlines&emc=tha23