Perhaps free presentation sounds like there might be some catch. I admit, in some cases, that is the case. Our chamber of commerce is struggling to grow and improve. They need support. Tonight was a great example.
Tonight we had a presentation by one of our commercial members about retirement. It was great. Elizabethe and I were able to ask some very specific questions and the speaker had the answers. And, to top it off, he didn’t try to sell anything to us, or get us to come to his office. It was very professional and the type of informational presentation that many people would pay to hear.
The sad part about the evening was it was attended by 4 people (5 if you count the speaker.)
How do you get the word to people about stuff like this?
The Macedon Palmyra Walworth Chamber of Commerce is rebuilding. We have a few dedicated board members who are working to make the chamber a valuable business resource. These Business After Hours, as we call them, are great for networking and we’ve decided to make every other Business After Hours an educational presentation.
For the $65/year for an individual business person to join, you definitely get your money’s worth, but like anything, there needs to be some support. Thus, if the chamber offers a great presentation about retirement, what value is it if you don’t attend?
It’s the old adage that you can lead a horse to water, but you can’t make them drink. Only, in this case, you can get them to the spring so they can drink!
My point is this… if you own a business, take advantage of the chamber of commerce and networking opportunities. They will provide you with the best return on your investment.
I spent a good portion of the day dealing with landlord stuff. There is sure a misconception among some renters that (a) landlords are “rich”, and (b) the money they pay for rent goes directly in to the landlords pockets.
Nothing could be further than the truth.
Let’s take a hypothetical situation based on some real numbers…
The landlord owns property in a repressed income area, but an area where there is a shortage on housing. In other words, there are not a lot of rentals available, but the people looking to rent don’t have a lot of money either. This is a difficult case.
The landlord’s mortgage payments, taxes, and insurance total $1000/month (and assume this is after any tax breaks, if any, the landlord receives). However, for this neighborhood, the average rent runs about $900/month, and because it is an economically repressed area, there is little appreciation on the property.
So, I ask this about the landlord’s choices. Does the landlord…
a) Charge $1000/month and break even and take a loss on any repairs, or not repair the building?
b) Does the landlord charge $900/month and take a loss on rent and repairs, or not repair the building?
c) Does the landlord charge $1100/month and break even?
d) Does the landlord charge $1200/month, and set the extra $100 aside for repairs and building maintenance?
e) Does the landlord sell the building hoping to recover his initial investment, and let the new landlord deal with it?
f) Other ideas?
The ideal answer is d) Charge $1200/month, and set the extra $100 aside for repairs and building maintenance.
The other landlords in the are in the same predicament, and if they ALL did it, it bring in tenants who can afford the rent for that neighborhood. In other words, part of the repression problem is you have renters who are attempting to live above their means. The other part is you have landlords who let them get away with it by taking a loss, or letting their building fall in to disrepair.
It is a tough scenario.
Going back to my original premise, not all landlords are “rich”, and some may not be making a lot of money on the income from rent. Most are hoping to get a small windfall when they sell the property, but in the mean time, the cash-flow isn’t a huge amount. Of course, the idea is that in the long run, the property will make them money.
Another part of the “rich” fallacy is that the assets of a landlord are liquid. Many non-property owners do not realize that if you have, for example, $100,000 in equity, you cannot simply walk in to the bank and say, “I want to take $20,000 out to repair my home.” What happens instead is the bank offers a line-of-credit, which you apply for just like any other loan, and then the building becomes collateral. Thus, your $100,000 in equity now drops to $80,000 because you borrowed $20,000 against it. You also now have a monthly payment on the $20,000 loan. Thus, it is possible for a person to be “asset” rich, and “cash-flow” poor, and as long as those assets are in a non-liquid form, they can remain cash-flow poor.
What many renters who have never owned property don’t realize is this…
Most rent, if not all, goes directly back in to the property. Here is a very realistic example…
Amount owed: $120,000
Property value: $155,000
Mortgage + insurance + taxes: $800
Rent received: $1000/mo
Annual Repairs: $1000/yr
In this example, if the landlord were to sell, they would pocket about $29,000. But, that $29,000 is not available for them right now. They may not even consider selling the house for 20 or 30 years. So, let’s not look at that right now. Consider that $29,000 their retirement fund (which isn’t a lot for retirement.)
This landlord is getting $200/mo over and above the rent received. But, they have about $87/mo in repairs. Thus, they are getting about $113/mo “profit”.
Can you live on $113/month?
Can you make your car payment on $113/month?
Now, let’s assume they own 4 homes they rent, and all 4 are the same scenario. Can you live on $452/month? 5 homes? Can you live on $565/month?
There are a lot of landlords who own property as an “investment”, hoping to make their money when they sell the properties. 30 years ago, that was a big motivation to invest in property, however since 2008, that bubble has burst and it has become more risky in certain markets, and it has become more difficult to receive a mortgage loan.
I guess my point is this…
It’s a long-term investment, and it isn’t easy, quick money. It is hard work, patience, and a lot of hope that the market is in your favor when you go to sell. And, although there are land barons who are rich, that is not the case for all landlords. Many are hardworking, do-it-yourselfers, who rely and that extra income, as small as it might be, to pay a few bills. In the mean time, the equity in the property is their retirement fund.