Archive for category: DCRE Report

As a real estate broker, when some one calls about a For Sale sign, I’m always asked, “What is the asking Price?” Usually, they expect a price based on cash to the seller. But lately my thinking has changed. Maybe the answer to this question should be, “It will cost you $$$ per month to own this property.”

This brings up the very interesting concept of price vs. value. Price is the measurement in dollars of something, whereas value is the actual benefit of your purchase. Let me give you an example. When I was a kid, my dad, an Air Force Colonel, enjoyed having a rum cocktail after a hard day at the base. I remember his explanation of how he had developed a system of converting price into value. Back then, he could purchase a bottle of rum for $5.00, and this bottle provided a benefit. Then when he went to buy a pair of shoes, he would compare the benefit or value of a pair of shoes priced at $10, converted to the benefit of two bottles of rum. So, when he went to buy something for $100, it translated to a value greater than 20 bottles of rum. (Needless to say, back in those times, he did not buy a lot of things for $100.)

This way of thinking about measurements applies to a lot of situations. A cruise ship is not 600 long, it can be better described as being as long as two football fields. A building is not 1,250’ tall, but is described as being as tall as the Empire State Building. When we travel by air, the trip is not described as being 1,000 miles, but as a trip of 3 hours. Think about the things we consume. Coca-Cola ads never show the price, it shows the benefit of satisfying your thirst.

Another way to measure something is to describe the cost or benefit in terms that are more understandable. For example, comparing the mileage of one car to another. Let’s say you drive a car 20,000 miles per year. If one car gets 20 miles per gallon and another gets 25 per gallon, what does this really mean? Over a distance of 20,000 miles, this will be an additional 200 gallons of gas. At $4.00 per gallon, this will be $800 more per year for the car with the lower mileage/gallon. Maybe this is the reason more expensive, super-economical cars with fewer creature comforts are not as popular as we think they should be.

Then there is the strange benefit of ownership satisfaction. Consider the difference in the price of watches. They all do the same thing, with the same degree of accuracy; yet sell from $20 to $20,000. There must be an emotional benefit of possessing a watch costing $20,000. The price is $20,000 – but for someone to buy the watch – they must receive a benefit equal to or greater than $20,000.

Call us we know how to measure the difference between price and value.

Unless you have been asleep or out of the country, you have noticed the bizarre spread of branch banks everywhere. At the start of the Great Recession five years ago when banks were in trouble and our government bailed them out to protect the United States financial system from failure, the big banks were considered too big to fail but needed help. So the government loaned them money to protect the big banks and the banking system.

Historically banks existed to hold deposits, transfer funds, make loans, collect interest and fees, and to pay interest to depositors and dividends to stockholders. Somehow after the Great Recession all this changed. Banks still hold deposits, transfer funds, collect interest and fees, but pay very little interest on deposits (1/4 of 1% or a $2.50/year for a $1,000 deposit) and provide very few loans.

So what are they doing with all the money they are borrowing from our government? Some are using it to make trades on the Stock Exchange while others are using the money to build branch offices. Yes, they are building branch offices. Not just one or two, but a branch office seems to pop up every mile on major roads. But why build branch offices, when customers can make deposits using their phone, withdraw money at an ATM and do most of their banking electronically?

The growth of drugstores, fast foods and gas stations, is understandable, these all pertain to items that are tangible you can hold them in your hand or in your car. But other than cash, money is not tangible, and there is no real reason to even go to a bank except to deal with a problem or arrange a loan.

So why so many branch banks? One theory is that banks are using the money they borrowed from our government at less than 1% interest rate to invest in their own real estate investments. They are using the money not to make loans to regular businesses, that’s too risky. But instead of making loans they invest in real estate for their own gain, essentially backed by our tax dollars. Yes, banks can legally invest in real estate if it is used for the operation of their business. They cannot buy an investment property like an office building or shopping center. But they can own their bank buildings. One of the regulations for the ownership of real estate by banks states, “A national bank association may purchase, hold and convey real estate for the following purposes, and no others; First. Such as shall be necessary for its accommodation in the transaction of its business.”

So banks are not making real estate loans because they are considered “too risky”, yet at the same time they are investing in real estate, through the ownership of multiple branches. Marketing experts might say this is to build brand recognition and customer loyality. We’re not so sure. The bank where I have my personal account has been Coral Gables Federal, then First Union, then Wachovia and is now Wells Fargo and I haven’t once thought of moving because of the name change. As long as my money is insured, what does the name on the door matter? Call us…we can’t explain everything, but we can provide some insight into real estate issues.

By Thomas J Dixon

If you live in Florida and own property, you will receive a TRIM (Truth in Millage) notice in the next 4 to 6 weeks. This notice will give you an estimate of the real estate taxes that the property must pay, based on the assessment and millage rate. The assessment is established each year by the County Property Appraiser using mass appraisal techniques. The millage rate is based on funds the city and county government need to operate. The real estate taxes for a property is then calculated by multiplying the assessment – say $100,000 times the millage rate of say 19 mills, which is really 1.9% or .019. This equals a tax of $1,900. I sometimes think that the use of the term millage rate is to confuse the taxpayer. It would be much clearer if it was expressed as a percentage of value.

As a taxpayer, you are only obligated to pay your fair share and the only part of the real estate tax equation which can be appealed is the assessment. For non-homestead property, the tax year of 2008 is very important because the Florida Constitution was changed to limit the increase in the assessment from year to year. The following is an extract of the new assessment procedure for non-homestead property.
Assessments of non-homestead property shall be changed annually on the date of assessment provided by law; but those changes in assessments shall not exceed ten percent (10%) of the assessment for the prior year. …. such property shall be assessed at just value as of the next assessment date after a qualifying improvement …such property shall be assessed at just value as of the next assessment date after a change of ownership or control and …changes, additions, reductions, or improvements to such property shall be assessed as provided for by general law….
There are serious unintended consequences of this amendment. For example, over time – as the difference between the assessed value and the just value increases – fewer and fewer property owners will be motivated to sell and fewer buyers will be interested in buying because of the impact of the increase in assessment and taxes after a sale. The next problem will be the lack of motive to upgrade, change or improve property because again, this will cause a re-assessment of the property. However, this is the Florida Constitution and unless it changes, you should take advantage of these benefits.
With the general decline in real estate values from land, condos, single family homes to income properties, the year 2008 is the best opportunity to lock in the low valuations so that in future years as the real estate market improves, your assessment and real estate taxes will be at a minimum.
After you receive the TRIM notice, there is usually a period of 25 days to file an appeal petition if you wish to protest the assessment. Then, sometime in the next 12 months there will be a hearing before a Special Magistrate to protest the assessment. As a property owner, you can file the appeal and present your arguments before the Special Magistrate. However, many property owners have found that using a professional is much more effective.
With our 30 plus years of combined knowledge of South Florida real estate valuations as estate brokers, professional appraiser, teacher and economic analysts, we are well equipped to represent property owners in the successful appeal of real estate tax assessments.

CALL US — WE CAN MAKE SURE THAT YOU ARE ONLY PAYING YOUR FAIR SHARE OF REAL ESTATE TAXES.

Every time I make payments towards my retirement account I think about the stories of Bernie Madoff, MF Global and other investment schemes, where the investment money was “lost”. To date MF Global is missing roughly $1.6 billion, JP Morgan had trading losses of $2 billion and I’m sure there will be other horror stories. Once a month I receive my retirement statement that some months show increases and some months losses of my funds. This is only a printed document from a national financial company. I trust that these statements are correct and the money will be there when I retire.

However, to be on the safe side, with my son Andrew we purchased a duplex, for investment, to rent out and receive the benefits of appreciation, cash flow, tax depreciation deductions, with returns greater than the ½% interest we are receiving from our bank. But the most important part of this real estate investment is the knowledge it is there. We can physically touch our investment.

In the United States, ownership of real estate is protected in the sense that it is very difficult for it to be stolen, it cannot be taken by the government without compensation, with its financing provides leveraged returns and its ownership is recorded in the public records. This combination makes real estate purchased at the right price a very good long term investment.

The question is how to make an investment at the right time and the right price. Many investors say the most important factor is location, location and location. While location is important, timing and price are also very important. The best timing is when the market is near the bottom and will rise over time. The right purchase price is when the rental income less expenses will give a positive return. I believe we are near the bottom of this real estate cycle and now is the time to consider the purchase of investment real estate.

The negatives of owning real estate are the issues of property management, paying bills, collecting rent, overseeing maintenance and here in South Florida worrying about hurricanes. The positive is the security of knowing the investment is really there and it is yours.

Let us help you make sure “YOUR MONEY IS REALLY THERE”

Tom Dixon

Hello, I’m Roger Lopez and this is my first newsletter for the Dixon Magenheimer Sisler Report.

Anthropology is the scientific study of humanity. It concerns itself with the biological and cultural evolution of our species.  Generally it can be divided into four fields: biological anthropology, linguistics, cultural anthropology, and archaeology. The film character Indiana Jones is an anthropologist.

Biological anthropology focuses on the questions surrounding our physical evolution, as well as the evolution of the rest of our primate family. A lot of people are often surprised to learn that humans are classified as apes, just like chimpanzees and gorillas (our genetic cousins), except that we wear clothes and occasionally eat at the Cheesecake Factory. Monkeys and the rest of the primate clan are our cousins as well. The cultural and linguistic subfields deal with questions about our universal behaviors as well as those that make us unique in relation to other societies and how these are intertwined with our language. Archaeology, as our friend Indiana Jones has taught us, is the science of describing ancient cultures through their artifacts and fighting Nazis.

I have known the Dixons for 15 years, half of which I spent learning all about our species. I began my anthropological career at the University of Miami where I took classes spanning all four fields of the science. I graduated with a B.A. in anthropology with a strong focus on the biological component. I went on to graduate school at Kent State University in Ohio where I enrolled in the Master’s program. I spent three years learning about feeding behavior and the biomechanics of several species of South American monkeys. This required me to spend a whole summer in the jungles of Suriname stalking monkeys and drinking a significant amount of rum.

One day I decided to no longer pursue a life of anthropology. Making a career out of the science requires a Ph.D., something for which I was not prepared to commit. Despite my decision, I knew I had been exposed to a vast wealth of knowledge and to an invaluable set of skills. Aside from its academic component, anthropology serves many purposes in the “real world”.  Archaeologists often work closely with governments and the private sector to ensure that land meant for development is free of any significant cultural resources (i.e. artifacts). And within recent history, linguists served an important function during WWII by helping the U.S. government decipher Japanese and German secret codes as well as developing our own undecipherable language based on Navajo.

While the leap from anthropology to real estate may seem counterintuitive, and it certainly was accidental for me, it can make more sense than expected.  We believe real estate is about problem solving and understanding the needs of others and from where these needs stem and solving them. Being able to relate to anyone irrespective of their background is essential to successfully representing buyers and sellers. I recently earned my sales associate’s license and plan on making good use of it. If you are looking for representation in a real estate transaction, or if you just want to chat about monkeys, now you know who to call.