Prepare Your Property for The Winter

As the Starks Would Say, Winter is Coming

By Ira Krumholz, President of NAI Daus Property Management Division
ikrumholz@naidaus.com

AAL CLE _6 Final 17The 2015-16 edition of the Farmers’ Almanac includes a good news/bad news weather forecast for Ohio. The good news is that the fall is expected to be longer and milder than normal. But the bad news is that the winter is expected to be similar to last year – in the publication’s words, “snowfilled and frigid.”

I’m sure that you will recall how last year’s harsh winter impacted real estate, including ice dams, frozen pipes and a seemingly continuous battle to keep drives and sidewalks clear of ice and snow. This month, we will discuss some of the things that can be done now to help minimize properly-related issues in the months ahead.

Parking Lots & Sidewalks
Winter weather is especially hard on walk ways and parking lots. Not only do these areas have to endure continual freezing and thawing but also scraping and corrosive chemicals. Before the snow and ice starts to fly, take some time to thoroughly clean these areas, paying particular attention to drains and catch basins, and inspect the entire area for damages. Any smaller cracks and crevices should be filled and any larger issues should be repaired or replaced. Take some time to secure contracts for snow clearing early and prepare any snow removal equipment for the upcoming season. Finally, fall is a great time to stock up on salt or ice melt, before demand drives the prices up.

Landscaping
Although nature certainly takes its course with plants and landscaping during the winter, there are some things we can do to help things along. Inspect and prune plants and prepare them for winter by fertilizing, keeping in mind to protect from any potential salt or chemical exposure. Similarly, prepare lawns for winter by aerating and fertilizing. Fall is considered the best time to reseed or replant a lawn but be sure to do this early enough to allow for germination. Mark any areas that are exposed to snow plows with flags or poles. Finally, repair and winterize any irrigation systems that may be in place.

Roof and Structure
Similar to parking lots and sidewalks, the exterior envelop is also subject to the full brunt of winter. Take some time to inspect all areas, paying particular attention to exterior window and door frames, the gutter system and valleys and penetrations in the roofing system. Caulk, fill or otherwise repair any gaps, cracks or damaged areas, keeping in mind that water and ice can work their way into all sorts of areas. Any areas of bare wood should be painted, treated or otherwise covered. Finally, remove any built up leaves or debris from the roof and gutter system. Click here for full article.

Advertisement

Points to Consider Before Remaking Your Workspace

SmartBusinessNAIDaus_Cle_1015Architects can play a key role in helping your company create a workspace that matches your vision of how you want the company to operate.

“An architect can sit down and interview your key people and gain an understanding of how everyone works in your business,” says Alec Pacella, managing partner and senior vice president at NAI Daus Property Management.

“He or she can understand the critical components of your business and see what parts of the office need to be more collaborative and where you need to have more privacy.”

Collaboration and open space are more popular than ever in the working world, but Pacella says too much of anything is often not a good thing.

“You need to be able to draw a line between having open space and having a total free-for-all,” Pacella says.

Smart Business spoke with Pacella about how to develop a workspace that fits the needs of your business.

What is the biggest change in today’s typical workspace?
Companies are much more efficient in the way that they use space and that amounts to less square footage.

Some of the factors pushing this trend are the increase in shared working spaces and the rise in the number of people working from home, as well as the diminished reliance on paper files.

The raised floors that would cover up all the cables and wires don’t exist anymore. Younger employees want to be more collaborative and companies are adapting to create workspaces that facilitate that kind of working environment with the goal of boosting productivity. Click here to continue.

 

Different Applications of the Real Estate Spread

PropertiesSept2015-1On the eve of yet another youth soccer season, I recently took my son to the sporting goods store to buy a new pair of soccer shoes. We narrowed the choice to three – a relatively inexpensive pair, a moderately priced pair and an expensive pair. And to my surprise (or shock), my son didn’t immediately focus on the most expensive pair. Instead, he began to ask questions about why there was such a difference in price. And this led to a whole discussion about cost versus benefit and choosing the appropriate tool – in this case, a shoe – to fit the need.

Most investors will secure a mortgage when purchasing real estate. While there are many reasons why the use of debt is commonplace in the world of real estate, the concept of positive leverage is at the top of the list. This concept, commonly known as “the spread,” compares the unleveraged or free and clear yield of the real estate to the interest rate of a mortgage that would be used to purchase the investment. The spread is the difference between the two rates and the greater it is, the better it is for the investor. So it should be no surprise that one of the most popular forms of analysis focuses on determining the spread. But, similar to my son’s shoe decision, there are several levels of this analysis – good, better and best. And, similar to the shoes, there is certainly a cost versus benefit decision that needs to be made when choosing which specific analysis to use.

Good
Spread between the CAP rate and the loan constant The mechanics of this particular analysis are actually pretty simple. By now, you should understand that CAP rate is determined by dividing the purchase price by the net operating income. And while the concept of a loan constant may not be familiar, it is just as simple – divide the original loan amount by the monthly payment. I will use an example for each analysis to better illustrate the process. Suppose we are looking at a property that has a purchase price of $1.4 million and an NOI of $123,404 (for details on this calculation, see the Financial Strategies column in the November 2013 issue of Properties, available at (www.propertiesmag.com). The resulting CAP rate would be 8.81%. On the debt side, we can get a loan with a 75% loan to value, 8% interest rate and a 25-year amortization. The resulting loan constant would be 9.26%. And the difference between the two, or the spread, would be 0.45%.  Click here to read the rest of the article.

Knowledge is Power

PropertiesAugust2015-1A wise real estate Yoda once told me that all a real estate agent has to offer are two things – time and knowledge. And sales comparables are certainly at the front of the line when it comes to knowledge. Commonly known as ‘comps,’ individually, they can provide guidance when attempting to value a similar property. And collectively, comps can provide insight into pricing trends, sales velocity and buyer characteristics.

Back in the ‘old days,’ there were not many sources for this type of information. The most common method to collect them was trekking down to the county courthouse and searching through stacks of microfiche. How times have changed. The information superhighway has resulted in a staggering variety of sources for this same information. Some are free while others have a cost, either in terms of money or ‘goodwill capital.’ This month, we are going to discuss some of the most common sources for this vital but sometimes elusive information.

County auditor web sites The good news regarding county auditor web sites is that all 88 counties in Ohio offer the ability to view information down to the parcel level online. And the better news is that these systems are typically free. The bad news is that the individual county sites can vary widely in terms of searching functionality. For example, Perry County has a very robust system that allows users to perform broad-based searches based on a variety of characteristics, such as land use, transfer date and city. However, Cuyahoga County’s site is much more basic, allowing searches only based on specific name, address or permanent parcel number. And, although Cuyahoga County also offers a robust GIS system, if you are strictly searching for comps, this system is not the best tool. Click here to download the entire article.

Valuation of Real Estate Assets

VALUATIONOFREALESTATEWritten by Ira Krumholz, CPM®
President of NAI Daus Property Management Division
ikrumholz@naidaus.com
Twitter @IraKrumholz
216-455-0905

Determining the value of a real estate asset is never an easy thing but the historic free fall in real estate values a few years ago and subsequent uneven recovery has made this task significantly more difficult. This month, we are going to discuss how a tumultuous market can impact the traditional approaches to determining value – cost approach, sales comparable approach and income capitalization approach. Before we do, a brief discussion of the three primary types of value is in order.

Market Value. This represents the most probable price, at a specific date, which a property should sell for after reasonable exposure in a competitive market under all of the conditions for a fair sale. There are a couple additional things to note. First, neither buyer nor seller should be under any duress, with both parties knowledgeable and informed. And second, the price should be based on the property’s highest and best use, which may or may not be the property’s current use.

Investment Value. This type of value is all about the value to a specific purchaser, with little regard to the larger overall marketplace. One example of this would be a purchase by an investor involved in a 1031 tax-deferred exchange. Motivated by the deferral of a tax consequence, a trade buyer is typically willing to pay more for a property as compared to a traditional buyer. Another example would be a property owner that controls almost an entire block of property, except for one parcel. The owner would typically be willing to pay more for that outstanding parcel as compared to a traditional buyer. Click here read entire article. Click here to read entire article.