Just When Things Were Bad, It Got Much, Much Worse

Property Values and Housing trades will be knocked from their knees to the ground April 22 by EPA.

Our nation’s pivotal economic engine, the home building trades, who have already been knocked out of the business of building new homes in this economy, have struggled to eek out some flagging work in renovations. That consolation market now will be decimated by a government initiative to remedy a faulty product that was discontinued for use before many of these builders ever picked up a hammer for hire.

The new EPA Lead Rule places all of the burden of compliance and financial consequence for the remediation of the long-prohibited product on the individual building tradesmen. If they fail to obtain the EPA training and also conform their practices to those procedures on all work on pre-1978 homes starting April 22, they will bear fines of $32,500 per day, an amount that is twice the annual salary for many of these folks. In addition to the burdensome training, the required procedures include wrapping the work area and wearing of special suits, like the isolation scene of the ET film. They also must follow prescribed cleaning, disposal of all materials, posting signs, inspecting, testing, as well as paperwork. Why is it that during the worst economic conditions of many of our lifetimes – why is it now that the government must place the burden of ameliorating a long un-used product upon the shoulders of the sector of the economy that is most uniformly hit by the economic crash? Why must these individuals bear this economic responsibility for a product that has been out of use for 32 years? Why now and why on their shoulders?

Who knew? A large number of affected trades people have not known of the Rule and its deadlines. The EPA did no wide-spread announcements to reach affected housing professionals. In practicality, the compliance for this Rule is impossible, since there are not even enough trainings to allow full compliance by April 22 for all of the trades affected. You might wonder, how about more trainers? Not possible either, since there is not enough trainer-training to multiply class availability, as local home builder associations have discovered. It is estimated by a local homebuilder group that only about 25% of the affected trades people will be trained in time. The remainder must turn away work on older homes, which for them is the only work that is available in this housing market.

What happens to energy efficiency makeovers? What about those government incentives to add insulation and better windows? Those programs were just starting to catch on in the pre-recovery economy, as the contractors adjusted their marketing and tooled up in those areas, and as consumers saw the payback in savings for those renovations. But with these new procedures in the EPA Lead Rule, the savings are gone, as the window job that was $350 now will cost $1,000 due to the burdensome additional labor and materials to address the requirements of the Rule. The EPA has even eliminated the opt-out for homes that do not house pregnant women and children. Thus, elderly who reside in homes they have owned for half a century, and to whom the offending products pose no danger, must also be subject to the expensive prescriptions of the EPA Rule. Those homeowners will skip the needed energy renovations and continue to struggle to pay their high energy bills.

Those same houses, with elderly owners, holding the investment of their lifetime, which were already deflated by one-third in the housing bust, now will lose even more value as those homes become un-sellable, due to this Rule. The majority of homes on the market in many areas, are homes older than 1978. Those inventories will deflate in value very quickly after April 22, as new buyers avoid the exorbitant costs of any repairs on those homes. The nation’s flagging economy that teeters on the value of homes, their sale, and the robustness of the housing market, will languish with this Rule in place. It has grave consequences for the entire economy.

What can be done? All Senators and Congress people should write to the Office of Management and Budget to delay the EPA Lead Rule, to study its consequences, and amend it before instituting it. They should petition the White House to do the same. Get them to do that. The bodies of Congress and Senate can also vote to suspend the rule altogether, in order for proper revisions to occur. Those revisions must include making training available, publicizing the requirements and deadlines to all affected trades, allowing opt-out for homes without children and pregnant women, and financial offset for the costs involved in ameliorating a toxic product that was discontinued in the trades 32 years ago.

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We want to discuss six real estate investing tips intended to help anyone just getting started in real estate investment to successfully launch an investment real estate business and hit the ground running.

1. Develop the Correct Attitude

Foremost, if you are to succeed at real estate investing, you must understand that real estate investment is a business, and you become the CEO of that business.

It’s crucial, then, as your first order of business, to develop the correct mind-set about investment real estate and be able to make the following distinction between buying a home and investing in real estate:

“You buy a home to live and raise a family; you buy investment property to pay for the home, live comfortably, and raise your family in style”

As one investor put it, “Only women are beautiful, what are the numbers?”

In other words, to invest in real estate successfully you must acknowledge that it’s not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; that what counts most is the property’s financial performance.

2. Develop Meaningful Objectives

A meaningful set of objectives that frames your investment strategy is one of the most important elements of successful investing. Stay realistic. Yes, we all desire to make millions of dollars from our real estate investment property, but fantasy is not the same as expressing specific goals and a method on how to achieve it.

Here are some suggestions:

How much cash can you invest comfortably? What rate of return are you hoping to generate? Are you expecting instant cash flow, looking to make your money when the property is resold, or merely looking to achieve tax shelter benefits? How long do you plan to own the property? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? What future net worth are you hoping to achieve by investing, and by when? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

As a novice to real estate investing, you probably know little about income property in your local market. So, do market research to learn as much as you can about income property values, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal when you see it.

Here are some resources to check out:

(a) The local newspaper,
(b) A local appraiser,
(c) The county tax assessor,
(d) A qualified local real estate professional,
(e) A local property management company

4. Run the Numbers

Calculating the property’s cash flow, rate of return, and profitability is crucial to a successful real estate investment business. As the CEO you’ve got to know what you’re buying, especially if you’re trying to determine which of several investment opportunities would be the most profitable.

You have two options:

Invest in real estate investment software. This will enable you to discover for yourself the rental property’s cash flow and rates of return, and create your own analysis reports. Plus, by running the numbers yourself, you gain a broader understanding of real estate investing nuances, and in turn might be less likely to fall victim to the wiles of someone with little concern about how you spend your money. Work with someone who owns real estate investment software and can run, present, and discuss those numbers with you.
5. Develop a Relationship with a Real Estate Professional that’s Qualified

Getting to know a qualified professional is a great way for beginners to get started with investment property because an astute professional can acquaint you with local market conditions, recommend a property that meets your investing objectives, and discuss strengths and weaknesses about specific property performance.

Just be certain, however, to work with a real estate person who understands real estate investment property.

Be sure the agent has a firm grip on key financial measures inherent to real estate investing, knows how to measure profitability and rate of return, has the ability to present the data you need to make wise investment decisions, and, most importantly, shows a genuine interest in how you spend your money. The last thing you want to do is to get involved with an agent that would throw you under the bus just to make a commission.

Here’s a good way to interview for an agent. Ask about cap rate, cash-on-cash return, and then request an APOD or Proforma Income Statement. If they stand there looking at you like a deer into the headlights of a car in response to even these basics, find another agent.

6. Start Investing

That’s it, it’s time for you to get started. Here’s to your real estate investing success.

About the Author

James Kobzeff is the developer of ProAPOD Real Estate Investment Software. Want to start working with rental property today? Discover how to create cash flow, rate of return, and profitability analysis presentations in minutes at => http://www.proapod.com

Tagged with: Estate • Ground • Investing • Running • Start

Filed under: RE Investing

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