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Archive for May, 2006

LandlordMax Property Analyzer

For over a year now we’ve been internally discussing about releasing a “Property Analyzer” software product to compliment our core LandlordMax Property Management Software. This Property Analyzer software would help you analyze real estate properties before you purchase them rather than manage them like LandlordMax. The main idea is that you could enter in information about a real estate property and try many different scenarios in seconds to see if a property’s numbers worked for you.

To give a quick and simple example, you could see if the real estate property you’re interested in purchasing for $200k (or $220k, $230k, etc.) at an interest rate of 5.6% for 10 years (or 4.8% for 5 years, etc.) with a rent of $1000/month (or $950/month, etc.) would be cash flow positive assuming a vacancy rate of 3% (5%, etc.), and so on. Basically you could run through a number of different scenarios in seconds to determine if that property will work for you, if it it will make you money and how (cash flow, capital appreciation, etc.).

However before we break the ground and start implementing this potentially new product, I’d really like to hear from you about it. Would you be interested in a “Property Analyzer” software product from LandlordMax? And if so, what features would like to have in it? Which features absolutely have to be in it? Let me know what you think.

I look forward to all your comments.

FollowSteph Website Re-design Completed

It looks like the re-design is now completed! All the data should be restored and all the old links should be automatically forwarding to the new urls. Feel free to drop me a comment to let me know what you think of the new design. And if you catch anything missing please let me know.

FollowSteph Website Re-design

As many of you might have noticed today FollowSteph.com‘s look and feel has substantially changed, as well not all the posts are there right now. That’s because I’m in the process of re-designing and re-implementing FollowSteph.com with WordPress, converting all the posts and data. All the old links will still work as expected, pointing to the right articles when I’m done.

So please bear with me as I convert the website. I expect I’ll be done sometime later tonight if all goes well!

Common Real Estate Ad Terms and Their Relationship to Selling Price

FreakonomicsThose of us who have dealt with the real estate market, we are all too familiar with the many terms used to describe a real estate property. Terms like “spacious”, “state of the art”, “charming”, etc., they all bring up different mindsets. To the untrained real estate investor, these terms can be confusing. However over time you start to get an understanding of what they really mean. For example, a “great neighborhood” often means that the houses in the neighborhood are nicer than the one being sold. No one will go out and say they’re selling you the ugliest house on the block, rather they’ll put a positive spin, such as you have a great neighborhood.

In any case, in the book Freakonomics, they did a detailed study of the many words used to describe real estate properties and they found strong correlations between the words used in the ads and the selling price of the properties. Now before I go on, please note that correlation means that the two items are related but it doesn’t mean that one causes the other. So for example, there is a correlation that cars painted yellow get in fewer acccidents. Does this mean that if you paint your car yellow you’re less likely to get into a car accident? Not at all. One does not explain the other. You have to look at other factors. In this particular example, the reason that yellow painted cars get into fewer accidents is because of the type of person who buys and drives a yellow car rather than just the color of the car.

Getting back to words that describe real estate properties, it’s been found that the 10 most common used in real estate ads do have strong correlations to the selling price.

Top Five Terms With Higher Selling Prices

State of the art

Top Five Terms With Lower Selling Prices

Great Neighborhood

Very interesting! Why do these specific terms have strong correlations with higher or lower selling prices? The book goes on to debate this, and I’m sure some of them are obvious once you start to think about it. However for today what’s interesting to note is that the words in your real estate ad will ultimately affect your selling price.

Again, I strongly recommend the book Freakonomics. There’s lots of great information on many a topic, not just real estate. If you’re interested, you can buy a copy here through this Amazon.com link.

Interesting Statistics About Real Estate Agents

FreakonomicsI’ve been reading another interesting book called Freakonomics over the last week which is filled with lots of facts and great explanations behind them. In my next article I’ll even write about another real estate related metric I found in the book. But for now, heres today’s tidbit:

Real estate agents keep their own properties on the market an average of 10 days longer and sell them for an extra 3+%. To quote the book, on a house of $300,000, that means they sell it for an extra $10,000.

Freakonomics goes into more details as to the cause, and it’s nothing negative against the real estate agent. It’s simply all about incentives, and it makes perfect sense once you understand the facts. So let’s take a quick look.

Looking at that same $300,000 property again, after breaking up the commission, etc., the real estate agent’s average take is $4,500, or about 1.5% of the total purchase price. Now if we take a $310,000 property (adding the $10,000 difference), the real estate agent’s additional 1.5% revenue on $10,000 comes to a total of $150. Therefore the question is, is it worth it for the real estate agent to work an 10 additional days (have more showings, consume a lot of time, take away time from selling other properties, etc.) for $150? I agree with the author, probably not, the incentive just isn’t there. Would you work an additional 10 days for $150? (yes I understand that it’s not 8 hours a day for 10 days, but it still does eat up a lot of time over those 10 days). Now if you change that $150 difference to $10,000, then again I agree with the author, there is substantially more incentive there.

So although the statistics clearly show that the incentives are higher for a real estate agent to sell their own properties, can you blame them? I can’t. Is there a better way to align both your incentives? Probably but I’m not sure how. If you think you do, feel free to comment.

50-Year Mortgages Increases Risk

CNN Money.com reported recently that you can now acquire 50-year mortgages! I can understand the market is becoming very competitive as the number of new mortgages is dropping, however I find it difficult to believe that lenders are offering 50-year mortgages. Assuming you acquire a mortgage at 25 years of age, that means you will be done paying your mortgage at 75 years of age, well past the average retirement age!

On top of this, assuming I understand correctly, these mortgage are adjustable. I personally like long term fixed rate mortgages because with today’s historical low interest rates, it’s to your advantage to lock in the rate (for example I locked in my personal home at a fixed rate of 5.4% for 25 years). The only benefit I can see from these 50-year mortgages is that your monthly payment will be much lower because of the term of the mortgage.

Without the protection of fixed rates, all you’re doing is giving people who normally couldn’t afford a house (for example many people in California) the opportunity to do so, but with even more risk than before. These are people that maybe even subprime lenders won’t consider that can now afford their monthly payments because of the length of the term. This just means that as interest rates continue to climb, they will affected to an even greater degree than normal lenders!

Let’s take a quick look at the numbers, you might be very surprised. I know I was!

Interest Rate Term (Years) Monthly Payments
5% 25 $2,922.95
7% 25 $3,533.90
5% 50 $2,270.69
7% 50 $3,008.44

Looking these numbers (I chose 25 years rather than the standard 30 year because of my own personal interests, but I’m sure the numbers are very similar), we can see that if the interest climbs from 5% to 7%, the 25-year mortgage increases the payments by $610.95. Now, taking the 50-year mortgage, if we increase the interest rate from 5% to 7%, the payment goes up $737.75, a much larger amount. Looking at percentages, the 25-year mortgage increases the payments by 21% whereas the 50-year mortgage increases the payments by 32%. Assuming that the people acquiring 50-year mortgages are doing it because this is the only way they can finance their properties, then the increases in interest rates are going to be much much more troubling much quicker!

Overly Agressive Email Blocking

I don’t know how many of you use Comcast, but recently they’ve been aggressively blocking emails being sent to their customers, even legitimate emails which has of course resulted in a lot of customer complaints, such as here, herehere, and especially here, just to give you an idea. This is very frustrating because any customer (or potential customer) that tries to reach us at LandlordMax is using an unreliable email address. In other words, we can’t be sure that our replies will make it to them, or even that we receive their emails in the first place.

This is bad on so many levels it’s incredible! Firstly the customer may not know they have an unreliable email address, and therefore lose important emails they are expecting, not to mention that they’re not getting what they paid for. From a business perspective, everyone interacting with people from Comcast are getting frustrated, not to mention Comcast’s customers wondering why a lot of their emails aren’t being answered.

I suspect it’s only time before Comcast will start to see an exodus from their ISP services. I know we’re personally dealing with this on an ongoing basis, but if it keeps going on, we’re going to have no choice but to limit our support with people who use Comcast email addresses, that is we won’t be able to guarantee that our emails make it through.

To quote one of the links above:

“We have had to check daily for this problem and it takes Comcast another day to clear it.”

So please be patient with us if you email us for support from a Comcast email address, this is a known problem and unfortunately we can’t guarantee to respond within our normal promptness, or even for that matter that the email will even get through. If you don’t see a response in a timely manner, please email us again from another email address.

Mouse Driver Chronicles

The MouseDriver ChroniclesIf you want to read a really good book on the entrepreneurial experience of a startup, I strongly recommend reading The Mouse Driver Chronicles. I recently picked up a copy at a local bookstore and I have to say I was impressed by what I read. A lot of the lessons and experiences they went through might seem like common sense, but as the authors put it, at the time it might not always seem so.

This book is the story of two guys who started a company to sell a product called MouseDriver, which is a computer mouse in the shape of a golf club head.

I strongly recommend picking up a copy and reading it when you can. Here’s the Amazon link to the book.

Top Of Google Search Update

In my previous post, I mentioned that LandlordMax is the #1 natural search result for “Property Management Software” on Google, which is an $8 cost per click advertising term on Google (that is, if you want is if you want to buy a top spot Google charges $8 per click, not sale). We’re still #1 on the search results, but not for every country. When I made the post, I completely forgot to check for the US (as we’re located in Canada), and thankfully someone reminded me of this. In the US we’re currently the #1 search result on page 2 of Google, which is still very good. At the rate we’re climbing in the search engines, I suspect it won’t be long until we’re the #1 search result globally on Google for our keyword!



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