2010 March :: The Construction Management Pro

3-29 Can relying on e-mails as your main mode of communication be damaging to your chances of winning a contractual dispute?

March 29, 2010

The first question is, are e-mails admissible as evidence in litigation/courts? They may not be unless the e-mails are authenticated in accordance to the electronic act i.e. by electronic signature.

Can you imagine a situation where you are going to show that the employer agreed by e-mail on something and you were just going to produce that e-mail as evidence when his lawyer object with a statement that e-mails are not admissible as evidence.

Assuming you did not follow up that e-mail with any written back-up, you may have nothing to back up your assertion that the employer agreed. So for all of you out there who assume that e-mails are good proof in case things goes wrong. Please think again and check with your legal counsel. Do not wait to find out only when things goes wrong, because by then it might be too late.

The notice clause of most contracts are boiler plate and are often antiquated (still mentioning fax or certified mail) and never get updated. If e-mail is a noted in as a means of notice under the contract it may not be admissible.

How do you avoid this potential problem? There are several procedures you could adopt. I usually start the process with the phone, proceed to e-mail for confirmation and, follow that with a formal letter.

Letters work best. If a contractor agrees via e-mail, send a letter back with the e-mail in the envelope as confirmation of the agreed to subject. You can further verify delivery by getting a return receipt showing signature of the addressee.

Electronic versions of documents can be corrected (altered) leaving no evidence of correction and therefore found not accepted as a proof. Emails with electronic signatures, scanned copy of signed original letters in .pdf format may add to the perception of authenticity. Periodic exchange of correspondence log – with reference number and subject of correspondence could be additional confirmation for exchange of correspondence – by this way any dispute over exchange of information could be cleared on a regular basis leaving no serious lapses when you need evidences.

The bottom line is communicate with the other party and agree on what counts and what does not count as acceptable means of notice. What is written in the contract .. counts.

To aid in understanding the flow of a project, a document control system is essential. Any communication, it does not matter what, should go through the document control system!

Emails are wholly indispensable for day to day communications but if a formal notice is required, woe be anyone who does not follow the Contract’s clear requirements. If your contract does not include emails as an accepted means of notice, I suggest that printing out a copy of the email, and signing and sending it to the recipient, either with or without a cover letter (though I do not believe a cover letter provides any additional verification of the authenticity of the email).

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3-26 How to Start Real Estate Investing and Hit the Ground Running

March 26, 2010

This article covers seven dynamite real estate investing tips intended to help anyone just getting started in real estate investing to successfully launch and hit the ground running with real estate investment property.

1. Develop the Correct Attitude

To stand a chance of succeeding at real estate investing, foremost, you must understand that real estate investment is a business, and you will become the CEO of that business.

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

You buy a home to live and raise a family; you buy real estate investment property to reach a financial objective; passive income, capital gain, return on investment.

As one very successful real estate investor said, “Only women are beautiful; what are the numbers?” In other words, you will not succeed at real estate investing until you acknowledge that it’s not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; what counts most is the property’s ability to perform financially.

2. Develop Meaningful Objectives

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

Here are some questions you need to ask:

How much cash are you willing to invest comfortably? What rate of return are you hoping to achieve by making the investment in real estate? 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 are you planning to hold the property before you dispose of it? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? Do you know enough about property management to do it yourself, or do you know of a reliable property manager? How much passive income are you looking to generate and why and by when would you like to achieve it? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

If you’re new to real estate investing, you undoubtedly know little about investment real estate. Start in your local market. Do market research to learn as much as you can about income property values, tenant/landlord laws, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal.

Here are some good resources:

(a) The internet is a great place to start (Zillow, Trulia, Realtor.com), (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

I can’t stress enough the importance of running the property’s cash flow, rates of return, and profitability numbers. Remember, real estate investing is a business, and as the CEO of your investment enterprise, 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. Do they meet your Plan’s objectives?

You have two options:

(a) Invest in real estate investment software. This will enable you to discover for yourself the investment 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.

(b) At the very least, work with a real estate professional that has invested in real estate and can calculate, present, and discuss the property’s financial data with you.

5. Develop a Relationship with a Qualified Real Estate Professional (not all Realtors know the what properties can sell/rent for)!

Working with a qualified real estate professional is a great way for beginners to get started with rental property investing 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.

Here’s a warning, however: Work with a real estate person who understands investment real estate. This is totally different from buying and selling homes!

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 a real estate agent that would throw you under the bus just to make a commission.

Here’s a good way to interview for an agent. Ask them for the property’s cap rate and then request an APOD. If their response (even to these basics) is to stand there looking at you like a deer into the headlights of a car, find another agent.

6. Find a financial advisor who understands the accounting, tax and legal implications of real estate investing. Not all lawyers, accounts and realtors are created equal. There are a number of decisions that need to be made from ownership entity of the property, how expenses and categorized and your investment intent that all make a substantial difference in how the property will ultimately perform financially.

7. Start Investing

Hopefully, this has given you some insight into real estate investing, highlighted a few things to make you a more prudent real estate investor, and perhaps alerted you to a couple of things that should be avoided.

Okay, that does it for us, now it’s time for you to get started. Here’s to your success.

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

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3-25 CDFI Fund Issues Capital Magnet Fund NOFA, Proposed Rule

March 25, 2010

 

The Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) has issued a Notice of Funds Availability (NOFA) for the Capital Magnet Fund program. This NOFA opens the inaugural application round of the Capital Magnet Fund, under which $80 million in FY 2010 funding will be made available to certified community development financial institutions (CDFIs) and non-profit housing organizations to support the financing of affordable housing and related economic development activities and community service facilities. The CDFI Fund simultaneously issued a proposed rule for the new program.

The Capital Magnet Fund was authorized under the Housing and Economic Recovery Act of 2008 and is intended to provide competitively awarded grants to certified CDFIs and nonprofit organizations “having as one of their principal purposes the management or development of affordable housing.” Capital Magnet Fund awards must be used to support affordable housing activities, though awardees may use up to 30 percent of their awards to finance community service facilities and economic development activities. According to the CDFI Fund press release, “applicants may apply for up to $12 million (15 percent of the aggregate award pool of $80 million) under this application round.”  Applications are due by 5:00 p.m. EDT on Thursday, April 15.

Source: NAHRO

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3-24 Household worth up 5.4 percent, household debt down 1.7 percent, but …

March 24, 2010

BY JOE TYRRELL
NEWJERSEYNEWSROOM.COM

The Federal Reserve reports that Americans’ pocketbooks did well during 2009, unless they happened to be sitting in foreclosed homes.

In its quarterly “flow of funds” report, the Fed found the total net worth of U.S. households rose 5.4 percent in 2009. While some benefited from rebounding stock portfolios, much of the gain from an unprecedented drop in household debt.

The 1.7 percent decline was the first recorded by the central bank since it began tracking the data in 1945. The result was that household net worth – the difference between the value of assets and liabilities – rose $2.8 trillion, to $54.2 trillion by year’s end.

The nation’s overall debt rose by 3.4 percent in 2009, according to the Fed. At the end of 2009, household debt stood at $13.5 trillion, non-financial business debt was $11 trillion, and government debt was $10.2 trillion.

The government debtload reflected a 22.7 percent increase during the year, although it slowed in the fourth quarter.

Reflecting tight credit, non-financial business debt was down 1¾ percent during 2009, the first such drop since the early 1990s, according to the report. All credit instruments except corporate bonds were down.

On closer inspection, even the decline in household debt was not necessarily good news. Much of it was attributable to defaults on mortgages and credit card debt, two areas where the federal bailout of banks did little for their hard-pressed customers.

The defaults removed the associated debt from the running total of liabilities, making net worth rise on paper even when the real-world result was families losing their homes. Reflecting the tight market for consumer loans, overall consumer credit sank 5¾ percent below the 2008 level.

See the report here.

Joe Tyrrell may be reached at

jtyrrell@newjerseynewsroom.com

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3-23 FRANK Introduces Bill to Preserve Affordable Housing

March 23, 2010

 

            House Financial Services Committee Chairman Barney Frank (D-Mass.) has introduced a comprehensive affordable housing preservation bill (H.R. 4868) that includes a federal first right of refusal allowing HUD to match a third-party offer when an owner decides to sell a project.

            The bill would also establish a voluntary preservation exchange program to encourage owners to sell properties to purchasers who will keep the housing affordable.  In addition, it would expand voucher assistance for tenants facing displacement because of the demolition, disposition, or conversion of assisted housing; provide for the recapitalization of aging Section 202 projects; facilitate the preservation of projects facing foreclosure; and establish a preservation program for rural housing.

            The House housing subcommittee will hold a hearing on the bill tomorrow.

Source: HDR Headlines

 

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Green homes face a red light

March 15, 2010

By Les Christie, staff writerMarch 10, 2010: 4:00 AM ET

NEW YORK (CNNMoney.com) — Lots of people, especially those trying to battle high utility bills, believe in energy-efficient homebuilding. But there’s something holding green technology back: It simply costs more to include it than it adds to resale value

Appraisals for newly built green homes do not fully reflect the cost of green technology, and the lower appraisal values mean buyers often cannot get the full financing they need from banks.

That discourages developers from using green technology, in turn diminishing the market for more green products. “We can’t get lenders to appreciate the value, and if we can’t get the values recognized, manufacturers can’t justify moving these products forward,” said Bill Nolan, a Florida home building consultant. How that works is illustrated in the case of clients of Michael Chandler, a North Carolina-based green building adviser, who wanted to build a $400,000 home incorporating many green features. The house was designed to include passive solar heat, solar hot water, radiant floor, high-performance windows and insulation. But the bank’s appraiser told them that the appraisal would come in for less than the cost to construct.  In that case, the buyers would need to come up with a bigger down payment. “Our best guess is that it will appraise at $380,000,” said Chandler. At 90% financing, the bank would put up $342,000, leaving the would-be buyers with a down payment of $58,000, instead of the $40,000 needed if the house was assessed at the full price. “With 10% down, the clients would have to come up with (an extra) $18,000,” Chandler said. “They can’t do that.”  Appraisers feel their hands are tied. “It doesn’t do a lot of good to simply add value based on cost,” said David Snook, a California-based appraiser who serves on the real property committee on education for the American Society of Appraisers. “The question is ‘How much will the market pay on resale?’” The appraiser’s job is to accurately assess the value of the home. If a feature costs $50,000 to install but only adds $25,000 to the price when the home is resold, the appraisal cannot reflect the full $50,000 spent. “Appraisers don’t make the market, they reflect it,” said Jim Amorin, spokesman for the Appraisal Institute. “Cost does not necessarily equal value. It depends on how the market reacts to the feature.”

Not under the influence

Also complicating appraisals these days are new rules to prevent loan originators from influencing appraisals. Builders cannot demand specific appraisers, ones more experienced at evaluating green building. With Chandler’s client, the house is in a rural zip code, one where few energy efficient homes have been constructed. The appraiser had little idea of how much building green adds to value. “The appraiser has no experience with green building,” he said. Another problem is that appraisers also rely frequently on foreclosed homes for comparison, especially in places hit hard by defaults. These homes sell at big discounts to the regular market and even bigger discounts to green homes.

Low cost alternatives

Because of the appraisal issues, developers often opt for installing only the lowest-cost green features. “Some can be incorporated without much additional cost,” said Curt Jones, a Connecticut-based civil engineer and green building consultant. As he describes the process for green certification, points are given for a wide variety of factors, some costing a lot, others costing nothing. Angling the home a little differently, for example, to catch more rays and help heat the house passively, may not cost the builder a dime. But installing solar panels on the roof definitely will add a lot to the final price. Ironically, turning green probably does add considerable value — or will, once green gets more established in individual locales and buyers get more familiar with it. In Seattle, a hotbed of green-building activity, new homes with green certification sell for 8.5% more per square foot than comparable non-green ones, according to a report from GreenWorks Realty. They also sell 22% quicker. “As more American homeowners green their homes, there will be more and more of a premium paid for green homes,” said Ben Kaufman, GreenWork’s founder. “I can imagine a miles-per-gallon type sticker on homes for sale and the marketplace will absolutely favor fuel-efficient homes.” 

 

 

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3-12 PHA Deadline to Obligate Fomula Recovery Funds

March 12, 2010

The deadline for Public Housing Authorities to obligate formula Recovery Act Capital Funds is Wednesday, March 17.  Under the terms of the Recovery Act, PHAs have to obligate 100 percent of their formula-driven Recovery Act Capital Fund dollars by this Wednesday. If a PHA fails to obligation all their funds, any unobligated balance is to be recaptured and redistributed to PHAs that are in compliance. The deadline is statutory, and HUD has no flexibility to suspend or adjust it.

Under the Recovery Act, PHAs have one year from the date of award to obligate all Capital Funds.  Within two years, they must expend 60% of these funds, with the full amount expended within three years.  Capital Funds awarded competitively must be spent within three years, but the deadline is not yet approaching because they were awarded later than the formula-driven funds.

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