With the changing of seasons and the cool weather seems to cool down the real estate market. Except of course where I am it seems like summer has just arrived. We’ve waited through the rainy season. It’s about time! Someone should let mother nature know that it’s November.

How rainy was it this summer? It was so rainy, I didn’t realize I had a significant leak in my above ground pool until late September when we had 24 days without rain.

I digress.

Guess what I’m seeing this week? Rate (rain?) drops. The “downpour” of emails has just started. Business has slowed just enough that incentives have started to crop up. I predicted this in a previous post. It’s a few weeks earlier than I anticipated, but welcome nonetheless. First email I received announced a 15 Bps drop across all 5 year fixed rates.

It seems that generally people stop focusing on buying real estate and focus either on getting things ready for the winter or maybe, just maybe they might be focused on Joly old St. Nick and sharing with others. Certainly the Christmas party invites have started.

Time to start thinking about tenant appreciation. They have after all been paying your mortgage for the last little while. What a welcome surprise it would be for them to receive a gift certificate to a local restaurant.

I think my real estate group (I say my as my wife and I founded it many moons ago) has come of age. Call it a maturity of sorts. We had two speakers come in and show us how they analyze deals. The first speaker, who has been with the group for many years, came as a slight surprise. I was fully expecting him to present the “company line” way of how to purchase commercial (res) deals. He was a mentor with Whitney/Kiyosaki and generally followed their method of teaching. I said “was” as he is now an independent mentor and investor. Why was it a surprise? Normally presenters provide a slightly… hm.. how shall I say this… tainted view of the world? More of a sales pitch than an actual, this is how things work in the real world. Not this time. He took two deals that different people sent him. Filled in his spreadsheet with the details from the listings and showed us how he analyzes the deals. He then adds in his own mix of reality (like real life expenses that no one ever includes) and showed us that neither of the deals were particularly attractive. The second property was “close” in his words, but the offer he was going to make for the numbers to work (i.e. cashflow from day 1) would be significantly less.

On the financing side of things, he clearly stated that no bank would go above 65% loan to value (LTV). He did mention the possibility of a vendor take back (VTB), but didn’t stress it and didn’t even talk about how he would raise the funds for the remaining 35%. Leading the audience to believe that you need cash if you are going to invest in commercial. I couldn’t agree more! He even cautioned people to start with smaller projects before considering moving into commercial. Hallelujah! His words were, if you make a mistake on a single family home, you can probably recover over time. If you make a mistake on a commercial deal, in all likelihood you will have to go bankrupt.

The second speaker got up and almost reiterated what the first speaker said. His focus is single family homes. He had a totally different approach than the first speaker, but the underlying message was the same.  Don’t get in over your head. If something happens, then you are the one responsible to fix it. His key message, have a plan. The old quote came out “not having a plan is a plan to fail.” He certainly has a plan. Tightly focused. Only looks for certain kinds of homes and certain kinds of tenants.

Part of that plan is welcome baskets when tenants move it (an echo from last months property management speaker) and a gift card at Christmas for all tenants for a dinner out.

These are the kind of speakers I enjoy and want to see more of coming from this group. All ships rise with the tide of professionalism presented this month.

My hat is off to the executive of OREIO this month. Keep up the good work despite all the obstacles I know you are battling.