The options-for-sale you never knew about

By Jafer Ali Shariff

Okay, so you have your letter

of intent ready for distribution.

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It’s now time to move onto the second stage in closing a deal; deciding on an option for sale that is acceptable to both you and the seller. Before we move on, it is prudent for you to note that there are many options for sale you can suggest, and each one has its own benefits. Therefore, you will need to analyze your particular situation and see which of the options best fits your situation. Remember that there is no one option that will suit all deals. For instance, if you are short on money currently and require some time, you can pick the options contract to facilitate the sale. What an options contract basically does is to allow you to stretch the payment terms so that you are not burdened to come up with a lot of cash fast. This option for sale is particularly useful in cases where you absolutely love a property but the seller is asking a high price.

By using the options contract, the seller knows he’s selling for the price he wants, therefore he’s happy; meanwhile, you on the other hand get to control of the property during the interim period without having to make a lump sum payment. A similar yet slightly different concept is presented by the split-funding option. While it allows the buyer to meet a seller’s demands without meeting them all in one go, split-funding also gives the seller some reassurances. To better understand this concept, consider the following hypothetical situation.

You as the buyer are very interested in purchasing a hotel while the sellers are cordially opened to the sale. All looks good, however when you sit down at the negotiation table, you find out that the sellers are highly keen on using their money tied-up in the business as they want to recover all the money they invested in the hotel very quickly. To make matters worse, although you recognize the potential benefits the hotel has to offer, its asking price is a little steep for you. Thus you find yourself in quite a quandary. Here’s where split-funding works its magic. You offer to assume financial responsibility of the hotel’s mortgage while simultaneously agreeing to pay half of the amount the sellers want at the time of the deal’s close.

You are then expected to make the second half of the payment within eighteen months after the close, with an additional sum as owed interest. This way both the buyer, i.e. you in this case, and the seller come out benefiting, thus all parties are happy with the arrangement. But what if the seller you are dealing with is fairly keen on offloading his property. In such a situation, it is better if you offer a floating seller-held mortgage. What this option for sale does is to allow you, as the buyer, to finance the purchase of the property with the seller’s assets. The seller, in turn, would take on a second mortgage for you, while you will be obliged to pay off the mortgage with interest to the seller over a mutually-agreed timeframe. In addition to the above mentioned options, if you dealing with development opportunities such as land, you might think of choosing the partial-release agreement. This deal is referred to as such because the seller agrees to release portions of the desired property to the buyer over a fixed payment timeframe, while the buyer is allowed to develop the property in the meantime. An initial down payment may however be required by the seller.

That said, let’s now move onto our last option for sale known as real-estate exchange. Under Section 1031 of the Internal Revenue Service Legislation, real estate investors may rollover their investments without having to make any capital-gains tax payments on the property in question. What this basically means that you can use the real estate, which you hold as an investment, as equity to finance the purchase of another property. Pretty neat huh? Now that we’ve gone over all the options, one final word of advice. Always keep in mind that you have different options, so don’t get into the habit of sticking to just one option.

Analyze your situation thoroughly and then pick and choose between the various options for sale outlined.

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The Investor’s Guide to
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Retirement Planning
How to Invest In Commercial Real Estate Using Your
IRA or 401(k)…Maximize Your Profit…and Save For
Retirement

The way to Fill it

Daily Shot 101

Appreciating the value of your building

By Jafer Ali Shariff

You’ve owned a building for sometime now, but unfortunately its value doesn’t seem to have gone up by much, or maybe, the value has even depreciated. Now you’re beginning to think that this is not what you had signed up for as you had always thought that buying real estate was the best investment option. Fret not, we are here to help. We will show you the remedies to turn your fortune around so that in a matter of a few months, you will see your building’s value going up, up and up.

First things first, get Mother Nature to work for you. There is possibly no sight worse in this field that seeing a barren and bland looking building. Hence, your best bet in appreciating the value of your building is to make use of landscaping. Before you start off however, sit down with representatives of the local community to see what kind of landscaping would be approved within the jurisdiction. Once that has been decided, then get to work and ‘beautify’ your building. At the same time, remember not to overdo it as there’s nothing that hits the eye more than overkill. Take on the help of a professional landscape gardener if you have to, as he/she will be in best position to decide how to go about getting the task done.

So once you’ve ‘spiced-up’ your building, you need to look at other ways of appreciating the value. Hence, it will be the ideal time for you to think about hiring a professional management team. Management is a vital aspect in real estate; therefore attaining the help of a team of professionals will allow you to benefit from various viewpoints and management styles.

Also, always remember that proper maintenance of your building will go a long, long way to appreciating your building’s value. There are four basic types of postures you can take as a manager. One; you can completely overlook all the depreciation to your building, thus obviously heading for a world of problems. Two; you can wait until something is broken before you go about fixing it. Although this posture may save costs in the short-run, it does lead to substantial costs in the long-term. Three; maintaining the property such that it remains in the original condition. Four; taking a proactive approach so that constant updates are made to the property.

Ideally, to appreciate the value of your building, you need to take the fourth and last approach. Not only will this lead to lower costs in the long-run, it will also help ensure that your property is in ‘tip-top’ condition always. Moreover, you will also be able to attract tenants at will as well as raise rents if you feel the need to do so. Do not, under any circumstances, settle for the first or the second approach; as these will only lead to insurmountable problems sooner or later.

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Retire Now, and Risk Falling Short on Your Nest Egg

Its up to you to take ACTION

By TARA SIEGEL BERNARD
Published: August 16, 2008
If you have just retired or are about to retire, your timing could not be worse.

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Graphic
Making Your Retirement Money Last in a Market Downturn
Leaving the work force just as markets stumble can do real damage to retirement savings. Your nest egg has shrunk just as you need to start withdrawing money from it; you are essentially locking in your losses. (And at the moment, sinking home values make matters even worse.)

Of course, if you have managed to put away much more than you will ever be able to spend, you can stop reading now. This article is for everybody else — those who thought they had saved just enough but now fear their retirement funds will not last.

If the market plunges while you are still early in your career, you have plenty of time to make up for it. In fact, market declines work in your favor while you are still on the payroll; they allow you to buy more stock or mutual fund shares cheaply. But should the market plummet the day after your retirement party, or even in the first years after, the risk that you will outlive your savings increases sharply.

“Any money that retirees take out of their portfolios or that they lose in market declines in the first five years of retirement has a higher cost because it’s money that won’t be invested to earn returns in succeeding years when the markets recover,” James Tzitzouris Jr., an investment analyst on T. Rowe Price’s asset allocation team, said in a study. “And the less they have invested after a bear market, the less potential they have to benefit from the compounding of any earnings in subsequent years.”

Right now, we are dipping in and out of bear territory. That is why it is crucial, especially if you are on the cusp of retirement or recently retired, to look closely at how your portfolio is invested. You should make sure your money is divided across different slices of the stock and bond markets. You also need to be sure your allocation is one your stomach is strong enough to handle.

The conventional wisdom is: ride with the ups and downs in the market and all will work out in the end. But retirement is the proverbial end.

Look at it this way. Since Nov. 28, 1980, there have been five bear markets, if we count the current downturn. Yet the market has managed to return an average of 8.62 percent to investors annually, as measured by the Standard & Poor’s 500-stock index as of Aug. 1. If you include dividends, the S.& P. 500 has yielded an 11.38 percent return on an annualized basis.

But financial markets do not travel in straight lines. If you happen to retire when those lines are pointing downward, you may have to make some sacrifices. And yes, that may involve working longer or spending less.

“It’s all about trade-offs,” said Christine Fahlund, senior financial planner at T. Rowe Price. “There is no perfect solution.”

Take a 65-year-old investor who retires with a $500,000 portfolio, with 55 percent invested in stocks and 45 percent in bonds. She withdraws 4 percent of her portfolio (or $20,000) in the first year and increases the amount she withdraws by 3 percent each year to keep pace with inflation ($20,600 in the second year, $21,218 in the third year, and so on).

If she follows this schedule, she has an 89 percent chance of having enough money to sustain her for 30 years, according to a T. Rowe Price analysis involving 10,000 simulated market situations.

But a bear market could throw everything off. The picture becomes rather grim if the portfolio earns 5 percent or less on an annualized basis in the first five years after retirement and the investor continues to make the same withdrawals. Suddenly, that 89 percent chance of having enough money shrinks to as low as 43 percent for the remaining 25 years of retirement, according to T. Rowe Price.

Fortunately, you can soften the blows of retiring in a slumping market. Here are some ways to help make sure your savings last as long as you do:

WORK LONGER AND SPEND LESS This may sound obvious, and somewhat depressing, but working just a few years longer can make a big difference.

Besides, it does not have to be entirely unpleasant. Maybe you could continue to work a bit longer but start taking the trips you planned for retirement: say, keep your job, but go to Maui. Or perhaps you could work part time and earn enough to cover the amount you would have drawn from your retirement portfolio. At least you are not dipping into your savings while they are down.

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Retire Now, and Risk Falling Short on Your Nest Egg

The way to Fill it

Published: August 16, 2008
(Page 2 of 2)

Thomas S. Rogers, a certified financial planner and co-owner of the Portland Financial Planning Group in Portland, Me., said he had one client who had planned to retire in July, just as the S.& P. 500 index entered bear territory. Mr. Rogers said he determined that his client, with $1.4 million in savings, could afford to retire. But the client was having trouble selling his condominium and decided to work a bit longer.

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Graphic
Making Your Retirement Money Last in a Market Downturn
“Psychologically, people find it hard to retire when the market is down 20 percent,” Mr. Rogers said.

EASE UP ON WITHDRAWALS One of the most practical alternatives, planners say, is to skip the annual adjustments for inflation and keep the withdrawal amounts steady. “That’s a self-imposed discipline that retirees would be wise to adhere to,” said Ian Weinberg, a certified financial planner in Woodbury, N.Y.

To get a better idea of how much you can afford to withdraw, you can test different amounts with a retirement income calculator on the Web, like T. Rowe Price’s.

FIND YOUR RISK TOLERANCE If the latest market dive tempted you to make major changes to your portfolio, it is time for a gut check. This goes for everyone, whether you’re on the cusp of retirement or you already consider golf your full-time occupation.

“You want to figure out what is the right portfolio mix for you and to also understand, or have a realistic sense, of how bumpy the risk is likely to be,” said Hersh Shefrin, a professor of behavioral finance at Santa Clara University in California. It may make sense, for instance, to reduce the stock portion of your portfolio and possibly invest more in bonds or cash.

Just remember that you can also invest too conservatively. Putting all your money into bonds is not a good idea, either, as stock returns will help the portfolio keep pace with inflation. A reputable adviser can help strike the right balance.

DIVERSIFY At this stage in your life, you should already have a diversified portfolio. It is one of the most important factors in generating more consistent returns and cushioning against sharp declines.

It is hard to generalize what stock-bond-cash split new retirees should have because it depends on their age, tolerance for risk and other individual factors. But investors also need to diversify carefully within those major asset classes.

“It’s not sufficient to say that ‘I’m well diversified because I’m 60-30-10 in stocks, bonds and cash,’” said John Nersesian, managing director for wealth management services at Nuveen Investments. He said that within stock funds, for instance, that money should be divided among “large cap and small cap, growth and value, domestic and international.”

And naturally, as retirement approaches, your mix of investments should gradually become more conservative. You should review your long-term asset allocation plan every 12 to 24 months, mainly to see whether you misjudged your risk tolerance or whether you need money for unforeseen circumstances, said Holly Isdale, head of the wealth advisory group at Lehman Brothers.

Some investors would rather leave this to professionals, whether a financial planner or a target-date retirement fund, whose investment mix gradually becomes more conservative as the retirement date nears. The strategies and fees of target-date funds vary from company to company, so be sure to do a side-by-side comparison.

REBALANCE When markets are volatile, your original asset allocation may be thrown off kilter. Investors should rebalance their portfolios once a year. That means selling positions that have done well and putting that money into areas that have fallen out of favor.

“Rebalancing forces us to do what is emotionally uncomfortable, but financially productive,” Mr. Nersesian of Nuveen said. “The natural thing to do is to add to areas that are doing really well,” when we should be doing the opposite.

“That will ultimately lead to a more consistent return,” he said, “which is the key to a more successful retirement experience.”

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Inside Two Electric Cars
GM’s Chevy Volt is a plug-in hybrid concept car. Tesla Motors’ Roadster is an all-electric vehicle in production. We peek under the hoods of both.

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Hydrogen and Fuel Cells – Its Advantages
3
Have you heard about the latest technology that has caught the attention of environmentalists worldwide? Hydrogen technology is not new and it has been around for many years now. Continuous developments with the technology is being pushed through various governments and institutions because they can see a lot of advantages by using an alternative source of energy like hydrogen fuel.

Currently, converted cars are now using hydrogen fuel. Car engines are typically gasoline powered but with the introduction of hydrogen fuel, car owners can choose between hydrogen fuel and gasoline to power their vehicle.

Here are the advantages of using hydrogen and fuel cells:

• Fuel cells aren’t dangerous. If you frequently surf the net, you’ve probably heard some myths about hydrogen. Fuel cells are easy to operate and are not hazardous. The reason why a lot of people view hydrogen negatively is because of the 1937 zeppelin accident in Hindenburg.  The accident was recorded and publicized extensively. That happened many years ago but with today’s advanced hydrogen technology, the use of hydrogen and fuel cells is not something to be scared of.

• Hydrogen provides plenty of energy. Fuel cells are powered with HHO gas and this is similar to water vapor. You will only use water and the HHO generator will do its task. It will separate hydrogen from oxygen molecules. The power of the generator will come from the separated hydrogen. Water is available anywhere, not unless your in a desert, scarcity is not an issue. With the scarcity of oil, it’s no wonder why its price is soaring higher and higher every year.

• Fuel cells require low maintenance. Once your car is converted, you will need to ensure that the quart-sized reservoir has the proper fluid amount. Other than that, you don’t have any other problem.

Gas stations are taking a lot of your hard-earned money. If you want to put an end to this, have your car converted now. Hydrogen powered vehicles are very limited and the purchase of such car is often regulated. Perhaps in the future, hydrogen powered cars will be available to the public and there will be better sources of hydrogen; only then can the price of hydrogen cars be more affordable.

Now that you know that the use of hydrogen and fuel cells is not dangerous, will you have your car converted? This is not a huge problem because all you need are hydrogen fuel car kits or boost kits and you can run your car using hydrogen power. You can definitely improve mileage and you can save a lot of money. Now, you can use the extra money to purchase other more important things.

At present, the source of hydrogen fuel is still under continuous research and studies. Experts are still trying to discover less expensive means of getting usable hydrogen. Although hydrogen makes up a large portion of the atmosphere, most are not in usable form. With studies underway, people can expect that in the future, the planet will be less polluted.

Environmentalists are pushing for the worldwide acceptance of hydrogen and fuel cells. It is up to the different countries now to pursue the use of hydrogen technology. Currently, only rich countries can afford this technology.

Well, who knows; in the future, everything might change.

Renewable energy    · Environment

Renewable energy sources worldwide at the end of 2006. Source: REN21

Renewable energy sources worldwide at the end of 2006. Source: REN21[1]

Renewable energy

Wind Turbine

Biofuels

Biomass

Geothermal

Hydro power

Solar power

Tidal power

Wave power

Wind power

Renewable energy is energy generated from natural resources—such as sunlight[2], wind, rain, tides and geothermal heat—which are renewable (naturally replenished). Renewable energy technologies range from solar power, wind power, hydroelectricity/micro hydro, biomass and biofuels for transportation.

In 2006, about 18% of global final energy consumption came from renewables, with 13% coming from traditional biomass, such as wood-burning. Hydropower was the next largest renewable source, providing 3%, followed by hot water/heating, which contributed 1.3%. Modern technologies, such as geothermal, wind, solar, and ocean energy together provided some 0.8% of final energy consumption.[1] The technical potential for their use is very large, exceeding all other readily available sources.[3][4]

Renewable energy technologies are sometimes criticised for being intermittent or unsightly, yet the market is growing for many forms of renewable energy. Wind power is growing at the rate of 30 percent annually, with a worldwide installed capacity of over 100 GW,[5] and is widely used in several European countries and the United States.[6] The manufacturing output of the photovoltaics industry reached more than 2,000 MW in 2006,[7] and photovoltaic (PV) power stations are particularly popular in Germany.[8] Solar thermal power stations operate in the USA and Spain, and the largest of these is the 354 MW SEGS power plant in the Mojave Desert. [9]. The world’s largest geothermal power installation is The Geysers in California, with a rated capacity of 750 MW.[10] Brazil has one of the largest renewable energy programs in the world, involving production of ethanol fuel from sugar cane, and ethanol now provides 18 percent of the country’s automotive fuel.[11] Ethanol fuel is also widely available in the USA.

While there are many large-scale renewable energy projects and production, renewable technologies are also suited to small off-grid applications, sometimes in rural and remote areas, where energy is often crucial in human development.[12] Kenya has the world’s highest household solar ownership rate with roughly 30,000 small (20–100 watt) solar power systems sold per year.[13]

Climate change concerns coupled with high oil prices, peak oil and increasing government support are driving increasing renewable energy legislation, incentives and commercialization. European Union leaders reached an agreement in principle in March 2007 that 20 percent of their nations’ energy should be produced from renewable fuels by 2020, as part of its drive to cut emissions of carbon dioxide, blamed in part for global warming.[14] Investment capital flowing into renewable energy climbed from $80 billion in 2005 to a record $100 billion in 2006.[15] This level of investment combined with continuing double digit percentage increases each year has moved what once was considered alternative energy to mainstream. Wind was the first to provide 1% of electricity, but solar is not far behind.[16] Some very large corporations such as BP, General Electric, Sharp, and Royal Dutch Shell are investing in the renewable energy sector.[17][18]