Second Homes – Condo Hotels Make Sense

The Compelling Facts…

What if… Just 5% of the Baby Boom Generation learned of a cost effectice way to own more than 1 home in retirement? 75 million boomers will retire over the next 15 years, 5% equals a demand of 250,000 condo hotel units per year, every year unitl 2020.

What if… you could buy a second home/condo, use it when you wanted, and a professional (hotel manager) optimized the rental income and minimized the expenses while you were not in residence? Would this be more desirable than the alternative of doing-it-yourself for at least 5% of the population?

What if… you could deduct several homes instead of just 1 or 2?

What if… you could say you have condos in Town & Country and on The Slopes & Shore? And all these condos cost you less than just one traditional second home?

What if… all these properties appreciated like your home has?

The Condo Hotel opportunity will be the choice of more than 5% of the Baby Boom Generation, and the trend is just beginning. The condo hotel industry will also breath new life and prosperity into the hotel industry, making quality and ‘the best located’ hotels more profitable than ever. Condo hotel will separate the real estate business from the hotel service business and create a win-win for condo hotel ownership and hotel guests. Lastly, retirees of the next decade will expect more and be able to afford a higher lifestyle through condo hotel. These are the premise of this paper.

THE POWER OF THE BOOMER GENERATION…

Why are Baby Boomers Important?

81 million US Baby Boomers* (born between 1946-64) began to reach retirement age (59 ½) in 2004. 28% of the US population is a Baby Boomer. 2016 is the peak year, with 4.3 million 59 year old birthdays. A Boomer turns 50 every 7.4 seconds this 2005!

*Many non-US Boomers will choose to retire in the USA to be closer to the world’s best health care system.

per year: 4,000,000

per day (4.0 mil / 365): 10,958

per hour (10.6 k / 24): 456

per minute (456 / 60): 7.1

Boomers have just begun buying their second/retirement homes.

Michigan has 234,000 second homes, California has 237,000 and Florida has 483,000. 6.4 million people own a second home, up over 40% since 1995. By 2010, an estimated 10 million people are expected to own a second home, despite 9/11, this is a 56% increase in just 5 more years and could be considered a boom market by any measure. More people will buy in the next 5 years than have purchased in the last 10 years, competition for desirable retirement residences will only intensify, appreciate in values will follow suit. Low rates have helped fuel this real estate market, but they are a smaller part of the equation than is commonly believed. Currency exchange rates have a much more dramatic inflationary effect on resort area real estate.

The trend began in 2001, and intensified as interest rates fell in 2002-03, causing some boomers to “buy early”. Real estate further became the investment “du jour” as it became clear in 2001-02 that the stock market was ‘not returning the level of investment returns’ that many boomers had built retirement savings expectations around.

This lack of security and control in the stock market, and its positive effect on real estate investment, will be discussed further in this report.

In addition, tax ramifications for second home ownership has helped encouraged second home ownership says the Wall Street Journal “In addition to low interest rates and demographics, the second-home market has been helped by the Taxpayer Relief Act of 1997, which established new rules for the treatment of a capital gain on a principal residence. Under the old law, taxes on gains were deferred if the seller bought a new home of equal or greater value up to two years before or after the sale of the primary home. In addition, sellers over age 55 could claim a one-time exclusion of $125,000.”

New rules repealed the mandatory gain-deferral and increased the exclusion to $500,000, as long as a taxpayer owned and used the principal residence for two of the five years preceding the sale date of the home. Plus, the exclusion now can be claimed every other year.

These tax changes “liberated” sellers from the pressure to trade up to avoid a tax hit. Instead, says an NAR spokesman, it has encouraged many sellers to trade down to more modest digs, while using the remaining proceeds to purchase second and third homes. Tax changes have created a whole new form of property ‘trading’, where there is a tax advantage to buy a new home every 24 months, allowing a capital gain profit with zero tax cost. For many savvy investors, this has created a true ‘cottage industry’ in home flipping.

“The second-home market can accommodate 100,000 to 150,000 new housing starts a year over the next 10 years”, estimates David Hehman, CEO of EscapeHomes.

But why second homes? As many professional people have discovered, as technology allows us to ‘work from anywhere’; why not work from someplace beautiful, someplace ‘vacation-like’, from the cottage? The evolution of the home office has turned to the cottage office.

The typical vacation-home buyer is 55 years old and earned $71,000 in 2003, while investment-property buyers had a median age of 47 and earned $85,700.

For properties purchased between mid-2003 and mid-2004, the median price of a vacation home was $190,000 compared with $148,000 for investment homes. In contrast with the last available full-year price data in 2001, vacation homes have appreciated 12.8 percent from $168,500, and investment homes have risen 25.4 percent from $118,000.

Nearly one out of five second homes will become primary residences after retirement – 27 percent of vacation homes and 14 percent of investment property. “In addition, buyers were looking to diversify portfolio investments,” Mansell said. “This is now the most frequently cited motivation for purchasing a second home.” In listing the reasons why they bought second homes, respondents said there were some differences depending on the type of home. Overall, 30 percent of buyers wanted to diversify investments, 28 percent sought rental income (37 percent investment vs. 7 percent vacation homes), 14 percent wanted a personal or family retreat (29 percent vacation vs. 8 percent investment), 6 percent planned to use for vacations (16 percent vacation vs. 2 percent investment), and 5 percent had extra money to spend.

“Because the typical second-home buyer is a baby boomer, it’s likely over the next decade that second-home sales will remain historically high,” Lereah said. “The boomers are still in their peak earning years and have both the wherewithal and the desire to purchase vacation homes and investment properties.” Ninety-two percent of all second-home buyers see their property as a good investment. In addition, 38 percent said it was very likely they’d purchase another home within two years, breaking down to 47 percent of investment buyers and 16 percent of vacation-home buyers.

The 9/11 effect, and family values is another unpredicted phenomenon that many experts sight when discussing the second home market. The theory says that as Americans were shocked by the events of 9/11, they wanted to create more ‘family together time’ and come together in vacation destinations where far-flung family members could rejoin as a whole unit. Drive-to destinations were first to experience the effects on family-tourism from 9/11, these resort locations within a 2-5 hour drive from metro areas actually saw increases in occupancy immediately following 9/11. The theory is still evolving, but through my own surveys of boomers, this effect has merit on cottage demand. Drive-to vacation cottages is still the fastest growing market.

Can the demand for second home, resort properties and retirement residences be truly measured or is it just another version of real estate investment hype? A new study by NAR, shows that 23 percent of all homes purchased in 2004 were for investment, while another 13 percent were vacation homes. In addition, there was a record of 2.82 million second home sales in 2004, up 16.3 percent from 2.42 million 2003. The investment-home component rose 14.4 percent to 1.80 million sales in 2004 from 1.57 million in 2003, while vacation-home sales rose 19.8 percent to 1.02 million in 2004 from 850,000 in 2003.

The figures have merit and factual measurement. Real estate values in nearly all ‘vacation, resort, and retirement’ areas have out paced the overall market by double digit (alarming) rates. The working communities of America are not only lagging, but in many cases falling in real value (when adjusted for CPI inflation).

(A note about inflation & currency: All too often we read reports about the increasing value of assets like real estate without any discussion of the cost of inflation in these increases or the exchange value of the currency being used to value the asset. If the dollar falls in purchasing value by 30% against other currencies, the value of real fixed assets should correspondingly rise by 30% (if they are desirable for purchase by foreigners). Real estate markets that have a high level of foreign investment will appreciate quickly as the dollar falls, and fall if the dollar strengthens (Hawaii circa 1990s). If the Consumer Price Index (CPI) rises by 3%, then the value of a home that rises by 5% has truly only increased by 2%. It is disturbing to this author that this is not more openly discussed by our mainstream press, who by profession are journalists with liberal arts degrees, not MBAs. Watch the true inflation-adjusted appreciation rate, no the media hype.)

Can these high rates of appreciation in second home markets really continue? Many experts believe, “Yes!”, it can sustain for a long run (not months, but years). The fundamentals of rapid appreciation equate to supply growing slower than demand. Supply in areas such as South Florida have been rapid (78,000 new or planned condo units entering the Broward/Dade county market by 2007), but material shortages and hurricanes have slowed the ramp-up and created a large amount of pent up demand chasing reduced supply. Also, the foreign buyer demand in the Miami area is extremely high, this means these buyers are using currency that is 20-30% strong than last year. A 30% rise in property values is easily absorbed in this environment.)

In areas such as Arizona and Las Vegas, water concerns and lack of infrastructure and skilled laborers have slowed the rapid pace, but the grow rate is still staggering. Other scenic second home destinations, like the mountain states, Pacific Northwest and Florida Keys have environmental hurdles which raise the barriers to entry for developers and restrict supply. A restricted supply in the face of demographically empowered demand is always a formula for rapid price appreciation (CA in 1970’s).

What goes up must come down? Yes. But a 20% per annuim rise for 5 years, followed by 5 years of stagnation or a 10% loss, is still 5%+ annual growth rate (worse case). If leveraged at 90%, the return on initial investment is still 44% per year. The hard part is making sure the best years are in the beginning… even hard is selling at a peak. It is estimated that there are between 40-90,000 new condo hotel units coming to market by 2008.

The demand for these units will exceed 1 million buyers, so the price of condo hotel units could be much higher than presently expected.

Franchises – A Proven Business System

Franchises offer the first time business owner a proven and successful business opportunity. If you are looking to start your own business for the first time, franchises provide you with the greatest opportunity for success. When you purchase a franchise from the “Franchisor”, and become a “Franchisee”, you are not only purchasing a business, but a complete business system.

Franchises have over a 90% success rate, compared to about a 15% success rate for those indidviduals starting their own businesses from scratch. Franchises have spent years developing and modifying their systems of doing business, and they pass that “trial and error” knowledge on to their Franchisees. Initial training exists for every aspect of the business, which can last anywhere from 1 to 2 weeks. Training usually takes place at one of the franchises existing locations or their corporate office. Training may consist of the day to day “hands-on” positions required to run the business, to marketing, hiring, purchasing, bookkeeping, management and supervisory techniques.

Assistance is available with “demographic” reports to aid in selecting the right location. Support is also available for lease negotiation and “build outs”, if necessary. Pre-opening strategies and marketing materials for newspapers, print-ads, handouts, yellow page advertising, radio and even TV ads are are complete and professional.

During the first few weeks of business the Franchisor may provide its own personel to the Franchisee for assistance and support. This helps ensure a smooth opening. Additionally, once the business is open, a Franchisee will receive ongoing assistance and support from the Franchisor, not to mention support from the other franchisees, all who are all just a phone call away.

Once a year or more Franchise Meetings occur between the Franchisor and their Franchisees to exchange ideas, develop new techniques and strategies, and to compare progress and profits.

All of this is not free, of course. Franchisees normally pay the Franchisor an initial Franchise Fee, plus monthly royalties which can range from 3% – 12% of their total income per month. But it can be well worth it!

In owning a Franchise, you are in business for yourself, but you are not by yourself!

(Copyright 2005-ehbvi-http://www.businessventureinc.com)

Get Rich Quick – A Genuine Scheme Or a Scam?

The question I am always asked is “Do they work?”

My answer is usually a blunt “No, they do not work…well, not for you!”

There are many angles to these work at home business and the GRQ is actually part of another, much grander scheme. Hopefully you are intelligent enough to realise when something is too good to be true…

The simple idea behind the GRQ, is that an individual is selling valuable information, software, marketing tools etc, that will guarantee your success if used properly. They will often offer a money back guarantee if you are not completely satisfied. Now, I don’t know about you…but I would not bother chasing an individual for my money back on a $5 piece of software. The limited guarantee will use legal jargon to illicit itself from the terms of such an agreement. There is no authority to help you chase up any claim should you require a refund, and such any refund will be offered under a limited stature, ie; a 30 day money back guarantee. The chances are, from the date of purchase it will take many months to wholly utilise any information as stated in the guarantee, therefore exempting themselves from any such agreement. It is on this basis that the GRQ guru makes his or her money. The information will be more than likely out dated, copied, incomplete, too technical to understand and usually designed to put people off before they even finish reading it. Again, it is this vague marketing of the product that relinquishes the seller of any comeback…they pray on the fickle human nature of someone who, for example, would even believe it was that simple to GET RICH QUICK!

“In a court of law, there is nothing about the GRQ that is technically illegal, you will receive exactly what you pay for. Basically, 99.9% of people will not understand, nor finish the literature.”

As times change, individuals have also had to adapt to the change in the market. Any businessman will know that to increase profitability, you have to decrease your costs and increase your market presence.

It is this very basic principal that has led to the turbo-seller! The cheek of this GRQ scheme is almost brilliant…

These new age GRQ program sellers, sell you little more than a few lines in an email and a few page-fronts to choose from. This has been so successful, that within ten minutes of browsing, I encountered no less then 17 different pages displaying the very same graphics. How can this be?

The seller will claim a 100% return on the buyer’s initial investment. Once purchased, the seller will (often in an automated email) dispatch say, 4 or 5 ready made front pages offering the very same content as the individual has just bought, with an email stating all they have to do is replicate their experience…and they will too make their return. Do this over and over again, and I would say it is possible to make some money…but not a lot. The market is already over saturated and without the know how to generate your own front pages and graphics…and the frame of mind not to have thought of the idea yourself…people inevitably get bored and give up. Meanwhile, the consumer becomes increasingly wise to seeing the same material on every website…and knows there is no more to this scam than, well, a scam!

The important thing to remember with the GRQ, which is true for nearly all internet schemes, is that they very cleverly, and legally, sell you exactly what they advertise.

Innovations, Entrepreneurship and Profit: How They Are Tied Together

What is Entrepreneurship? When we think of entrepreneurship, what immediately comes to mind are businessmen, and small scale enterprise or businesses. Actually, the definition of entrepreneurship varies depending on the perspective used. It may be a field in business or it may be an activity in which people engage in. Describing the processes involved within it defines what entrepreneurship is. Understanding and seeking innovations, like improving an existing product line, is one of the processes in entrepreneurship. But is not merely innovating, this process should be taken a step further for it to be considered as part of entrepreneurship.

The step further would be to transform the innovation into economic goods, something that will generate income. In entrepreneurship, an individual or a group of individuals identify a business opportunity by finding a prospective or valuable item, product or activity that can be utilized for business and generate sustainable profit. When the market value generated by the business opportunity or innovation is greater than the value of the value of the combination of resources used to create the opportunity or innovation, then there is profit. Profit occurs when the value of the resources used to create a product is increased through innovation.

The definition of entrepreneurship lies in a single but most important concept: discovery. Without discovery and innovation, there will be a stagnation in the market economy as there will be no improvement. Entrepreneurship paves way for economic growth, as it supports economic growth through its discoveries and innovation. Through entrepreneurship, new and better things, processes and systems are created, recreated and uncovered. The creation or discovery does not need to be isolated to new product lines or existing product lines. It can also be applied to methods of production, market, resources or an organization or even an industry. Entrepreneurship can provide solutions for economic stability as it continuously seeks improvement and development of our resources to give them a greater value.

Let’s take the following situations as example of understanding what entrepreneurship is. Check out the following situations:

· A stay at home mom who knows how to cook delicious Indian cuisine starts to sell them to the teachers and staff of the nearby school.

· A downsized employee found another use for old vehicles, designs and fixes them, and made a playground for her pet day care center.

· A scientist discovers a new element but does not attempt to identify practical uses for it.

All of the situations except for that of the scientist show entrepreneurship. Remember that entrepreneurship is discovering or improving new product lines, market, processes, resources or organization. The stay at home mom found a new market in her neighborhood, the nearby school, and she took advantage of it to generate income. The downsized employee developed a new use for old vehicles. The situation with the scientist cannot be considered as entrepreneurship. There was no attempt to generate a market value for the new element as the scientist did not attempt to identify its practical uses. If he created a product with the use of the new element, then that could be identified as entrepreneurship.

3 Questions You Need to Ask to Do Business on YOUR Terms

Do you want your business to represent you as well as your mission? And do you also want to feel happy about the way you do business? The keys in this article help you accomplish all that – and more!

All heart-centered entrepreneurs have one thing in common:

They want to make a positive difference in the world.

And the ambitious ones, like my clients, and myself, want this difference to be BIG – as big as is possible for them.

Of course, they want to have a life as well.

Sure, they want to reach a lot of people. And yes, they want to make good money (whatever that amount is – that’s different for everyone).

But they don’t want to compromise themselves, their values, or their lifestyle.

Unfortunately it doesn’t always work out that way.

It can be hard to have it all: success, money, fulfillment, a thriving business and a great lifestyle.

Most people aren’t even sure it is possible to have it all – let alone believe that THEY are worthy of having it all!

Don’t get me wrong: I don’t believe in woowooland where the sun always shines and money grows on trees and everybody is loving and nice and smiling and happy-happy-happy all the time.

I’m too realistic and grounded for that. Life and business can be great, but that doesn’t mean there are no challenges, problems, disappointments or overall shitty experiences.

It can get pretty messy sometimes.

That’s part of business and of life.

But I DO believe it’s possible to create a business that supports your ideal lifestyle AND make a Big difference at the same time.

And I believe you owe it to yourself and your clients to take excellent care of yourself first, and to do your utmost to create a business that serves you instead of drains you.

(I’ll share lots of wisdom and practical tips on how to accomplish this in my upcoming book ‘The Art of Divine Selfishness – transforming the world by thinking of YOU’)

Unfortunately, a lot of entrepreneurs do feel drained, overwhelmed, overworked, underpaid and unfulfilled.

I know – I have felt like that many times myself. Most recently in the last couple of months, when I didn’t manage to create enough alone time for myself.

Thankfully I have managed to turn this around by making a lot of decisions and changes in my business, programs and work schedule.

These 3 questions helped me with that.

They can help you get clarity around your business, mission and needs as well.

Question 1:

What wants to be expressed through me?

No, it’s not an easy question to answer.

But this question is absolutely essential. It helps you:

  • Go within yourself, and tap into your own inner wisdom;
  • Connect to your soul purpose, and
  • Connect to that thing that ONLY you can do, that thing you were born and uniquely suited to do.

One or more answers might come up right away, but it will probably take more time than that. Just keep the question in the back of your mind, and see what comes up.

Once the answers come up, start thinking about HOW you can express your purpose in your business:

What services, programs, products etc. could you turn your purpose into?

Question 2:

What do I need to express this purpose in a way that makes me happy?

  • What do you need?
  • How many hours do you want to work per day, week, month and year?
  • What does your ideal client look like? What boundaries do you need?
  • What don’t you want to put up with anymore?

Imagine that ANYTHING is possible, and you can create ANYTHING and EVERYTHING you want, like and need:

What would your business look like then?

Question 3:

What possible pitfalls or obstacles might be in the way of creating this ideal business of yours?

  • What could get in the way of you creating your ideal business? And how can you prevent this from happening or solve it if it does happen?
  • Maybe you need more knowledge, about business models and marketing and overall entrepreneurship. (This was my biggest obstacle when I started my business)
  • You might need more courage. Or boundaries. Or hire your first or second or third assistant.

This week’s transformational action:

  1. Take some time to answer these questions above.
  2. After that, translate your answers into actions.
  3. What do you need to do?

When will you do it?

Create bite size action steps or take a giant leap.

Whatever you do, act upon the insights you gained.

And remember: the action that seems hardest to take, is most likely the one that will yield the most results.