Climbing Interest Rates Good News for Investors

Climbing Interest Rates Can Be Good News for Investors
Rising interest rates have the potential to reshape rental markets across North America. Many investors are already finding that companies and individuals are opting to rent rather than purchase. If, as expected, interest rates continue to rise, rental markets may be affected as follows:

  • Both companies and individuals lose purchasing power when rates rise, as higher rates limit how much a buyer can borrow to purchase a residential or commercial property. To stay within their means, buyers may be required to make concessions in order to purchase a residential or commercial property. Therefore, they will seriously consider the rental option.
  • Landlords will likely see their tenancy rates rise along with interest rates. As affordability becomes more of an issue for potential buyers, property owners are likely to benefit from the fact that more people will opt for renting in order to maximize their dollars.
  • As demand for rental units increases, rents will rise to reflect it. Above-average tenancy rates will likely result in increases in the value of rental properties; landlords can charge more per unit than they could with previous lower tenancy levels.
  • Capitalization rates will be impacted by higher tenancy levels and rental rates. Capitalization rates – net operating income divided by the sale price – are used by investors to value property. By increasing rental income and reducing vacancy rates, owners can increase capitalization rates, making the property more appealing to potential buyers.

Relying on Your “Retirement Safety Net” May Be Risky

Yes, business owners can retire. But they need to consider all options. The reason many small-business owners don’t adequately prepare for retirement is that they often view the businesses as their retirement safety net. When they retire, they expect to transfer the firm to a family member or sell it and turn it into cash. In the meantime, they plow earnings back into the business to keep it growing.

According to financial professionals, this all-the-eggs-in-one-basket approach is a very risky retirement planning strategy. There are many options available to sole proprietors as well as small-business owners who want to offer savings plans to employees and themselves. These include:

  • A SEP-IRA – a tax-deductible retirement plan similar to a traditional IRA but targeted to solopreneurs.
  • A SIMPLE IRA – designed for small-business owners with fewer than 100 employees. Pretax contributions are deducted directly from employees’ paychecks.
  • A Solo 401(k) – self-employed individuals with no employees can contribute a maximum of $53,000. A spouse who works in the business can contribute the same amount.
  • A SIMPLE 401(k) – another retirement vehicle for businesses with 100 or fewer employees. Account-holders can borrow against the money in a 401(k) and make withdrawals penalty-free in cases of financial hardship.

Funds invested in a diversified retirement plan trim the tax bill now and grow tax-deferred until withdrawals are made later. Usually, the cost of opening and administering a retirement savings plan is modest. Some 401(k) providers actively target small businesses and even offer access to retirement planning experts.

Flying High: A Guidance System Can Steer You to Success

It’s human nature to make goals to lead us to success. But it’s also human nature to lose those goals in the face of everyday concerns.

As poet Robert Burns famously said: “The best laid schemes o’ mice an’ men / Gang aft a-gley.”

What we need is a guidance system similar to those in airplanes, suggests author and coach Terri Murphy in a recent article in RISMedia: “(An airplane has) a guidance system that continually adjusts the nose of the plane to make course corrections, which keeps the plane in the intended target.”

Most of us, however, don’t have a guidance system and, rudderless, let our plans go awry.

Murphy suggests a solution: Define three top goals that, if achieved, will “make you feel super successful.”

Home in on one daily key priority that represents a step toward your goals. A weekly checklist and an action plan will encourage you to complete the daily activities that support your top priority.

At the end of the week, assess your progress and tweak your plan accordingly.

And, most importantly, keep referring to your top goals and don’t slip back into those “comfortable” habits that keep you from achieving them.

While we may lack an airplane’s guidance system, we humans do have the ability to plan. To keep those plans in the air, we need a system.

Whether it’s Murphy’s or a hybrid of several similar goal-oriented systems, it must be sufficiently compelling (and user-friendly) to make you want to abandon your day-to-day crises and concentrate on your success.

What to Look for When Buying a Business
Potential business owners often view buying an existing business as less risky than starting a company from scratch. Turnkey businesses provide an established client base, a recognizable name, and a predictable cash-flow pattern.

But shrewd investors can further reduce their risks by evaluating the following areas before purchasing:

Franchise vs. an independent business

The brand recognition that comes with an established franchise business is a positive. However, many franchises will require investors to go through an approval process and agree to pay franchise fees, which may also include a percentage of quarterly or yearly profits. Review the franchise agreement in detail prior to investing so that you are aware of franchise stipulations regarding brand image, fees, and mandatory upgrades.

Independent business opportunities may offer more flexibility with marketing and branding. Plus, there are no upfront franchise costs to pay, and the year-end profits are yours either to reinvest in the business or to spend as you see fit. A prudent sole proprietor with a strong, well-thought-out marketing plan would be well-suited to this type of investment.

Financials and infrastructure

Business owners should be able to draw a discretionary income from their business. When examining your potential buy, look at whether the discretionary income has gone up or down over a period of years. If the owner’s income is shrinking, you will need to evaluate why: Is it poor management? Has competition increased? Are community demographics or political changes having an impact on the business? It may be possible to turn around a faltering business, but you must be prepared for the potential financial ramifications.

When you purchase a business, certain chattels may be necessary to run the company’s day-to-day operations. For example, a convenience store will require a cash machine, shelving to display products, and refrigeration units to house perishable food items.

It’s important that the seller clearly stipulates which chattels are and are not included as part of the sale of the business, and an inspection may be required to ensure that all included chattels are in good working order prior to your taking possession.


Goodwill is the amount of perceived value assigned to the business due to its community reputation and appeal within its existing customer base. A valuation of goodwill is included in the purchase price. And while a positive community outlook increases the goodwill value, a poor perception of the business in the community could have serious long-term consequences that may take more time than you have to correct.

Existing employees

These can be a big help. Or not. Existing employees likely have the training, experience, and customer rapport required to help smooth the transition. And customers who see the same employees continuing to provide the same level of service may be more open to the change.

On the other hand, existing employees who are resistant to the ownership change may cause problems, both from a public/customer relations perspective and in challenging new processes and procedures designed to improve the operation.

SA Realty Watch Group
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Worth Reading
Sometimes You Have to Fire Your Customers. Here’s Why
By Adam Robinson

Your new customer is making your employees’ lives miserable. Look to your company’s core values for guidance. If you’re all about respect, that should extend to your customer base. Keeping nightmare customers could destroy your team morale and make a mockery of your core values. Fire this one.

Benjamin Franklin Built His Character around 13 Virtues
By Trent Hamm

The Simple Dollar

Benjamin Franklin credited his success to the practice of 13 core life virtues. In fact, for a significant part of his life, Franklin carried around “virtue cards” to help him record on a weekly basis which virtues he was successfully living by – and which areas needed work. Tracking and reflecting on the traits and virtues you want to live by – at work and in your life – could be a game changer. Download his weekly plan via the link above.

Be Like Bill Gates and Warren Buffett
By Michael Simmons


The world’s busiest and smartest people – from Bill Gates to Warren Buffet – set aside time every day to read and focus on deliberate learning. Why? They know that learning is the best investment anyone can make. Find out why you should devote at least five hours a week to learning, and get tips on how to start.

The World According to TED
TED Talks educate and inspire. They’re simple but significant tools that small business owners can tap into for personal and company growth. Thousands of TED talks are available, but these videos offer some of the most practical messages for entrepreneurs:

The right frame of mind is essential for success. Find out what ways of thinking to avoid in 5 Ways to Kill Your Dreams:
5 Ways to Kill Your Dreams

As your business grows, you must guide your team through changes. Learn how in 5 Ways to Lead in an Era of Constant Change:
5 Ways to Lead in an Era of Constant Change

It’s not going anywhere. Discover how to use social media to enhance your business with How to Make a Splash in Social Media:
How to Make a Splash in Social Media

Every entrepreneur wants to know the secret to success. Here are several to choose from: 8 Secrets of Success:
8 Secrets of Success

This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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