Reduced Investment in Middle Class Rentals

March 2016
Business Success
Brought to You By: Randy Elgin

Randy Elgin
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How to Win Big in Today’s Economy

The altered economic landscape presents innovative and nimble businesses with opportunities to thrive.

Find out how by requesting my free report “How to Win Big in Today’s Economy.”

Just reply to this email and I’ll send it right out to you.

Worth Reading

Selling Feelings
By Ben Thompson


Remember the bad old days when it took the majority of your resources just to get your product in front of the buying public? Now those resources are best spent differentiating your product. A differentiated product delivers a better user experience that goes beyond its form and features. Thompson urges businesspeople to invest the resources necessary to understand exactly what differentiates their products and exactly why customers buy them. Or not.

Addicted to Distraction
By Tony Schwartz

The New York Times Sunday Review

Today nearly everyone is addicted to the Internet, and many people are in denial and/or powerless to disconnect. With its endless access to information and stimulation, the Internet has become society’s most socially sanctioned addiction. Schwartz describes his own difficulties in first admitting and then overcoming his own Internet addiction.

This Month: What customers want this year

Have your first-quarter efforts offered customers what they really want?

As we close out the first quarter of the year, it’s wise to question whether your business is focused on what your customers currently value and desire. To keep up with the latest trends, check out the following:

5 Consumer Trends For 2016

To attract 2016 customers, business owners must be innovative with today’s technology. What novel ideas are appealing to consumers?

5 Marketing Changes Small Businesses Need To Make in 2016

Marketing strategies constantly evolve as consumers, industries, and tools transform the marketplace. Check out these top 2016 strategies for small businesses.

Wisdom Quotes

Quotes on…Budgeting

A penny saved is worth two pennies earned…after taxes.

Randy Thurman

A budget tells us what we can’t afford, but it doesn’t keep us from buying it.

William Feather

Budgeting has only one rule: do not go over budget.

Leslie Tayne

We must consult our means rather than our wishes.

George Washington

CRE Isn’t Building Much for the Middle Class Any More

One loser in post-recession North America has been the middle class. And this has started to make a difference in the spending patterns of commercial real estate investors. Increasingly, new developments are focusing on the upper-income and lower-income sectors, leaving little for the middle class.

A Pew Research Center study found that the U.S. middle class was particularly hard hit by the recession and housing crisis; those earning from $42,000 to $126,000 annually now represent 50% of the U.S. population compared to 61% in 1971, while the high-end earners doubled to 9% of the population. The lower-income portion of the population is now 20%, up from 16% in 1971.The middle class is also losing its wealth. From 2007, middle-income earners boasted median wealth of $161,050; in 2013, middle-class wealth had declined to approximately $98,000 – with most of the decline due to the recession.

Commercial real estate is responding. As writer Robert Carr notes in National Real Estate Investor: “Some commercial real estate investors have already begun to make spending decisions that ignore middle-class needs in favor of the upper- and lower-income earners.”

One research firm suggests that many owners of middle-class multiunit rentals have found it difficult to raise rents, while those catering to a higher-income demographic seem to have no problem increasing their rents.

The result is more development of higher-income Class A properties and of subsidized affordable housing projects targeted at the lower-income sector. There’s just not much for the middle class.

Angel Financiers Learn How to Invest in Tech Startups

Angel Investor Investing in tech companies may be risky, but if you succeed in finding a winner, the payoffs boggle the mind.

And these days, finding a winner doesn’t mean you have to be techy. It just means you’ll have to go back to school.

According to Kiplinger Wealth Creation: “Whether you’re looking for steady dividends from an established giant such as Apple or Microsoft or wanting to place a bet on a fast-growing upstart, opportunities abound.”

However, many angel investors simply aren’t tech-savvy. And that concerns the entrepreneurs.

Bloomberg News quotes tech entrepreneur Daniel Debow, who sold one of several start-ups for $227 million: “I’ve seen it multiple times with people who have good intentions but bad experience.”

Fortunately, where there’s a knowledge gap, there are people prepared to fill it.

As Bloomberg News reports: “Angel training courses have popped up in Silicon Valley to help prepare the dozens of employees who turn into millionaires when a major technology company like Facebook Inc. or Twitter Inc. goes public and want to make investments of their own.”

And while the United States, Europe, and China hold the top three spots for buying high tech, the craze circles the world. In Canada, National Angel Capital Organization (NACO) has developed a modular course to teach investors the ins and outs of investing in tech start-ups.

In fact, nontech investors may offer entrepreneurs something more than their cash.

While they may not be wise in the ways of technology, they may be very wise in the ways of business.

Entrepreneurs, for all their creativity and product knowledge, need to understand how businesses work to maximize their success. Their angels may be able to help with that..

Marketing to Boomers Can Be a Tightrope Act for Retailers

walker “You don’t want to market to someone as a baby boomer. They don’t want to be in that category,” comments Christine Carlton, cofounder of online retailer

Quoted in a recent article in the Globe & Mail, Carlton neatly summed up the problem retailers are having marketing to boomers – who don’t want to be marketed to as boomers.

Suggests Steve Olenski in Forbes: “They don’t want to be reminded of their age, but of their accomplishments and of their future.”

There are 76.4 million boomers in the United States, and they have money. As a Neilsen report indicates, they account for 70% of Americans’ disposable income, and the younger boomers stand to inherit a combined $13 trillion in the next 20 years.

While many retailers are targeting special products, such as antiaging creams, at boomers, their marketing is subtle, with older but beautiful (and often airbrushed) models and celebrities as spokespeople.

Also targeted to the 50-to-70 age group are home-related products, including furniture and decor items and raw materials for boomer DIYers.

Why? Many are getting ready to sell or have sold their old homes and are beautifying their new nest. As Olenski notes in Forbes: “70% of baby boomers think their current house is not the best they can get. They want to be out on their own, in a more luxurious place.”

Finally, boomers are Internet and social-media savvy; as marketer John Manrique points out in the Forbes article: “They do their homework online. Baby Boomers know their stuff…so you’d better too.”

Business Loans: Right for Your Small Company?

Your small business is growing, and the time has come to expand, or you may want to re-finance into a lower long-term interest rate. Whatever the reason, you’ve decided a commercial mortgage is the answer. But chances are the commercial mortgage industry has changed since you first qualified for a mortgage. So here are some basics to help you through the process:

Commercial mortgage defined: Somewhat like a residential mortgage, your commercial mortgage is usually secured by a specific property. A nonrecourse loan allows the lender to seize the secured property should the borrower default. However, that lender is unable to tap the borrower’s other assets (including other properties). In a recourse mortgage, the lender has a claim on the borrower’s other assets, such as cash, other property, and even wages.

Commercial lenders have stringent credit and loan-to-value (LTV) requirements. The LTV is simply the amount of the loan divided by the appraised value or the purchase price of the property – whichever is lower. Most commercial lenders prefer your loan-to-value ratio be in the 65% to 80% range.

Terms can range from under five years to twenty years, often with an amortization period that is longer than the term. In this case, the borrower will make smaller payments for the length of the term, but face a “balloon” payment (the remainder of the loan) at the end of the term. An approaching “balloon” payment is one reason many small businesses refinance their commercial mortgage.

The benefits of a commercial mortgage: For many small businesses, a commercial mortgage is an ideal option because it doesn’t draw on cash reserves or use up short-term credit – it leaves those free for equipment purchases or the hiring of additional staff.

Eligible commercial properties: There’s a long list of properties that are eligible for commercial loans. These include office buildings and retail spaces as well as warehouses and storage facilities. Most borrowers would be wise to check with an experienced commercial real estate agent as to eligibility.

Finding the right commercial mortgage for you: The most important task is to examine your credit history and the value of the property you will use to secure the loan; debt service calculators are readily available online. Also be sure to consider extra costs including lender fees, title insurance, and environmental and inspection reports.

Commercial lenders, including private lenders and banks, have their strengths and weaknesses, and which is best depends on your individual circumstances. In general, banks may have lower rates, but it’s easier to be approved and the application process is simpler with a private lender.

Key questions

What property types are eligible?
Can I be prequalified?
Is there a balloon payment?
What documents are required?
What are the extra costs?
Will financial reporting be required?
Do I have to keep a certain amount of assets on hand?
If I want to sell the property, is the mortgage assumable?

Is it a fit? For many small businesses, a commercial mortgage may be the answer – but do ask the questions first.


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. This newsletter is not intended to solicit properties currently for sale.