Do You Really Need Warranties on Appliances?

Buy and hold investors often find themselves in the appliance market. Smart tag-ice]landlords[/tag-ice] and investors know there are many ways to cut costs and get the best deals. One thing sure and certain is retailers’ profits are getting smaller and slimmer so they are now relying more and more on warranties.

Buy and hold investors often find themselves  in the  appliance market.  Smart [tag-ice]landlords[/tag-ice] and investors know there are many ways to cut costs and get the best deals.  One thing sure and certain is retailers’ profits are getting smaller and slimmer so they are  now relying more and more on warranties.  

 

Hence, the added pressure to buy warranties on ranges, refrigerators, dishwashers and etc.  Question is- do we really need them?  After all, we’re dealing with tenants, right? 

 

Here’s my take.  No, skip the warranties.  We don’t need many of them, or probably any of them.  Why? 

 

Most of today’s appliances will last and do what they are supposed to do.  We’re all familiar with the best most reliable brands.  For instance, don’t  ever buy high-end fancy appliances for rentals. (I wouldn’t buy those for your own home either.  We had to remove a top –of- the- line dishwasher from our kitchen recently  because it didn’t clean the dishes very well).   If anything will break down, fancy appliances often will. And they’re more difficult to get parts for.   

 

1. Basic run of the mill appliances are the best.

General Electric, Kenmore, Roper are some of the brands we buy on a regular basis.  Still doubtful?  Not sure what to buy?  Go to a good and busy appliance store such as H.H.Gregg  and ask one of the salespeople what apartment owners are buying.  They will tell you because they know the merchandise that’s moving.  They also know who’s buying what and why.

 

Parts  for basic brands can be found fast and the costs for repairs won’t be astronomical.  That’s when you actually do have repair problems, which will be rare.      

 

2. Always be careful and get the right size.

The salespeople will tell you which frig to buy for a one bedroom or a two bedroom unit.  That’s because one bedrooms will have smaller kitchens.  You’d better get the smaller frig so it will fit.  Too elementary?  It’s a very common mistake. Beware.

 

3.  Make sure your tenants know how to use appliances properly

Sometimes  repairs come about because tenants simply aren’t taking good care of the appliance.  Did you know you shouldn’t completely fill up  a dishwasher’s  soap  box?  We got that tip from a dishwasher repairman.  Too much soap puts too much  added stress on the dishwasher.  Added stress ages the dishwasher faster.  

 

Let’s get back to the warranty issue.  Why are many warranties useless?

Warranties are often just another way for retailers to get you to pay more. Don’t get caught up in this back-end fee and cut it out completely.     

 

Look at  the appliance’s  track record.  If it’s good, you’re okay.  Check with [tag-tec]Consumer Reports [/tag-tec] and see what the best appliances are.  (You should be reading that mag religiously anyway).

 

Read the find print on warranties.  You might be in for a big surprise on what is not covered.  

 

Over all, from our experience, warranties on appliances are a waste of money.  If you buy reliable brands and you only use  trusted repair people if you do have a problem  you will save lots of  money in the  long run.      

Technorati Tags: , , ,

Saved by Generation X

Thank goodness for Generation X. They’re the young folks born between 1965 and 1979. They’re now entering the real estate market for their peak house- buying years. And just in time. A slower market, still reeling from all of the dizzying street theater of the last three years needed some ballyhooing upwards.

Thank goodness for Generation X.  They’re the young folks born between 1965 and 1979.  They’re now entering the real estate  market for their peak house- buying years.  And just in time.   A slower market, still reeling from all of the dizzying street theater of the last three years needed some ballyhooing upwards. 

 

Can investors rest easy because of  Generation X’ers?  Pretty much. 

 

It’s definitely  a buyers’ market, but many of the X’ers are still sitting on the sidelines.   Why?

 

They don’t think the market has bottomed out yet.  They’re waiting to see how far  down it will go. Next question is how will they know?  How will anyone know, for that matter? 

 

“We’re nearing the end of the slowdown for most markets,” Ethan  S. Harris of Lehman Brothers tells the Wall Street Journal.  “Prices still have some ways to fall before they stabilize, but there are signs that the most drastic parts of the downturn-marked by a sharp pullback in demand and new construction-have run their course.”

 

In other words, there  wasn’t a nuclear  fallout after all .  However there have been smaller bubble bursts. “There’s no reason for prices to be falling in areas without a bubble,” he goes on to say.  “People are just slowing down purchase decisions.” 

 

Okay, so that’s nothing new.  We’ve known there were markets inFlorida,California,Nevada andArizona where investors had over-speculated, driving prices to artificial highs.  But when will the X’ers really jump into the market?

 

Just as soon as they come to the conclusion it’s now or never.   When the  “Mildred, we’ve got to find a place to live” concept kicks in.   I don’t think that  will  be long.

 

The economy is strong.  It can carry the real estate markets.  Job growth is very good, and from the looks of it, Christmas won’t be bleak for a lot of consumers.  If inflation remains steady and energy prices don’t go haywire the X’ers  will  start thinking about the same things their parents and grandparents were concerned about.  Good neighborhoods, good schools, etc. 

 

 

However, here’s a warning.  Generation X is not exactly like the Boomers. There are marked differences.  Beware as you rehab.

 

Master suites and kid wings are going out of style  as are  fancy over- the- top kitchens. X’ers don’t care as much about the prestigious zip codes either.    There will be more single home owners who will not need all that space.   These are important points to ponder as you invest in the new markets. 

 

Don’t forget there are still other buyers in the  future.   Immigrants and Generation Y will make their own impact in the years to come.  Smart investors will be keeping  the needs of  all of them in mind now  so that future profits will be reaped.   

 

 

 

 

Bad Real Estate News; Good Investment

Are you getting ready? It’s coming. One of the best investment opportunities in years. This is not late- night infocommercial fluff. Here are the facts you can take to the bank in 2007-2008.

[tag]Foreclosures [/tag]are rising. A lot of people have been proclaiming that for some time. What’s different now is the sheer number of them.

 

Are you getting ready?  It’s coming.  One of the best investment opportunities in years.  This is not late- night info commercial fluff.  Here are  the facts you can take to the bank in 2007-2008.

 

Foreclosures are rising.  A lot of people have been proclaiming that for some time.  What’s different now is the sheer number of them. 

 

Looking to California, where most trends seemingly start, we see  many homeowners already in default in three counties.  Those counties are Merced, San Joaquin, and Stanislaus.  In fact, according to Realty Trac, 1 in 214 did not make their house payments in October.  The national average for default  is usually 1 in 1,000.

 

The three California counties had 1,600 homes in [tag-ice]default [/tag-ice] on mortgages in October.  Let’s really look at that statistic.  That’s running almost eight times the number of defaults for that same area in  October, 2005.     These are the folks who are beginning to get into trouble with the banks.

 

Since default is the first  foreclosure  step, the news for these homeowners is not good.  And they will have plenty of company.  There will also  be some banks with  colossal headaches too.  As we know, banks don’t like landlording, rehabbing or any  of the daily  chores connected with real estate.  They want out of [tag-tec]bad loans[/tag-tec] quickly  because they don’t want  their books to look bad.  That’s the good news for savvy investors.  

 

Here’s the formula to watch for.  Adjustable rate mortgages or ARMS’s + little equity=foreclosure. 

 

Homeowners who bought into the “sales talk” that you can get into a larger house with little or nothing down will generally  be the ones in the most trouble.  That’s because they won’t be able to afford the higher monthly payments, once the real mortgage payments  kick in.

 

What they had been paying for the first year or so of their mortgages  was what I refer to as an “introductory loan”.  I would compare such loans to the commercials you see on TV for  “ buy now, no interest paid until ____ deals”  for furniture and other big ticket items.   When the real  killer  payments finally are due, they often  give much  more grief than  buyers had  ever anticipated. 

 

Some homeowners were able to purchase  their  homes for 100 percent, or in some cases, 125 percent of the value.  Smart investors have always taken advantage of such loans because they gave you a good start.  But that was based on strong calculations and a solid escape plan on exactly what you were going to do with  that property.  So the loans themselves, under the right circumstances,  were not the total  problem. 

 

The biggest  problem was  the misuse of ARMS’s.  Too many new homeowners did not understand that real estate markets fluctuate.  They were not prepared for the down as they watched prices climb.  They got caught up in the hype and sheer exhilaration of a market going to the moon. 

 

This  mistake that many people made was in  the flawed  thinking  that the market would always be going up.  They had no idea home prices could stop rising or actually go down.  Some of them are still stunned.

 

The ones who were able to sell quickly did okay.  The market then  was very good so they could get out easily.  Instead of ruining their credit or facing the auction block, they had quietly exited. 

 

Now  it’s different.  The homeowners  who can’t sell  or  refinance  are the  ones you need to watch for.   Our advice is to learn everything you can about foreclosures and how to buy them now.  If you don’t have the means to get into the new  markets, team up with other investors.  We’ll explore more on how to do that  in later posts.   As the opportunities present themselves  you will be ready. 

 

 

Technorati Tags: , , , ,

Exurbs:Don’t Discount Future Countryside Growth

A funny story was told about a city man who moved to a farm outside of Nashville. He wanted to raise some cattle and hay but didn’t have the right tools. One night, as a storm was approaching, he had to get the hay in fast. So why not pile what you could salvage into the trunk of your Mercedes E350?

They’re being called [tag]exurbanites[/tag], and no one’s laughing at them now, especially in Tennessee which ranks sixth in the nation for the exurbanite population. According to the Brookings Institute, there are 438,600 of them living in the Tennessee exurbs. I wish I could make it 438,601.

 

A funny story was told about a city man who had  moved to a farm outside of Nashville.  He wanted to raise some cattle and hay but didn’t have the right tools.  One night as a storm was approaching he had to get the hay in fast.  So why not pile what you could salvage into the trunk of your Mercedes E350?

 

They’re being called exurbanites, and no one’s laughing at them now, especially in Tennessee which ranks sixth in the nation for  the exurbanite population. According to the Brookings Institute, there are 438,600 of them living in the  Tennessee exurbs.  I wish I could make it 438,601.

 

What’s the allure?  Exurbanites want the convenience of the city with the peace and quiet of the country.  Right now many of them are getting it.  Like Oliver Douglas, the New York lawyer featured in the old sitcom Green Acres, they’re moving to the country to get away from traffic and perhaps fulfill childhood dreams of farming and animal raising. 

 

But the biggest incentive is cheap land, or should I say, [tag-tec]cheaper land[/tag-tec].  [tag-ice]Housing[/tag-ice] is less expensive.  People can spread out.  You can have a four bedroom house and a few acres for much less than it would cost in the city. Contrary to what your real estate agent may be telling you, there are people on this planet  who actually want a yard. 

 

As investors we may be able to have our cake and eat it too.  Growth is coming.  Get ahead of the curve and buy a few acres out.  Raise your family or spend your retirement there.  As the growth reaches you, sell out.  Then reinvest in something else.

 

Exurbanites are looking for several primary things.  They want to be near an interstate.  A close-by hospital is important for emergencies.   They can go to the city for surgery and out-patient services.  Most want some kind of garbage pick-up, and as we’ve talked about in a previous post, sewer lines are a must.    Many small towns can supply adequate fire and police protection as long as the growth doesn’t get out of control.

 

Here is the list of other  leading exurb  states from the Brookings Institute. 

 

Texas                       6 percent

California                2.1 percent

Ohio                        4.1 percent

Michigan                4.6 percent

New York                2.4 percent

Virginia                   5.9 percent

Maryland                7.5 percent

South Carolina        9.5 percent

Wisconsin               7 percent

Technorati Tags: , , , , , ,

Black Friday and Real Estate

Mary Hance, better known as The Tennessean’s Ms. Cheap, aptly describes it as the retail equivalent of the opening of deer season.

Shoppers Shelia Gad and her sister Sandra Baxter were camping out at Rivergate Mall in Nashville as early as 3 a.m. Friday. (Last year the mall had unplugged the coke machine so they could juice up their space heater to stay warm).

 

Mary Hance, better known as The Tennessean’s Ms. Cheap, aptly describes it as the retail equivalent of the opening of deer season.

 

Shoppers Shelia Gad and her sister Sandra Baxter were camping out at Rivergate Mall in Nashville  as early as 3 a.m. Friday. (Last year the mall had unplugged the coke machine so they could juice up  their space heater to stay warm). 

 

Best Buy and Circuit City customers are now paying others to stand in line for them.  The going rate: $100.  One man actually paid $200 for the #10 spot at the Best Buy near Hickory Hollow Mall.  But those are the polite shoppers.

 

You almost had to have an MBA in business to understand some of the ads and rebates.  The craft store, Michael’s, had one of the most complicated ads.

“$5 Turkey Buck + $10 Turkey Buck  on purchases over $65 only for the hour between 9am and 10am.”

 

Honestly I couldn’t even see  the fine print on their giant 25% off coupon.  It was a list of all the stuff not included in the sale like Christmas trees.        

 

Something’s amiss when you hear comments like this describing the  Green Hills Mall at 7 a.m.  “There wasn’t hardly anybody there.  We pulled into a parking spot,” said Crystal Walker.  She later ventured on to Cool Springs Mall  in spite of a broken ankle.

 

It’s all about Black Friday.  Anybody in the retail trade can tell you if you don’t get out of the red the day after Thanksgiving, it will be a very bad year.  I grew up in retail and I can certainly testify to that.  But I made a vow to myself at age 13, that as soon as I was able, I would never go anywhere near a mall  during the  [tag-ice]Thanksgiving [/tag-ice]weekend.  It’s been 18 years now since I realized that goal.     

 

Maybe a better title for all this shopping fanaticism  could   be “Black and Blue Friday”.  There have been shootings, beatings and trampling in some areas.  It’s pretty bad when stores need  police back-up, not for shoplifters but for customer control.

 

So I guess that’s where a “customer experience manager”  like Bryan Zudel of Best Buy,  comes in.   He was lining up [tag-tec]customers[/tag-tec] with a megaphone at 5 a.m. outside, not inside, the Antioch, TN store. (I’d rather be cocooned in my toasty featherbed I once  got on  a regular sale).    

 

So what does that tell us about the real estate market? 

 

More than you may think. 

 

Have real estate markets experienced similar craziness over the last year or two?  

 

It’s pretty bad when gang members in Chatsworth, California are writing in graffiti, “New Homes in the Low Millions”.  That sign was recently reported to  the  Ben Jones’ Housing Bubble Blog.

 

And yes, expensive homes have been  sprouting everywhere, even in previously bad, off-limits  neighborhoods.  They were  like kudzu; that  sci-fi spreading plant now  plaguing much of  the south.

 

Noise, traffic, constant construction,  and  neighbors close enough to sniff your morning coffee… no one seemed to care.  A family with  baby triplets pays top dollar for half a house.  No yard on a busy street  and they still  think they’ve gotten a bargain.  Older, not so charming homes, that sold for half a million less than ten years ago are now priced   over the million mark. Who would have ever thought?  

 

After all, your home is inflation -proof, right?   So what if you have to take some cash out  of it?  Isn’t that how it’s done?  What could possibly  go wrong? 

 

Could it be the  buying frenzy was just that.  A buying frenzy?  Everyone else was jumping  into the market before prices went way up.  There seemed to be no end to it.  Get in now while you can. You would  never have these  golden opportunities again.

 

So what has really happened?

 

The markets are slowing down.  We know that for a fact.  Why is that surprising?  Ever spend  the first Tuesday of the New Year working in a mall?  You’ll find more activity in a cemetery.  Where are all those people who were waiting in the dark and the cold to get in the stores at 5 a.m.?   Are they still  fighting over flat  screen TV’s? Hardly.

 

The homebuilding sector has already slowed down.  We talked about that a few posts ago.

 

Copper production is down because that market is easing.  Why?  Fewer orders for copper in pipes and wires.

 

The younger, newer real estate agents who’ve never experienced a slowdown are having to take side jobs.  Is that really earthshaking?

 

My predictions are that contractors will get easier to deal with over the next year.  They’ll be looking for more work as past jobs phase out.  That may possibly have an effect on the immigration situation as labor needs subside.

 

Inventories will rise.  There will be even more houses on the market and buyers will have more choices.  But I still hold that prices in many areas will not crash.  That’s as long as the government holds the war on terror in check and people maintain the confidence to continue to do business. 

 

Incidentally,  my family spent Black Friday together  feasting on  my sister-in-law’s succulent  Thanksgiving turkey.  I’ll take that over Michael’s Turkey Bucks  any day.

Technorati Tags: , , , , ,