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In leasing today and particularly commercial and retail real estate, it is common to come across the word ‘amortisation’. In brief, the word explains the concept of recovery of landlord incentive costs over the duration of the lease.

In this property market we need to attract tenants to the property and encourage a decision of taking out a new lease. In the case of new tenant occupancy, the landlord may choose to provide some incentive which could be by way of rent-free, a new fit out, or reduced rental. This is common when the market is in a downturn or slump and an oversupply of vacant space exists. In today’s market this is the case and will remain so for some time. The creative provision of incentives is part of the leasing process.

Get the incentive money back!

When such incentive activity is provided by the landlord, it is common practice to recover the costs of that incentive back to the landlord plus interest on the funds provided, and such recovery is to be structured over the duration of the lease. Amortisation is the process that achieves this.

This then suggests that any incentive, rental rebate, or rent-free period is not actually free. That is certainly the case, and an experienced real estate agent or broker will support the process and the economics of the lease deal to ensure that the landlords funded incentive is recovered in some way.

What do tenants want?

When the tenants ask for a new lease and some incentive as part of it, they do not expect to hear about the amortisation process and the economics behind it. They do not want to hear that the good incentive that they are to get in the lease deal is to be paid back whilst they are in occupancy. Let’s just say that the concept is known between the agent and the landlord and the recovery of the incentive is structured (added) into the rent profile and the rent review processes during the lease.

The tenant in today’s market thinks that the market is slow and in their favor, and on that basis the landlord has to do something that attracts them to the property. That is where the incentive becomes part of the negotiation. An incentive can be anything of value to the tenant, but is normally one of the following:

• Rent free period
• Rent reduction period
• Cash paid to the tenant
• Fit out provided to the tenant

Whatever the incentive used, it is up to the real estate agent to structure the rent and incentive process in favor of the landlord as part of negotiating the deal. At the end of the day, a tenant only wants to know about the premises and the total rental which is to be outlined in the lease.

It is the job of the real estate agent to ensure that the incentive is structured so that the landlord achieves the recovery of the outlay in incentive. The tenant doesn’t always want to know the exact detail of what you are doing in the rental commerce. They just want to know what they are paying for total occupancy of the premises on a monthly or weekly basis and how that rent will increase over the term of the lease.

In a quiet market with a saturation of available vacant premises, it is common for incentives to be very active and at times they will reach a level of 30% of the total of the rent paid normally under the lease during its term. In any new property project the level of incentive will go slightly higher to approximately 37% but in doing so the developer for the project will have written that incentive cost into the project. In such case the tenants will pay an inflated rent (as a face rent) to allow the developer to recover the outlay.

So how is it done?

So the rent and incentive commerce goes something like this. If the rent for the premises with no incentive being provided is $200 per m2 pa (apologies to those of you who calculate rent by the foot), and the incentive that is to be provided to attract the tenant to sign the lease is equivalent to an amount of 10% of the rent recovered from the tenant during the term of the lease, then the starting rent should be $220 per m2 pa. This is called a ‘face rent’. The rent without any incentive paid in the lease ($200 per m2) is called an ‘effective rent’.

Whatever the start rent is to be (face or effective), it will then be escalated by a rent review structure that is practical and fair in the market. Your good market knowledge is part of this lease rent assessment and decision. The landlord needs to know what is right and fair in the prevailing market conditions to attract tenants to the property. Extended vacancies are not a real strategy here and are to be avoided; even a lease that has a low rent start or a higher level of incentive, can be shaped to a better rent level over a few years and therefore be in line with market rent at a later time.

By the way, property valuers will always find out the type and amount of incentive that was provided to a tenant to entice them to take up a lease. The valuer will then remove the incentive from the value of the property as part of their professional valuation process.

In some cases a landlord will want (or try) to ‘hide’ the incentives paid in any lease from the valuer for this very reason; this ‘hiding process’ is common when a property is being valued for mortgage loan purposes. I am not saying that this ‘hiding process’ is ‘legal’, but rather it happens, and a good property agent will know about it and understand what the real rent for a property actually is (with the incentive removed). Financiers know about the mechanisms of incentives and how they are provided and documented, and valuers of property similarly so. Importantly the level and type of lease incentive in the market is known by all parties and is not exceeded unnecessarily.

How to do this?

In handling amortization of lease incentives, it can be done in various ways. Check with a local solicitor to ensure that you are complying with standards and legislation in your area and country. Here are some examples of how incentives are handled.

1. Some landlords choose to have the incentive repayment process added to the rent that would have normally been paid should an incentive not have been provided. In this case the tenant does not always understand that the rent has been inflated to recover the incentive for the landlord. Nothing is ‘hidden’, it’s just that the tenant pays a high rent for the premises.
2. Other landlords may choose to have the amortization of the incentive separately detailed in the lease document as a separate ‘charge’. In this case it becomes a separate payment of incentive rental each week or month and the tenant knows what it is for. The incentive is clearly seen by anyone that reads the lease and all parties know what is going on.
3. Other landlords may choose to have the amortization of the incentive documented in a separate agreement between the parties well away from the actual lease itself. This is usually done by way of a ‘deed’ or separate legal agreement. Given that the tenant signs the ‘deed’ they then know that they are paying for and of its existence. It is the other people that read the lease that may not know of the existence of the incentive. If this is the case, take particular care at the time of property sale as the potential buyer of the property will want to know the full commerce of the occupancy.

The important message here is to understand that incentives are active from time to time when you lease properties in a market that has an oversupply of space. Incentives are the way in which the landlord attracts an interest in occupancy. As a professional real estate agent or broker, it is your job to ensure that the full recovery of the incentives is achieved. The landlord should be shown that you are going to get all their incentive money back from the tenant over the lease term (not the lease option), together with a rent for the premises that is fair and reasonable in the market and location in which you work.

A good lease incentive is one that attracts the tenant to the property, and then is paid back to the landlord as quickly as possible.

Basic Real Estate Statistics Explained

We are going to define some of the basic real estate statistics that get thrown around on a regular basis. To do that, we will use one real estate market, located in Hood County Texas. Even more granular, we will use the single family numbers for homes in Granbury Tx, a small town of approximately 8,000 residents which has seen substantial real estate growth in the past 12 months. It is important when reviewing real estate statistics to use a group of numbers large enough for consistency, but granular enough to tell your story.

The statistics that we will be referencing are true and accurate for the year discussed but are being used to define the real estate statistic itself.

We have chosen Granbury Tx as our example because the growth of the local real estate market there make the statics stand out.

Anytime you are evaluating statistics, especially in real estate, the source of the numbers are extremely important. In most instances, the MLS (Multiple Listing Service) provides the most accurate numbers when referring to real estate. This is because they have all listings by all local real estate brokers in their database. For the sake of explanation of the data, we will be looking at the numbers for home sales in Granbury Tx, directly from the MLS. These numbers are meant to give an example of how to read the statistics themselves. Anytime you evaluate real estate numbers, its important to pay close attention to how the numbers are gathered. In this instance, we will be using ONLY single family properties in the city of Granbury.

Basic Real Estate Statistics

• Number of Sales – This one is pretty self explanatory. It is simply the number of single family homes sold in a particular month. In January of 2015, they had 51 single family homes sold. One thing to pay attention to when looking at this statistic is are they using the Under Contract date or the day the property actually went to closing. These two dates are usually between 30 and 60 days apart, so its critical that you know which one is being referenced. In addition, many of the homes that get calculated, if you are using the “under contract” number may not actually close! In our example, we are using the number of homes that actually closed. In January of 2016 they had an increase of over 49% which brought the total to 77 from 51. Growth of that level is very seldom ever seen.
• Sales Volume – Sales Volume is simply the total amount of dollars spent on single family housing within that month. Once again, when reviewing this statistic, its important to keep the property types consistent. If you are comparing two areas to see which one has grown more and you include vacant land in the number for one area, you must include it in the other too. As previously mentioned, our examples only include single family properties. With Number of Sales looking at the units, you would expect the Sales Volume to go up appropriately, but in this instance, it went up even more than the units (by percentage). The total Sales Volume of single family homes in Granbury in January of 2016 was $15,191,500 as opposed to the January of 2015 number of $9,281,915. That is an increase of over 63%. Because the Sales Volume went up at a larger rate than the number of units, this reflects the average home sale being much larger in 2016 than 2015.
• Months of Inventory – This is a commonly referred to statistic when examining a real estate market. This statistic refers to at the current rate of sales, how long will it take to sell through the existing level of inventory. This reflects the supply and demand for the market. In our example, in January of 2015 the level of inventory was 9 months and in January of 2016 it had dropped to 6 months. That is a 33% drop in available inventory! This means if you are looking to buy a home in Granbury Tx, it will be a little tougher in 2016 as there is less inventory available to buy.
• Median Days To Sell – This stat simply refers to how long it takes for single family properties to be put under contract. Don’t let the “to sell” confuse you. To accurately show the demand for active homes, you really want to track how long it takes to go “under contract”. The process of acquiring final lender approval, insurance and getting to a closing can vary on a variety of factors. In January of 2015, the Median Days to Sell was 88. That number dropped by over 30% to 61. Once again, this tells you if you are looking for homes in Granbury TX, you better get your offers in quickly as the most desirable homes are going fast!
• Average Price – This statistic can be derived in a variety of ways. We are going to use it in its most raw form and simply be the Average Price of Homes Sold within that month. Be careful when looking at this statistic printed anywhere as how the user defines the date sold can vary. Needless to say, Average Price can be used for active homes for sale or for the homes that sold. The Average Price of ACTIVE homes for sale is generally a pretty useless number as you can list a home for any price, without any possibility of it ever selling. Many homes listed for sale are at unrealistic prices thus the Average Price of Active homes for sale can fluctuate dramatically and give little insight into the market. You will want to look at the Average Price of SOLD homes. In January of 2015, the Average Home Sale was $181,998 and it jumped to $199,888 in the same month in 2016. This is an increase of almost 10%. This is not a number that truly tells the increase in home values across the board, but simply of the homes sold in that month, what the average was.
• Median Price – The Average Home Sales Price can be skewed by a variety of factors. All it takes is one 5 million dollar home sale to throw those numbers off. To get a better view of the overall increase in value, it can be better to look at the Median Sales Price. Median Sales Price takes the number that is perfectly in the middle. For instance, if you have 11 homes that you are using in your statistic, you would take the sales price of the 6th one. This leaves 5 homes sold higher and 5 homes sold lower. In this instance, they are pretty close as the Median Sales Price increase from January 2015 to 2016 was 9.69%. This shows that we didn’t have the Average Price skewed too much because of an extremely large or extremely small sale.

There are hundreds of ways to look at the same numbers, when referencing to real estate, so be very careful to read the fine print on exactly what numbers they are using. When making comparisons, you will want to make absolutely sure that both are referencing the same property types, dates etc. It like the old saying says… there are lies, damn lies and statistics.

None can deny the necessity of mobile apps in our lives. While no business sector has remained aloof from the rage of mobile app development, it is on-demand services, food and retail, and core industry like real-estate which got more share of the pie. Yes, it’s also the retail property businesses that got more benefits in sales after the app revolution and saw their revenue growing high. In regards to this, here is a complete guide on how to make your own real-estate dealings mobile with a useful app.

Trends observed in property purchases

-Most buyers first sneak through the web or online portals to search for property searches before going for other sources like paper advertisements, referrals, etc.

-Millennials rely more on online search for nitty-gritty details or information about a property

-People like to hunt for properties online because they can see a large number of properties.

Types of Real-estate app solutions

-Online property search application

-Property booking solution

-App solution for renting apartments

-Property management solution for owners

While these are the specific apps that can help real-estate business owners as well as buyers, let’s take a look at the key features that an app meant to help rent and property seekers should have.

Direct marketing method

The app should have a direct approach to marketing to promote the properties held by the property owner. The app would list the properties in a fancy manner with location, prices, property aspects, surrounding amenities, landmark, and other related information. In short, the app should be able to showcase all properties in a complacent and clarified manner so that buyers can know every minute thing about a property and can take the decision to choose one smoothly.

Support for location-tracking

Mobile users have been so used to the aspect of GPS or Global Positioning System to navigate here and here that you need to sync your real-estate mobile app to the Google Map to help the property seekers. Integrating the app with geolocation will readily help the buyers to land on the phone’s Google map to know the exact route and convenient mode of transport to the property’s location.

Easy-to-use user interface

You need to keep in mind that a real-estate application is not about showing brilliance and classy design, but is about user-friendliness. Thus, like any other user-centric applications such as eCommerce, online cab services booking, your app should be user-friendly so that users could easily understand how to search for a property. Easy user-interface of an app means quick property search, responsive search filter, hassle-free payments and saving favourites or wishlist.

Scope for customers to place queries

Lastly, do not rule out the need for an online enquiry mechanism in the app like live chat or email integration. It is a must-have for quickly responding to customers who are interested in a property and wish to know more apart from what provided in the app. They might want to talk to the seller directly.

Real-estates is the large and flourishing industry and to get a grip over its every potential you need a mobile app too. It would help your business make more revenue and grow by making your properties more easily accessible to prospective customers. However, make sure to keep in mind the mentioned features while you have your app crafted by an app development company.

Here’s something I’ve been playing with, and my results have been pretty good, too.

A few months ago a friend was launching a big product with lots of cash prizes for the top affiliates. I knew there would be tons of affiliate competition, with every affiliate trying to out-do the others with bigger and better bonuses.

How to compete?

I decided not to.

Instead, I thought about what every affiliate’s bonus pages would look like: Highly polished, slick, professional, lots of graphics, videos, etc.

Odds are they would all start to look very much alike, right?

So I thought… what if I did something different?

What if my page looked like something you might get in the mail – black and white sales letter, using the Courier typewriter font, very old-school looking…

And what if, instead of a highly polished professional photo of myself, I used one where I just woke up? Or one where I just finished exercising, or just finished the yard work?

In other words, I looked like the guy next door and not some slick marketer.

Taking this thinking to the next level, I decided I didn’t want to spend time or money on creating a bonus. Everyone else was doing that, so why should I?

Instead, I would hold a live class. The homework would be to go over the program before class. Then in class we would implement, step-by-step, what was in the program. And I would record the whole thing, so people could just follow along.

In case you’re wondering – it worked beautifully. My sales were a very decent 5 figure number, and my commissions were half that plus bonuses.

And one more thing – I cheated, too. I had my virtual assistant run the class for me. She got to learn some great new skills, and I put less than 2 hours into the entire project.

The takeaway: When you have a lot of competition, it’s time to stop directly competing and find another way.

If they are using tons of graphics and slick videos, you go with a 1980’s black and white typewriter look.

If they are offering bonus packages filled with 5, 10 or 20 products, you offer no products (I offered hold-your-hand training, which in my opinion is worth far more anyway.)

You get the idea.

Do you know what would work even better than that?

MAILING the actual letter. Yup. Talk about old school. If you collect real addresses of your BUYERS, you might consider doing this on big ticket items.

I know marketers who do this. They are few and far between, and they are KILLING it. They only mail to buyers, which greatly improves their conversions. They use a service to send out the mailers for them. And they make more on one of these mailings than most successful marketers earn in 6 months.

Which brings me to my second idea… if you don’t already have the mailing addresses for your buyers, start collecting those now.

When you have a sizable portion of them (at least 200, preferably 500) approach a marketer with a product your list would love. Make sure there is plenty of profit in that product. Take the sales letter, adapt it to a black and white mailer (cheap to produce) and send it to your buyers.

See what happens. Tweak, rinse and repeat.

You can easily DOUBLE your income using this method.

Know why? Again, because it’s contrary. It’s different. Almost no one is doing it.

Your customer gets maybe a half dozen pieces of mail in a day. Two are bills. Two are sales flyers from local businesses. One is a catalog.

And then there’s that mysterious white envelope. Yeah, it’s going to get opened. Yes, it’s going to get read.

Wow! They’re surprised. Someone they know from ONLINE is sending them REAL MAIL.

They don’t throw it out. Instead, they open their browser, type in the URL and ORDER THE PROGRAM.

Sure, not everyone does, but… enough do. Believe me, I’ve seen this work time and time again. Which is why I’m about to start sending out sales letters via snail mail (Shhh, don’t tell anyone!)

If you are thinking about starting a real estate career in Jamaica, you have to understand that this is different from the regular 9-5 jobs. To be successful, you are required to generate good leads, which will provide you with clients in order to get paid. During your interview with any of the top companies in Jamaica, it is a must that they will ask you about your sphere of influence (SOI) or pipeline. This basically means the leads that you currently have, for instance if you want to focus on commercial properties in New Kingston, it would be necessary to have strong connections to generate good leads.

The New Kingston area in this city is considered to be the business capital and boasts head office for virtually all companies, hotels, top restaurants, foreign embassies, apartments, banks and more. So, immediately you know that the competition would be strong in this location and will require you to work harder to get paid.

If your sphere of influence is empty and you cannot get properties to sell or perhaps get investors to rent or buy, then you definitely cannot generate a solid income. A real estate agent lives from the commissions made from rentals, sales or referrals, so basically, no client equals zero dollars. The real estate market in Jamaica is currently experiencing a downturn, with high interest rates and less people able to purchase properties.

So, it might not be a good time to enter this field, especially if you are not equipped with a killer sales skill, some good leads and a lot of patience. It can be pretty difficult to break into this market, particularly in the Kingston and St Andrew areas. This is where you will find the majority of Jamaica real estate agents and brokers, so it would not be an easy play field.

However, if you really want to give it a try, by all means go ahead, as the market is likely to bounce back in the next couple of years. The best way to do this is to start off as a part time agent and have a job that can provide some additional income on the side. But, as soon as you start you should start gathering leads and learn as much as you can about this business in order to be ready when the market gets back some momentum.

You can get leads from different mediums and not just from the people in your immediate circle. Good leads can come from emails, newsletters, fliers, newspaper advertisements, referrals from past coworkers, dinner parties, grocery shopping or just about anywhere. The possibilities do exist, sometimes they might not be noticeable, but if you are proactive and eager for work it will happen sooner than you think.

One of the best places to look is in the real estate classifieds that come in the Sunday Gleaner. Most of the times the persons trying to sell on their own will gladly welcome the help and you could get 2 or 3 new clients each week. Keep in mind that some are up-to-date with the happenings in the market and will prefer to sell on their own or just simple to avoid paying commissions.

You are more likely to find this resistance for the high-end properties, such as a prime beachfront lot on the north coast which is suitable for tourist development. But, the bottom line is that they might not be knowledgeable with the entire sale process and you just might be able to convince them to give you the listing. Good luck!