Demand for Rental Property and Residential Contracting is Expanding

Guest post by Sara Mackey

As positive as recent economic data has been in the United States, all economists agree that a full recovery is not possible without significant improvement in the residential real estate market.  Banking foreclosures and qualifying for a mortgage with an adequate down payment are the obstacles at hand.  As a result, the rental and leasing business has grown materially, well above inherent cost structures, and where there is high demand for rentals, the need for residential contracting firms is also increasing.

Apartment Building

Photo by RenoTahoe

Is now the time to start your own residential contracting company?  The answer is undoubtedly “Yes”.  Timing can be everything for a new venture.  The key for any new firm is to gather new customers as quickly as possible at low cost and to build on those early successes going forward.  You also need to be passionate about being your own boss and be prepared for the time commitment involved.  Your relationship skills will be tested every day, as you deal with your customers and with family members that feel that you may have become obsessed with your new undertaking.

Starting a new business can be a very time-consuming effort, but the rewards are worthwhile if you are persistent and determined to accomplish things on your own.  Here are a few other pointers when starting a residential contracting firm:

  • Self-Assessment:  Now is the time to ask yourself and your family if you are ready to start your own company.  Time will be in small supply, as well as money for the short-term.  You will need discipline and an assortment of skills, although others can perform some of these tasks.  You, however, will handle the hiring and firing, new client acquisition, accounting, and advertising.  Timeliness and reliability are necessities in this industry, together with honesty.  Check your passion and desire, and act accordingly;
  • Industry Research:  Research building codes, local permit requirements, and learn from other firms how they conduct their businesses.  There are no shortcuts for experience, but counsel from industry “mentors” is highly advised;
  • Prepare a Business Plan:  You can get help for this effort, but you want to estimate in detail your equipment and staffing needs, state licensing requirements, insurance, website, and accounting/billing software needs.  Offset these projections with expected customer revenues to arrive at your base-line financial needs.  Investment capital will be needed to get started, and once you are up and running, you will also need working capital to cover operating deficits until you reach break-even and the delays in collecting from your clients.  Arranging sources of investment and working capital will demand a healthy portion of your overall effort;
  • Initial Marketing:  Create an attractive name for your business, and decide how you will gather potential customers, prepare estimates, and allocate resources for the work at hand.  A commercial vehicle with your information prominently displayed is a “must have”.

There is never a perfect time to start a new business, but the timing now seems appropriate.  Good Luck!

Is It Better to Bank With a Credit Union?

Bank

Photo by I-5 Design & Manufacture

It’s been a long time since I dumped a commercial bank for a large local credit union.  At the time, I was sick of my bank’s name changing every other year, and I hated the large fees that they charged for overdraft and falling below account balance requirements. The credit union offered low fees and a member dividend every year. Add in the friendly staff and the move seemed like a no-brainer.

It seems as though the rest of the nation might be catching on. According to the LA Times, over 1.3 million Americans switched to Credit Unions last year. The article cites factors such as Occupy Wall Street, congressional ire over debit card fee rate hikes and Bank Transfer Day which was organized by activists.

Call me anti-political, but when I start seeing political movements and agendas shape common money wisdom, I get skeptical. So, I’m rethinking credit union banking and taking a new look at which is better for consumer banking: large commercial banks or credit unions?

Banks Versus Credit Union on Costs

Are credit unions cheaper than commercial banks? With the way major banks are increasing fees it sure seems like it. However research from a Fed economist provides a more nuanced picture.

The study found that credit unions charge less in fees, but more in upfront costs. For example, commercial banks offered the best introductory APR for credit cards, averaging 8.5%, while credit unions charged 11.2%. However, late fees for credit cards were $35.84 for big banks and $18.54 for credit unions.

The same goes for depository accounts. Overdraft fees for commercial banks averaged around $22.93, while credit unions hovered at a friendlier $19.75. However, one area of difference has been in closing costs. According to CBS news, credit unions charge 2% less in closing costs for mortgages.

Banks Versus Credit Unions on Interest Paid

When it comes to paying interest; credit unions are the better choice. On average, credit unions pay .3% more in interest on certificates of deposits. While I don’t think that .3% interest will make a giant impact on income you can earn, more money is still more money.

Putting a Price on Customer Service

This is really where you are likely to see a major difference. Credit unions are owed by the members that bank at the institution, while banks are investor owned. It all adds up to a very different banking experience.

Many banks are actually looking for ways to charge for using bank tellers and customer service. However, great customer service can save you money.

When I was going through the closing process for my home, I’d indicated on my application that I wanted to use a particular title company. I worked for a banking company and received a free title search and insurance. Meanwhile, my lawyer, who I would not recommend, took it upon themselves to do the title work and jack up our bill. Our credit union caught my lawyer’s mistake immediately long before closing. They notified me and I was able to iron out the mess (and chastise my lawyer).

The lesson from my experience is that my credit union did not need to work out my title search. They had no interest in who did title and they earned no money from helping me to work out the issue. They could have simply ignored my application and allowed my lawyer to charge for the title search. However, they did take additional steps and it saved me hundreds of dollars.

Usually, poor customer service makes us angry, but doesn’t cost us money. When it comes to banking, it can mean dollars saved or earned.

Which is Better?

For most people, it’s probably a trick question.

Overall, credit unions have better customer service, savings interest rates and lower fees. However, lower fees won’t be much of an advantage for someone that doesn’t have trouble managing their accounts and meeting balance requirements. Banks offer lower overall costs, which is a noticeable advantage.

Perhaps the best answer is that they each have their strengths and weaknesses. It’s best if you pick the institution that best fits your personal needs best.

Avoid These Investments that Don’t Keep Pace with Inflation

Investing for retirement is nothing more than a race, and your pursuer is inflation. If you stash your savings in anything that inflation can catch, you’ll only be wasting your money.

Inflation is the word people working at the Fed (with intelligent sounding titles, like “chairman”) use in place of the phrase “rising prices.” Inflation is the realization that as time goes on, things get more expensive. Hop in your time machine and go back 10 years. You’d find that gas was nearly a dollar per gallon, movie tickets were almost half what they currently are and property taxes were still outrageously high, but slightly less so than today.

(Of course, if you’ve recently thought about refinancing your home, you know that deflation is just as much a concern as inflation. But will save that for another time… :))

Why Do Savers Need to Worry About the Pace of Inflation?

Most people think savings is the opposite of spending, but this analogy isn’t really accurate. Savings is just delayed spending.

Savings Account

Photo by jonathansin

Think about savings and inflation this way. You golf every week for $22. Then one day decide that you’d rather quit golfing, save the weekly $22 for 30 years so that you can golf for 30 years after you retire. You are diligent and stash away the weekly $22 for the next 30 years, right up until retirement. The first day of being work-free, you grab your old golf clubs and head to the links. Surprise, a round now costs $65 to play. Grabbing a calculator, you realize that instead of trading 1,560 rounds of golf in the past for 1,560 rounds of golf in the future, you traded 1,560 rounds in the past for 528 future rounds.

Would anyone disagree that 1,560 rounds is better than playing 528 rounds? This is exactly how savers get burned when they invest in instruments that don’t keep pace with inflation. Unfortunately, there are a number of ways people invest that lose to inflation.
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Why Your Children Should Open a Roth IRA at Age 18

I remember when I started saving for retirement. My employer announced that they were going to begin a 401k plan with a match. I didn’t know much about investing at the time, aside from the facts that I:

  1. Wanted to retire as early as possible,
  2. Knew the match was like free money (I like free money)
  3. Heard 401k plans are a good way to go.

Starting at 21, I was probably ahead of the curve. Many of my friends began their savings the next year, after graduating from college. I’m certain that there are many others that put off saving well into their careers. The point I’m trying to make is that most people are faced with the option of saving for retirement by the time they have a job. That’s not to say that they make the smart choice of actually opening an account.

Bull Market Wall Street

Photo by Carlossg

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