Marketing Luxury Real Estate: Express Yourself


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You have certainly heard the expression, “beauty is in the eye of the beholder”. As a luxury real estate marketing professional it is important to tune into the tastes and preferences of your client when selecting properties to show them, properties that they may like. Some homes may not appeal to you personally from an aesthetic standpoint. And, that is why you need to put aside your own standards to be of maximum help to your clients.

However, when it comes to personal branding, that is the time to get personal and express yourself. Your personal brand, from an aesthetic perspective must reflect your own tastes, your core values and your own personality. Yet, you must take into consideration your target market. That is, who you intend to attract as ideal clients.

Who are your ideal clients? As it turns out, when you really think about it, your ideal clients are people who share your values. For example, if you value a lighthearted sense of humor, your ideal clients would definitely not be curmudgeon s, killjoys or wet blankets.

In our strategic branding consulting practice our job is to help luxury real estate agents and companies dial into their unique DNA (different, not alike) and also dial into their target market. Then, we find a brand signal that can be expressed as a fusion of the two.

Too many luxury real estate marketing professionals are so busy trying to please others that they disregard their own very important personal perspective. As a result they attract clients who are less than ideal. Others go to the opposite extreme and disregard their target market altogether. For example, their chosen brand identity is too formal for a relaxed vacation destination where second home buyers want to leave the formality of the city behind them.

What is amazing about this process of personal branding is that there is always a way to articulate your personal brand signal so that is harmonious with your target market without compromising your DNA or your integrity. The key is to express yourself fully and have fun in the process. Your ideal clients will have a much easier time finding you that way.

Real Estate Leads 101- Dealing With Angry Leads

I think it’s safe to say that the majority of agents out there have been on the receiving end of an angry rant from their real estate leads. There you are, just trying to do your job, follow up and see what you can help them with and they just go off. Maybe you caught them at a bad time. Maybe they’ve been harassed in the past by another agent. Maybe they’re just grumpy all the time. There’s a hundred reasons why your real estate leads might yell at you and it never feels good to be on the receiving end of an outburst.

But just because some real estate leads may initially yell at you doesn’t mean you can’t still convert them to clients in the future. If an angry outburst or tirade from your real estate leads is enough to scare you off, you might not have a thick enough skin to deal with being a real estate agent. Don’t run for the hills in the face of an outburst, face it dead on and learn how to defuse an angry real estate lead so that you can nurture them into a client.

If you’re contacting your real estate leads very early in the morning or rather late at night and they cop an attitude, maybe that was your first mistake. It’s tough to get a hold of some people, but that doesn’t necessarily mean you should be at them first thing in the morning or last thing at night. This inconvenient contact may be what’s throwing your real estate leads into a funk in the first place. Vary the times you’re trying to contact leads, always have a reason for contacting them and be as polite and aggressive as possible. I know, it sounds like an oxymoron, being polite and aggressive, but when it comes to converting real estate leads, you need just the right amount of persistence and politeness to make an impression.

If you’re face to face with real estate leads, or a client for that matter, and they start going off at the mouth about how much you suck, a list of reasons WHY you suck and just how badly your whole demeanor sucks, it’s time to take a deep breath. You want to deal with this angry outburst from your real estate leads in a non-angry way. That means listening first. Let them rant, let them rave and keep a neutral expression on your face.

When the tirade is over and it’s your time to talk, keep your voice as calm and level as possible. If you attack as your real estate leads just did, the situation’s liable to turn into one big shouting match. Respond with feedback to what you heard and address their issues directly. Don’t immediately blow off everything they say, instead make empathetic statements such as “Just to be sure I understand, you’re saying that you feel….” Use your real estate leads’ name to catch their attention and hopefully calm them down.

When your client is at the height of anger, you don’t want to make them seem totally in the wrong and yet you probably don’t want to put them totally in the right either. Instead, say things like “I’d probably feel the same way in that situation” or “I understand how you feel.” Never sound patronizing or bored and be very careful about your facial expressions. You can think your real estate leads are the biggest jerks in the world at the moment, but it should never show in your expression or demeanor.

Stay away from statements that might aggravate a person’s anger, such as “You’re being unreasonable,” “Calm down,” or “Just let me talk.” The important thing is not to take anything your real estate leads say personally. You never know what’s going on in their life to have gotten them to such a level of anger. It could be that they have no desire to see a real estate agent or it could also be that they just had a huge fight with their kids and need some recovery time.

Top 21 Real Estate Investing Terms and Formulas

Understanding the real estate investing terms and formulas is extremely helpful (if not crucial) for brokers, agents and investors who want to service or acquire real estate investment properties.

This is not always the case, though. During my thirty-year experience as an investment real estate specialist I often encountered far too many that had no idea, and it showed – both in their performance and success rate.

As a result, I felt it needful to list what I deem are the top 20 real estate investing terms and formulas worth understanding categorized as either primary or secondary. The primary terms and formulas are the very least you should know, and the secondary terms takes it a step further for those of you who are seriously planning to become more actively engaged with real estate investing.

Primary

1. Gross Scheduled Income (GSI)

The annual rental income a property would generate if 100% of all space were rented and all rents collected. GSI does not regard vacancy or credit losses, and instead, would include a reasonable market rent for those units that might be vacant at the time of a real estate analysis.

Annual Current Rental Income

+ Annual Market Rental Income for Vacant Units

= Gross Scheduled Income

2. Gross Operating Income (GOI)

This is gross scheduled income less vacancy and credit loss, plus income derived from other sources such as coin-operated laundry facilities. Consider GOI as the amount of rental income the real estate investor actually collects to service the rental property.

Gross Scheduled Income

– Vacancy and Credit Loss

+ Other Income

= Gross Operating Income

3. Operating Expenses

These include those costs associated with keeping a property operational and in service such as property taxes, insurance, utilities, and routine maintenance; but should not be mistaken to also include payments made for mortgages, capital expenditures or income taxes.

4. Net Operating Income (NOI)

This is a property’s income after being reduced by vacancy and credit loss and all operating expenses. NOI is one of the most important calculations to any real estate investment because it represents the income stream that subsequently determines the property’s market value – that is, the price a real estate investor is willing to pay for that income stream.

Gross Operating Income

– Operating Expenses

= Net Operating Income

5. Cash Flow Before Tax (CFBT)

This is the number of dollars a property generates in a given year after all cash outflows are subtracted from cash inflows but in turn still subject to the real estate investor’s income tax liability.

Net Operating Income

– Debt Service

– Capital Expenditures

= Cash Flow Before Tax

6. Gross Rent Multiplier (GRM)

A simple method used by analysts to determine a rental income property’s market value based upon its gross scheduled income. You would first calculate the GRM using the market value at which other properties sold and then apply that GRM to determine the market value for your own property.

Market Value

÷ Gross Scheduled Income

= Gross Rent Multiplier

Then,

Gross Scheduled Income

x Gross Rent Multiplier

= Market Value

7. Cap Rate

This popular return expresses the ratio between a rental property’s value and its net operating income. The cap rate formula commonly serves two useful real estate investing purposes: To calculate a property’s cap rate, or by transposing the formula, to calculate a property’s reasonable estimate of value.

Net Operating Income

÷ Value

= Cap Rate

Or,

Net Operating Income

÷ Cap Rate

= Value

8. Cash on Cash Return (CoC)

The ratio between a property’s cash flow in a given year and the amount of initial capital investment required to make the acquisition (e.g., mortgage down payment and closing costs). Most investors usually look at cash-on-cash as it relates to cash flow before taxes during the first year of ownership.

Cash Flow

÷ Initial Capital Investment

= Cash on Cash Return

9. Operating Expense Ratio

This expresses the ratio between an investment real estate’s total operating expenses dollar amount to its gross operating income dollar amount. It is expressed as a percentage.

Operating Expenses

÷ Gross Operating Income

= Operating Expense Ratio

10. Debt Coverage Ratio (DCR)

A ratio that expresses the number of times annual net operating income exceeds debt service (I.e., total loan payment, including both principal and interest).

Net Operating Income

÷ Debt Service

= Debt Coverage Ratio

DCR results,

Less than 1.0 – not enough NOI to cover the debt

Exactly 1.0 – just enough NOI to cover the debt

Greater than 1.0 – more than enough NOI to cover the debt

11. Break-Even Ratio (BER)

A ratio some lenders calculate to gauge the proportion between the money going out to the money coming so they can estimate how vulnerable a property is to defaulting on its debt if rental income declines. BER reveals the percent of income consumed by the estimated expenses.

(Operating Expense + Debt Service)

÷ Gross Operating Income

= Break-Even Ratio

BER results,

Less than 100% – less consuming expenses than income

Greater than 100% – more consuming expenses than income

12. Loan to Value (LTV)

This measures what percentage of a property’s appraised value or selling price (whichever is less) is attributable to financing. A higher LTV benefits real estate investors with greater leverage, whereas lenders regard a higher LTV as a greater financial risk.

Loan Amount

÷ Lesser of Appraised Value or Selling Price

= Loan to Value

Secondary

13. Depreciation (Cost Recovery)

The amount of tax deduction investment property owners may take each year until the entire depreciable asset is written off. To calculate, you must first determine the depreciable basis by computing the portion of the asset allotted to improvements (land is not depreciable), and then amortizing that amount over the asset’s useful life as specified in the tax code: 27.5 years for residential property, and 39.0 years for nonresidential.

Property Value

x Percent Allotted to Improvements

= Depreciable Basis

Then,

Depreciable Basis

÷ Useful Life

= Depreciation Allowance (annual)

14. Mid-Month Convention

This adjusts the depreciation allowance in whatever month the asset is placed into service and whatever month it is disposed. The current tax code only allows one-half of the depreciation normally allowed for these particular months. For instance, if you buy in January, you will only get to write off 11.5 months of depreciation for that first year of ownership.

15. Taxable Income

This is the amount of revenue produced by a rental on which the owner must pay Federal income tax. Once calculated, that amount is multiplied by the investor’s marginal tax rate (I.e., state and federal combined) to arrive at the owner’s tax liability.

Net Operating Income

– Mortgage Interest

– Depreciation, Real Property

– Depreciation, Capital Additions

– Amortization, Points and Closing Costs

+ Interest Earned (e.g., property bank or mortgage escrow accounts)

= Taxable Income

Then,

Taxable Income

x Marginal Tax Rate

= Tax Liability

16. Cash Flow After Tax (CFAT)

This is the amount of spendable cash that the real estate investor makes from the investment after satisfying all required tax obligations.

Cash Flow Before Tax

– Tax Liability

= Cash Flow After Tax

17. Time Value of Money

This is the underlying assumption that money, over time, will change value. It’s an important element in real estate investing because it could suggest that the timing of receipts from the investment might be more important than the amount received.

18. Present Value (PV)

This shows what a cash flow or series of cash flows available in the future is worth in today’s dollars. PV is calculated by “discounting” future cash flows back in time using a given discount rate.

19. Future Value (FV)

This shows what a cash flow or series of cash flows will be worth at a specified time in the future. FV is calculated by “compounding” the original principal sum forward in time at a given compound rate.

20. Net Present Value (NPV)

This shows the dollar amount difference between the present value of all future cash flows using a particular discount rate – your required rate of return – and the initial cash invested to purchase those cash flows.

Present Value of all Future Cash Flows

– Initial Cash Investment

= Net Present Value

NPV results,

Negative – the required return is not met

Zero – the required return is perfectly met

Positive – the required return is met with room to spare

21. Internal Rate of Return (IRR)

This popular model creates a single discount rate whereby all future cash flows can be discounted until they equal the investor’s initial cash investment. In other words, when a series of all future cash flows is discounted at IRR that present value amount will equal the actual cash investment amount.