Show Standard-Examin- Sunday er Aug 5 1990 3F ConsumerReal Estate Real estate investing not DEAR EDITH: We frequently hear about people who make large sums of money investing in real estate however we only seerri to be able to eke out small profit's' on video with a testimonial But you can't compare your experiland ence to that never-nevYou're living in the real world and you're doing things right To comment briefly on your figures: You've left out your costs for property taxes insurance and utilities while you own the place and there's always the possibility you'll have to pay points to the bank that gives your buyer a loan And what about the legal costs of selling — title search survey attorney — whatever is customary in your area? My leaflet ($1) “Analyzing Your First Real Estate Investment" contains basic advice: you may want to send for it at the address listed below An excellent book is Peter Miller's “Successful Real Estate Investing" (Harper and Row) DEAR EDITH: We paid off our FHA mortgage last year and we know there’s about $2800 due us er For example we recently pur-- I chased a house from an estate for $560$) We put about $6000 it' for improvements the finance costs will be about $3000 and eventually the real estate 'broker's commission will be about $5000 The house ap- -' praised for $75000 after the ren- ovations which is what we are ’ asking for it As you can see we ' will be lucky to make only $5000 net profit before taxes Considering the work we put into the house (evenings and weekends for two months) and - the risk involved $5000 hardly - scents' worth it We have had similar results with several other buildings To make substantial sums-4- t would take forever and - we would have to work 24 hours a day in-'e- to Are there really reasonable profits to be made in real estate investing? — Mr VN A Yes if you're willing to get rich slowly Some people would be happy to make $5000 working evenings and weekends for two months Thai's $30000 a -- year If you're looking for the stuff you see on cable TV as you've discovered for yourselves it pretty much doesn’t exist It may have applied in the past and in certain areas Once in a while lightning may strike a certain investor who then goes PE ratio can show investors earning power of a company DEAR MR HALLEY: I have read your column in the Standard-Exam inerl Perhaps you could help me understand some things about stocks I don’t under- stand I own some stocks and in the paper it shows that they have a PE ratio of 10 I noticed once that when the stock market had gone dpwn a few points the PE ratio of my stocks had gone down to 9 Later when the market had gone up a few points the 9 had changed back to 10 It usually remains at 10 I am not sure what-thi- s means Since the PE had dropped to 9 does this mean that the company was not making as much money as it was when it was at 10? Since there are stocks that have a higher PE ratio than 10 does that mean that these other companies make more money than do companies with lower PE ratio? — LB Clearfield A This particular ratio is ply the price of the stock divided by the earnings per share The PE ratio is an indication of the earning power of the stock If the ratio is high there is an expectation that the future earn- ing$ of the stock will be greater than the current earnings If the ratio is low then the future earnings are expected to be less than the current earnings Fast growing firms would be more likely to have a- high PE ratio than slow growtli companies The value of this ratio will - -- Your Money J Randall Certified Halley Financial Planner move as the price of the stock goes up or down or as the current earnings figure changes For example: If the current earnings are $ 0 per share and the price of the slock is $100 then the PE ratio is 10 If the price of the stock moves down to $90 then the PE ratio will drop to 9 The ratio is a relative measure that can be used when comparing two different stocks Q A friend told me that when a stock splits it is usually an indication that the company is in financial trouble and therefore the company is trying to raise money by selling stock at a lower price Is that true? A Stock splits are used by the management of a corporation to keep the price of the stock in the popular trading range If the price of the stock is too high investors may lose interest and trading volumes could drop This could cause the stock to drop back simply due to a lack of demand A stock split does not mean that the company is in trouble and needs funds Remember the money you pay for a stock purchased through the normal stock exchanges does not go to the issuing company it goes to the in 1 scheme of TV fame get-rich-qui-ck vestor who is selling the stock Q I don’t understand what determines the price of stock For example if one share of stock is bought at $100 do 1000 shares shares have to be bought before the value of this stock climbs? A There are several ways in which this price is set However in all markets the price is determined by the supply and demand of the particular stock Let’s use the following example: I own 100 shares of XYZ corporation The current stock price is $25 I am considering a sale of this stock if I can get $26 per share You are looking to buy 100 shares of XYZ stock but you will only pay $24 per share If you and I were the only people wanting to transact business there would be no sale or purchase of the stock Now if we add several hundred people who are willing to buy XYZ stock it is likely that I will be able to sell my stock at the price I have set or better because there is a large demand for XYZ stock The price would be bid up by those who feel they must have this stock Randall J Halley is a Certified Financial Planner with America First Credit Union Send your personal finance to: Business editor questions r PO Box Ogden 84402 Writers will be referred to by initials and all questions will be answered in print Standard-Examine- in a refund of unused mortgage insurance premiums from HUD But they won’t release it without a statement from our bank on a certain form saying the mortgage is paid off Meanwhile the bank one) went belly-u- p (an and is no longer in business We offered HUD a copy of the certificate of satisfaction of mortgage that's in the public records out-of-to- but they want that particular (bank) form What a hassle we've had Do you have any suggestions? — JL W'hen all else had failed (not before) I'd call my senator or representative's office and ask A one of them to intervene Most federal agencies snap to attention when someone from Congress in- quires about a case DEAR EDITH: We purchased a home in Florida in 1986 but did not make it our legal residence until January 1990 We do not want to lose our tax exclusion on the home up North An accountant said we have to sell within two years An accountant in Florida says we are not limited on the time to sell This year we will be up North about seven months We would like your opinion on the time we can keep our old home and not lose the tax break — Mr HR A The IRS says your principal residence is the place you reside more of the time Establishing legal residence in Florida doesn't change that e excluTo use that sion the place you sell must be your principal residence for three of the five years before the sale So if your main home were in Florida you would indeed have to sell within two years and that’s what the accountant up North was thinking of But the Florida accountant one-tim- Consumer Reports “takes a By GENE AUSTIN Kmghl Riddef Newspapers One of five home sellers who dealt with real estate agents in the last five years was dissatisfied with the results according to a new survey by Consumer Reports magazine reThe magazine in a Estate Real “Do titled port Agents Help?" in its July issue said the overall dissatisfaction rate with real estate agents was one of the highest rates to show up in a Consumer Reports survey The magazine has polled its readers on their reactions to a vars since riety of five-pa- ge service-provide- 1977 Consumer Ffeports said its typisurveys of cally show that only about 10 percent of clients or customers of service-provide- rs a service are dissatisfied More than 72000 Consumer Reports readers who responded to the survey said they had attempted to sell property between 1985 and 1989 and more than 56000 said they used an agent A spokesman for the National Association of Realtors (NAR) said he did not dispute some of the survey results but thinks “I think the subheading ought to be that 80 percent actually are helped" by real estate agents said Jerry Jarvis NAR senior vice president at the trade association's Chicago office “Our surveys show a satisfaction rate similar to theirs but we show it as 77 to 80 percent satisfied I think overall it (the Consumer Reports survey) makes some interesting points though They make some excellent suggestions such as to list the home at a reasonable price and beware of devious agents" The most frequent complaint in the survey was that the agent did not earn the commission charged More specific gripes were that the agent failed to show or advertise the home as promised pressured the seller to lower the sale price too soon and did not provide enough help during negotiations “Of course satisfaction is closely tied to success” Consumer Reports comments “Those most satisfied with their agent sold their houses within one month or minimum Penalty Current Sutneat Simple sold at list price" The magazine also concedes that selling a house is a difficult and stressful experi- ence that often puts unusual burdens on both home sellers and agents Consumer Reports said “nearly 75 percent” of survey respondents eventually sold their homes for less than the original listing price A breakdown shows that 23 percent did sell at the original listing price and 4 percent got more than was first asked Of the others 40 percent dropped the listing price only percent to 5 percent and 20 percent dropped it 6 percent to 10 percent “They could say that 87 percent were able to sell at 90 percent of the listing price or more” said Jarvis Consumer Reports also asked readers participating in the survey to rate real estate agencies they had dealt with Rating results for agencies most national chains were tabulated and included in a “satisfaction index” report The highest satisfaction rating a 78 went to Edina Realty a chain in the Midwest 1 1 1 951 Certificate 6 Month $50000 throughout New Mexico and Utah mmommmmn ' A You know your daughter and her situation better than I do With regular tenants if you don’t get your rent you go to court and evict them You might not want this solution with you daughter but that's the only thing I can suggest If you aren't sure about her income her other debts and her outlook toward paying bills and if you need the money to live on rent to a stranger instead Buy a selected IBM0 PS20 and get a Software Starter Kit to boot Over $450 worth of software at no extra cost when you buy a selected PS2 ® model Spreadsheet word processing and graphics Plus A network of 35 offices serving you re- verse tactic" or slant in its reporting need to get started J! one-tim- Real estate agents get low marks We’re offering the perfect opportunity to bring your small business into the computer age with the IBM® PS2® and the software you to $100000 (who must hear this question all the time) is right As long as you're up North more than half the time your old home is still your principal residence and you e exclusion can use the whenever you sell it DEAR EDITH: I will be renting my home to my daughter for less than I could get from a stranger How can I be sure I will get my rent as I need it to live on? — Mrs HW Rochester NY tor early withdrawal rote only to change without notice interest Right now when you buy a selected IBM PS2 you’ll receive our small business Software Starter Kitat no extra cost This kit has everything you need to handle your books write correspondence construct charts and graphs to plot your growth manage your customer mailing list and more Software worth over 450 The small business Software Starter Kit provides serious management tools for your small business including: Microsoft® Works a powerful tool for spreadsheets graphics word processing database and electronic communications Andrew Tobias’ Managing Your Money® for business and personal financial matters And two more software programs to enjoy after your work is done: Hoyle® ’s Book of Games for hours of family enjoyment King’s Quest® IV an imaginative and challenging fantasy game With the power and flexibility of the PS2 The IBM PS2 gives your small business plenty of power to get the job done today and flexibility to grow as your small business grows So stop in today and boot up your Software Starter Kit on your own IBM PS2 It’ll help your small business get down to business Offer ends August 30 1990 How’re you going to do it? PS2 it! Point 122 Connecting COMPUTE! I ! i CENTERS SAVINGS AND LOAN ASSOCIATION - 7 Clearfield Branch: 75 S State St Ogden Branch: 2180 Washington Btvd 6 5th South Branch: 490 E 5th South Salt Lake City Payson Bianch: 201 E 100 North Orem Branch: 48 B University Mali Centerville Branch: 323 E Pages Lane 0 Logan Branch: 610 N Main St Murray Branch: 125 E 6100 South for the offices listed belowMam Office: 125 S Main St Salt Lake City Phone 322-900- 0 825-222- 399-921- 6 465-259- 224-105- 753-555- 0 5244 2236 WASHINGTON BLVD OGDEN UTAH 84401 801-62- 1 10-5 10-- 6 SATURDAY STORE HOURS MONDAY-FRSDA-- Authorized Advanced Products Dealer Y Baaed on manufacturers' suggested list prices IBM and PS2 are registered trademarks of International Business Machines Corporation Inc Managing Your Money is a registered trademark of MECA Ventures Microsoft b a trademark of the Microsoft Corporation from Hoyle Products a division of Brown & Bigelow Inc Hoyle's Book of Carnes trademark used under license King's Quest is a registered trademark of Sierra Online Corporation |