• Member Statistics

    • 828,215 Colleagues-to-Date [Sponsored by a generous R&D grant from iMBA, Inc.]
  • David E. Marcinko [Editor-in-Chief]

    As a former Dean and appointed University Professor and Endowed Department Chair, Dr. David Edward Marcinko MBA was a NYSE broker and investment banker for a decade who was respected for his unique perspectives, balanced contrarian thinking and measured judgment to influence key decision makers in strategic education, health economics, finance, investing and public policy management.

    Dr. Marcinko is originally from Loyola University MD, Temple University in Philadelphia and the Milton S. Hershey Medical Center in PA; as well as Oglethorpe University and Emory University in Georgia, the Atlanta Hospital & Medical Center; Kellogg-Keller Graduate School of Business and Management in Chicago, and the Aachen City University Hospital, Koln-Germany. He became one of the most innovative global thought leaders in medical business entrepreneurship today by leveraging and adding value with strategies to grow revenues and EBITDA while reducing non-essential expenditures and improving dated operational in-efficiencies.

    Professor David Marcinko was a board certified surgical fellow, hospital medical staff President, public and population health advocate, and Chief Executive & Education Officer with more than 425 published papers; 5,150 op-ed pieces and over 135+ domestic / international presentations to his credit; including the top ten [10] biggest drug, DME and pharmaceutical companies and financial services firms in the nation. He is also a best-selling Amazon author with 30 published academic text books in four languages [National Institute of Health, Library of Congress and Library of Medicine].

    Dr. David E. Marcinko is past Editor-in-Chief of the prestigious “Journal of Health Care Finance”, and a former Certified Financial Planner® who was named “Health Economist of the Year” in 2010. He is a Federal and State court approved expert witness featured in hundreds of peer reviewed medical, business, economics trade journals and publications [AMA, ADA, APMA, AAOS, Physicians Practice, Investment Advisor, Physician’s Money Digest and MD News] etc.

    Later, Dr. Marcinko was a vital and recruited BOD  member of several innovative companies like Physicians Nexus, First Global Financial Advisors and the Physician Services Group Inc; as well as mentor and coach for Deloitte-Touche and other start-up firms in Silicon Valley, CA.

    As a state licensed life, P&C and health insurance agent; and dual SEC registered investment advisor and representative, Marcinko was Founding Dean of the fiduciary and niche focused CERTIFIED MEDICAL PLANNER® chartered professional designation education program; as well as Chief Editor of the three print format HEALTH DICTIONARY SERIES® and online Wiki Project.

    Dr. David E. Marcinko’s professional memberships included: ASHE, AHIMA, ACHE, ACME, ACPE, MGMA, FMMA, FPA and HIMSS. He was a MSFT Beta tester, Google Scholar, “H” Index favorite and one of LinkedIn’s “Top Cited Voices”.

    Marcinko is “ex-officio” and R&D Scholar-on-Sabbatical for iMBA, Inc. who was recently appointed to the MedBlob® [military encrypted medical data warehouse and health information exchange] Advisory Board.

    entrepreneur

    Frontal_lobe_animation

  • ME-P Information & Content Channels

  • ME-P Archives Silo [2006 – 2020]

  • Ann Miller RN MHA [Managing Editor]

    ME-P SYNDICATIONS:
    WSJ.com,
    CNN.com,
    Forbes.com,
    WashingtonPost.com,
    BusinessWeek.com,
    USNews.com, Reuters.com,
    TimeWarnerCable.com,
    e-How.com,
    News Alloy.com,
    and Congress.org

    Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

    Product Details

    Product Details

    Product Details

  • CERTIFIED MEDICAL PLANNER® program

    New "Self-Directed" Study Option SinceJanuary 1st, 2020
  • Most Recent ME-Ps

  • PodiatryPrep.org


    BOARD CERTIFICATION EXAM STUDY GUIDES
    Lower Extremity Trauma
    [Click on Image to Enlarge]

  • ME-P Free Advertising Consultation

    The “Medical Executive-Post” is about connecting doctors, health care executives and modern consulting advisors. It’s about free-enterprise, business, practice, policy, personal financial planning and wealth building capitalism. We have an attitude that’s independent, outspoken, intelligent and so Next-Gen; often edgy, usually controversial. And, our consultants “got fly”, just like U. Read it! Write it! Post it! “Medical Executive-Post”. Call or email us for your FREE advertising and sales consultation TODAY [770.448.0769]

    Product Details

    Product Details

  • Medical & Surgical e-Consent Forms

    ePodiatryConsentForms.com
  • iMBA R&D Services

    Commission a Subject Matter Expert Report [$2500-$9999]January 1st, 2020
    Medical Clinic Valuations * Endowment Fund Management * Health Capital Formation * Investment Policy Statement Analysis * Provider Contracting & Negotiations * Marketplace Competition * Revenue Cycle Enhancements; and more! HEALTHCARE FINANCIAL INDUSTRIAL COMPLEX
  • iMBA Inc., OFFICES

    Suite #5901 Wilbanks Drive, Norcross, Georgia, 30092 USA [1.770.448.0769]. Our location is real and we are now virtually enabled to assist new long distance clients and out-of-town colleagues.

  • ME-P Publishing

  • SEEKING INDUSTRY INFO PARTNERS?

    If you want the opportunity to work with leading health care industry insiders, innovators and watchers, the “ME-P” may be right for you? We are unbiased and operate at the nexus of theoretical and applied R&D. Collaborate with us and you’ll put your brand in front of a smart & tightly focused demographic; one at the forefront of our emerging healthcare free marketplace of informed and professional “movers and shakers.” Our Ad Rate Card is available upon request [770-448-0769].

  • Reader Comments, Quips, Opinions, News & Updates

  • Start-Up Advice for Businesses, DRs and Entrepreneurs

    ImageProxy “Providing Management, Financial and Business Solutions for Modernity”
  • Up-Trending ME-Ps

  • Capitalism and Free Enterprise Advocacy

    Whether you’re a mature CXO, physician or start-up entrepreneur in need of management, financial, HR or business planning information on free markets and competition, the "Medical Executive-Post” is the online place to meet for Capitalism 2.0 collaboration. Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds. THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
  • OIG Fraud Warnings

    Beware of health insurance marketplace scams OIG's Most Wanted Fugitives at oig.hhs.gov

Biohazard Insurance on Rental Property Protects Owners, Tenants

Expensive and Emotional

By Rick Kahler CFP®

The call I recently received from a distraught client dealt with a disturbing question I’d never heard in all my 45 years of owning and selling real estate and my 35 years in financial planning. “Rick, my tenant committed suicide in my rental house. He shot himself. It was such a shock.

And then the biohazard clean up and repairs cost $30,000. My insurance only paid $10,000. What can I do to cover the difference?”

This client, who does not earn a high income, saved for several years to buy her first rental. One year ago she proudly put $30,000 down and borrowed $120,000 to buy a two-bedroom home for $150,000. Like most rentals financed with a loan, excess cash flow is nonexistent; her expenses and loan payment basically equal the rent. Her intention was to eventually have a paid-off rental property to help provide her retirement income.

We explored some options. She could borrow $20,000 with a five-year loan and monthly payments of $377. This would definitely mean reducing her lifestyle. She could sell the house and probably net enough from the proceeds to pay the difference. This would seriously impact her future retirement income goal. She could consider asking the estate of the deceased to cover the costs. The phone went silent as she pondered this idea. “That would be hard.”

The thought of who is legally liable for the damages of such a terrible tragedy is not a pleasant subject to ponder. Compared to the emotional costs for the victim’s loved ones, of course, the financial costs are insignificant. Yet they still must be dealt with.

In a home where a violent death occurs or a natural death goes undiscovered for some time, the owner of the property faces significant biohazard cleanup costs that must be done by specialists. In addition, repairs and replacement furnishings are often required.

Bringing an action against someone’s estate to recover such costs is a choice anyone would be reluctant to make. The estate may not have the means to pay such costs. Even if funds were available, asking for payment could seem cruel, callous, and heartless.

As my daughter said to me, “Put yourself in the shoes of that man’s family for a moment. Imagine the expenses you already have to take care of: the funeral, a casket, a headstone, a cemetery plot, and other duties that you have to carry out while you’re still grieving—only to be told you need to cough up an additional $20,000 dollars on top of it all.”

Certainly, my client is in an unenviable lose/lose position. Through no fault of her own, she either suffers a significant financial setback or faces the possibility of filing a lawsuit against the estate of the deceased.

Sadly, all of this could have been avoided if my client had purchased the proper insurance. She thought she had, because her policy had a rider covering damages from a crime scene and biohazard clean-up. Unfortunately, the coverage capped at $10,000.

I asked Amy Borella, a property casualty agent with Great Western Insurance, what the industry standard is for this kind of coverage. She said, “Every policy can have different endorsements and every company can cover claims differently. There is no standard for how a claim like this would be handled.”

***

***

Assessment

It was a relief to learn that my homeowners and rental policies did have coverage, with no cap. I strongly suggest, if you own rental property, to be sure the same is true for your policies. In case a tragedy should happen, adequate insurance provides protection for both you and your tenants.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

Book Marcinko: https://medicalexecutivepost.com/dr-david-marcinkos-bookings/

Subscribe: MEDICAL EXECUTIVE POST for curated news, essays, opinions and analysis from the public health, economics, finance, marketing, IT, business and policy management ecosystem.

MORE FOR DOCTORS:

“Insurance & Risk Management Strategies for Doctors” https://tinyurl.com/ydx9kd93

“Fiduciary Financial Planning for Physicians” https://tinyurl.com/y7f5pnox

“Business of Medical Practice 2.0” https://tinyurl.com/yb3x6wr8

THANK YOU

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

***

Mid-Year US Markets Investment Update 2017

Second Quarter 2017

[By Rick Kahler MS CFP®]

Most clients I have met with recently show surprise when I tell them the first half of the year was a good one for investors. As one client said,

“How is that possible with all the problems in the world?”

She ticked off the unrest in the Middle East, ISIS, our strained relations with Russia, the instability of North Korea, not to mention the tweeting antics of President Trump and Congress’s inability to fix health care or provide tax relief. To her, all these appear to be good reasons for markets to be going down, not up.

Her response isn’t unusual

Most people mistakenly assume that markets rise when there is good news and do poorly when there is turmoil and pessimism. Actually, it’s often the opposite.

The U.S. stock market has more than tripled in value during the runup that started in March 2009, when the world as we knew it seemed to be ending. The most recent quarter somehow managed to accelerate the upward trend. We have just experienced the third-best first half, in terms of U.S. market returns, of the 2000s.

Still, as good as markets were to investors, economic growth was admittedly meager in the first quarter. The U.S. GDP grew just 1.4% from the beginning of January to the end of March.

Round-up

The S&P 500 index of large company stocks gained 2.41% for the quarter and is up 8.08% in the first half of 2017. International stocks are finally delivering better returns to our portfolios than US stocks. The broad-based EAFE index of companies in developed foreign economies gained 5.03% in the recent quarter and is now up 11.83% for the first half of calendar 2017.

Real estate, as measured by the Wilshire U.S. REIT index, gained 1.78% during the year’s second quarter, posting a meager 1.82% rise for the year so far.

The energy sector, which was a big winner last year, has dragged down returns in 2017. The S&P GSCI index, which measures commodities returns, lost 7.25% for the quarter and is now down 11.94% for the year, due in part to a 20.43% drop in the S&P petroleum index. This proves once again the value of diversification. Just when you start to question the value of holding a certain investment or wonder why the entire portfolio isn’t crowded into one that is outperforming, the tide turns. If only this were predictable.

In the bond markets, longer-term Treasury rates haven’t budged, despite what you might have heard about the Fed raising interest rates. The coupon rates on 10-year Treasury bonds have dropped a bit to stand at 2.30% a year, while 30-year government bond yields have dropped in the last three months from 3.01% to 2.83%.

Some good news

The unemployment rate is at a near-record low of 4.7%, and wages grew at a 2.9% rate in December, the best increase since 2009. The underemployment rate, which combines the unemployment rate with part-time workers who would like to work full-time, has fallen to 9.2%, its lowest rate since 2008.

The current bull market is aging, however. The runup has lasted far longer than anybody would have expected after the 2008 crisis. Inevitably, although it’s impossible to predict exactly when, we are approaching a period when stock prices will go down. It is always good to remember that the stocks in your portfolio will eventually plunge by more than 20% (which is the definition of a bear market).

Assessment

This might be a good time to revisit your stock and bond allocations and be sure you are diversified into five or more asset classes.

 *** 

***

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

***

Understanding 1031 Exchanges

Join Our Mailing List

The Ultimate Infographic Guide

By 1031 Gateway

In this infographic you will learn how to defer your capital gains taxes utilizing a 1031 exchange, what kinds of properties qualify for 1031, what the basic 1031 rules and time limits are, and how to benefit your heirs by stepping up your basis.

***

1031Exchange

***

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

More:

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

 

Retirement Portfolio Real Estate?

Join Our Mailing List 

Inefficient and Illiquid … But?

By Rick Kahler MS CFP® http://www.KahlerFinancial.com

Rick Kahler MS CFPWhat’s the best way to hold real estate in a retirement portfolio? For many investors, the answer seems to be “not at all.” That’s not the right answer. This asset class, appropriately owned, can help support you well in retirement.

Not like Stocks

Unlike stocks, which trade on a highly efficient and liquid exchange, trading real estate is inefficient and illiquid. The ease of buying and selling stocks is one of the major reasons the asset class is over-represented in most portfolios.

Based on the fascination of the financial press with the stock market, it’s easy to get the impression that stocks comprise the largest financial asset class. According to Matthew Yglesias, author of The Rent Is Too Damn High, the total value of commercial real estate in the US as of December 2013 was $20 trillion. This equals the value of publicly traded stock. (The largest asset class is bonds with $37 trillion.)

While one could make a strong argument for owning equal amounts of real estate and stocks in most retirement portfolios, very few hold any real estate at all.

Direct Ownership

Probably the worst way to hold real estate is to own it directly. The only popular retirement plan that allows direct ownership of real estate is the self-directed IRA. Unfortunately, the government discourages holding real estate this way by taxing it unfavorably. As I’ve described in a previous column, it’s not a good idea.

RLPs

Registered Limited Partnerships [RLPs] were a popular way to own real estate in the 1980’s. While someone must have made money on these investments, I don’t think it was the investors. I don’t know an investor who made a dime, but I do know some distributors and promoters who got very rich with them. The problem wasn’t the real estate but the lack of transparency inherent in a limited partnership. This allowed promoters and distributors to hide high fees and commissions that didn’t give the investors a chance of profiting.

REITs

Gradually, the real estate investment trust gained popularity as another investment vehicle for owning real estate. A publicly traded REIT is similar to an ETF (a form of a mutual fund) that trades on the major exchanges and invests directly in real estate. REITs receive beneficial tax breaks, must pass through 90% of their cash flow to investors, have a high degree of transparency, and are highly liquid. They also tend to specialize in certain types of real estate, so rather than hold REITs individually; I prefer to own a mutual fund that owns a diversified assortment.

The fees and commissions associated with REITs are very low, which helps make them a good choice for investment portfolios. It is also another reason they don’t often show up there, since most financial vehicles are sold, not bought. Mutual funds, annuities, and cash value insurance pay much higher commissions than exchange traded REITs.

Wall Street solved that problem by creating the non-traded REIT, which does not trade on a securities exchange and therefore is highly illiquid. The benefits touted by salespeople are the potential for higher dividends, plus lower volatility than publicly traded REITs. Here’s the downside: Their lower volatility is an illusion created by their high illiquidity. They also lack transparency, which gives cover to charging high fees and commissions. The non-traded REIT is scarily like its older cousin of the 1980’s, the registered limited partnership.

USA

Assessment

Including real estate in a retirement portfolio can be a good idea as long as the ownership is properly structured. A mutual fund that holds a broad diversification of publicly traded REITS is one way to help you build a strong foundation for retirement.

Channel Surfing the ME-P

Have you visited our other topic channels? Established to facilitate idea exchange and link our community together, the value of these topics is dependent upon your input. Please take a minute to visit. And, to prevent that annoying spam, we ask that you register. It is fast, free and secure.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

Why I Hate Non-Publicly Traded REITS

Join Our Mailing List 

On Product Frustration

Lon JefferiesBy Lon Jefferies MBA CFP®

As my experience in the financial planning and investment advisory industries has grown over the years, there is one investment that I’ve seen no logical reason to own — non-publicly traded real estate investment trusts.

Josh Brown, one of my favorite analysts and author of TheReformedBroker.com nailed each of my frustrations with these products. Here is a significant excerpt from his post:

 ***

I consider non-traded REITs or nREITS to be part of the group of investments that are just absolute murderholes for clients – they pay the brokers so much that they cannot possibly work out (and they rarely do without all kinds of aggravation and additional costs). Further, I have yet to hear a single credible explanation as to why a broker would recommend a non-traded REIT over a public REIT other than compensation. The only explanation that makes sense to me is that 7% is a lot more than the 1% commission you get doing an agency trade on a NYSE-traded REIT. A reader with experience in the industry sent this to me and I found it hilarious. Below, a fictional, transparent conversation between an indie broker and his “client” that would never occur…

If Brokers Were Transparent:

Rep:

Before we wrap up our quarterly portfolio review I would like to talk to you about a new investment I think you might be interested in.  You have been looking for more income and this is an investment vehicle that pays a 7% dividend.

Client:

Sounds great, give me the details.

Rep:

With your portfolio size and risk tolerance I would recommend a $100,000 investment.  Given that amount let’s first go over the fees. If you invest $100,000 I will be paid a commission of $7,000. My firm is going to get $1,500 – $2,000 in revenue share. My wholesaler, the salesman that works for the investment’s sponsor company, will get $1,000. He is a great guy, buys me dinner and takes me golfing. The sponsor company is going to get around $3,000 to pay for some of the costs they incurred in setting up the investment. So after Day 1 there will be around $87,000 left over to actually invest.  I bet you are getting excited.

Client:

Are you on drugs? Why would I pay 13% in fees on anything?

Rep:

Don’t worry, it won’t feel like you are paying $13,000 in fees. The rules allow my firm to report your investment at $100,000 on your statement. You never really know what its worth but you will think you never lost money. Pretty sweet huh?

Client:

You have to be kidding.

Rep:

No, this is a really good investment. Let me tell you about the income component before you jump to any conclusions. Like I said this investment pays a 7% dividend and the dividend won’t change.

Client:

That sounds high and how do you know it won’t change?

Rep:

You see, the sponsor just picks the 7% dividend number out of thin air. Here’s how it works. You see the vehicle you are going to invest in is new and it’s going to take the firm a while before your net $87,000 is actually invested. Later on, maybe 2-4 years from now they will have the money fully invested and it will generate actual cash flow. So they just pay a quarterly dividend of 7% by giving you your money back. This is great from a tax perspective because return of capital isn’t taxed as income.

Client:

Are we on hidden camera or something?

Rep:

Ha, you are funny. I bet this next benefit will change your mind.

Client:

I hope so or I should start looking for another financial advisor.

Rep:

This is the best feature. You can’t sell your investment until the sponsor has the opportunity to create liquidity. You might be locked up in this investment for 7-10 years.

Client:

This feels like the Twilight Zone. Your firm allows you to sell this crap?

Rep:

Oh yeah, our firm sells a ton of it. In fact independent broker dealer firms like mine sold over $20 billion of these investments in 2013. Think about that. Reps like me made over $140 million dollars and our firms pocketed $20-$30 million.

Client:

This is crazy, what is this investment?

Rep:

Non-traded REITs. $100,000 sound about right?

***

Currency

***

Josh touched on every part of these investments that I despise — excessive commission paid to the so-called “financial advisor” (salesman), a supposed “dividend” that is really just paying the investor his own money back (essentially providing an interest-free loan), and a complete lack of liquidity and transparency.

When I begin working with a new client who owns one of these products, it is impossible to obtain accurate, current information on the investment (not even a true value is apparent). Even worse, if the client wants to sell the investment he would need to do so at pennies on the dollar. For the most part, once an investor purchases one of these products he just needs to forget about it and hope that one day he can get his money back.

Assessment

The bottom line is that if your advisor ever recommends a non-publicly traded REIT, I’d strongly recommend you walk out the door and start searching for a true financial advisor with a fiduciary responsibility to act in your best interest.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Product Details  Product Details

On Doctors Investing in Commercial Real Estate

Join Our Mailing List 

Want a good way to build wealth? Own commercial real estate -OR-not!

By Rick Kahler CFP® http://www.KahlerFinancial.com

Rick Kahler CFPReal estate is one of the largest asset classes in the world. The family home is the largest asset many middle-class Americans own. And real estate makes up a significant portion of the net worth of many wealth accumulators.

Direct Ownership

Directly owning real estate is not an investment for the faint of heart, the armchair investor, or the uneducated. Most wealth accumulators would do well to leave direct ownership of real estate to the pros and invest in real estate investment trusts (REITs) instead.

Some Guidelines

Still, the lure of investing in a tangible asset like real estate is enticing for high risk tolerant investors who need a sense of control and interaction with their investments. If you are among them, here are a few guidelines that may keep you on a profitable path.

1. Don’t attempt to purchase investment real estate without the help of a commercial real estate specialist who is a fiduciary bound to look out for your best interest. Engage a Certified Commercial Investment Member (CCIM) with years of training and experience in analyzing and acquiring investment real estate. To find a CCIM near you, go to http://www.ccim.com.

2. You will sign a disclosure agreement that will tell you who the Realtor represents. Be sure the Realtor you engage represents you and not the seller, both parties, or neither party.

3. Never trust the income and expense data provided by the seller’s Realtor. While a seller represented by a CCIM will have a greater chance of supplying you with accurate data, most will significantly understate expenses and overstate the capitalization rate. Selling Realtors often understate the average annual cost of repairs and maintenance. I estimate this annual expense at 10%.

4. Another often understated expense is management. Many owners manage their own properties, so the selling broker doesn’t include an estimate for management expenses. They should. Real estate doesn’t manage itself, ever. You will either need to hire professional management or do your own management (always a scary proposition). Even if you do it yourself, you have an opportunity cost of your time, so you must include a management fee in the expenses. Most small residential apartments and single-family homes will pay 10% of their rents to a manager.

5. You must verify all the costs presented to you by the seller’s Realtor. Demand copies of at least the last three and preferably five years of tax returns. Research utilities, property taxes, legal fees, insurance costs, repairs, maintenance costs, replacement reserves, tax preparation, and management fees. As a rule of thumb, expenses will average 40% of rental income on average-aged properties where the tenants pay all utilities except water. Newer properties may have expenses as low as 35%, while older properties can be as high as 50%.

6. By subtracting the vacancy rate and stabilized expenses from the rent, you will find the net operating income. This is the income you will put in your pocket—assuming the property is paid for. By dividing the net operating income by the purchase price, you will find the return you will receive on your investment, called the capitalization or “cap” rate. In Rapid City, for example, the cap rate tends to be 4% for single-family homes, 5% to 8% for duplexes to eight-plexes, and 8% to 12% for larger residential and commercial properties.

Home for Sale

Assessment

Yes, Physician-investors and all of us can build wealth with real estate. You just need to educate yourself, work hard, start conservatively, think long-term, and be prepared for lean years. This is not a quick or easy path to riches.

More:

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

LEXICONS: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com

Product Details  Product Details

For Doctors Considering Rental House Investments?

Join Our Mailing List

Risks versus Rewards

By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

Landlord!

The very word implies wealth, authority, and status. Maybe that’s one of the reasons there are so many books and seminars claiming to teach you how to build wealth by owning rental property.

Yes, medical professionals can get rich as a landlord. Doctors can go broke, too.

And, in between those two extremes, you can find yourself dealing with a bunch of problems like leaking roofs, non-paying tenants, and economic downturns. The risks of building wealth with real estate are substantial. This is true whether you want to become the biggest property owner in town or just buy a second home as a rental to help finance your retirement.

Points of Consideration

With real estate prices still low after the collapse of the housing bubble, and with the current low interest rates, it may be a great time to buy a second home. Before even considering such a purchase, though, here are some important points to consider:

1. Do you plan to eventually live in the house yourself? If so, buying it now and having a tenant pay the mortgage for you might be a great move. Still, you need to take the following factors into consideration and make your decision carefully.

2. Will you need current income from the property? Then you’ll need to be able to buy it without a mortgage. Otherwise, the mortgage and other expenses will eat up most of the rent payments, and you won’t have any cash flow.

3. Do you have the time and skills to manage the property yourself? Water heaters quit, pipes need replaced, and furnaces go on the blink. Will you be able to do your own maintenance or spend the money to hire it done? Are you available to check out prospective tenants and show the property? A management company can relieve you of the hassles of arranging for repairs and vetting tenants. You’ll still pay the bills, though, plus fees of perhaps ten percent of the rent.

4. Be realistic to the point of pessimism about your expected return. Assume that expenses—repairs, maintenance, taxes, and insurance—will be about 50% of the gross rental income. Always figure the income based on a property being vacant for several months of the year.

5. Be aware that a more expensive house won’t necessarily provide a corresponding increase in rent. The rental market eventually tops out. If a $150,000 house rents for $800 a month, a $350,000 house may only rent for about $1400.

6. If your main reason for owning real estate is investment income, and you have a small amount of money or don’t want the risk and management headaches of owning a house, a real estate investment trust (REIT) is often a wiser choice than owning real estate directly.

7. Be patient. If you over-buy income property and try to get rich quick, you risk losing it all. At one-time, Rapid City lost a number of military jobs and rental properties were sitting vacant. As I scrambled to make mortgage payments, it felt as if I didn’t own my rental houses, they owned me. Right now I have interests in companies that own paid-for rental property, but getting to that point took over 30 years.

Assessment

The IRS classifies some income from rental property as “passive.” Trust me, there’s nothing passive about being a landlord. Owning rental property can certainly be one way to add to your net worth and contribute to a comfortable retirement. Just like any other form of wealth-building, however, it requires education, good decision-making, an awareness of the risks, and plenty of effort.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

Our Other Print Books and Related Information Sources:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Hospitals: http://www.crcpress.com/product/isbn/9781439879900

Physician Advisors: www.CertifiedMedicalPlanner.org

Product Details  Product Details

Product Details

Selling into a House Poor Market

When the Local Real-Estate Market is Challenging

Join Our Mailing List

By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

An exciting new medical practice opportunity in another state …. Health problems that make one-level living an urgent necessity …. The need to downsize quickly because of a hospitalist job loss ….

These are just a few of the reasons medical professionals might need to sell a home sooner rather than later. The real problem arises when the local real estate market is a challenging one. Here are a few suggestions for anyone looking to sell a house under difficult conditions.

1. Evaluate the urgency of your situation. If you can wait a few months without harming your career, your finances, or your health, that may be the wiser choice. If you can’t make payments, or you need to relocate right away and can’t buy a new house until you sell the current one, waiting to sell is usually a losing proposition.

2. Take a hard look at the costs of waiting. You often can cut your overall housing costs significantly by biting the bullet and selling, rather than paying for two homes until you get the price you want. In addition to mortgage payments, add up expenses like property taxes, maintenance, utilities, and commuting costs.

Example:

For example, suppose you paid $400,000 for a house that’s worth $300,000 in the current market. Selling it now would mean a loss of $100,000, but holding onto it costs $3000 a month. Suppose the market improves by 33% in three years, which of course is not something you can count on. You sell the house then for $400,000. In the meantime, keeping it has cost you $108,000. If you keep the house on the market for a year, then give up and sell at $300,000, you’ve added $10,800 to the original $100,000 loss. You’re often better off to cut your losses and sell.

3. Grit your teeth, hold your nose, and be realistic about the market value of the home you are selling. Your original purchase price has NOTHING to do with current reality. The market is the market, and buyers couldn’t care less about what you paid for the home. They only care about the competition and getting the most home for their money, just as you did when you bought the property.

You need to research the housing market in your area or hire competent help (like an appraiser) to help you determine the market value of your property. Real estate agents can help with pricing, but you must proceed carefully. Some agents practice a technique of “tell them what they want to hear, get the house listed, and then work on getting them to reduce the price.”

4. Think like a buyer as well as a seller. Many sellers forget that the pain of selling at a loss is eased if the replacement home they buy is also valued less than it was several years ago. The loss in the home being sold can often be offset by the bargain price of the home being purchased.

5. Do your best to negotiate with your lender. If your mortgage is more than the sale price of the house, you’ll owe money to the lender at closing. Depending on the circumstances, it may be possible to get the lender to accept a lower payoff. Before the closing date, find out exactly how much you’ll need to pay and know where you’re going to get it.

Assessment

Our reluctance to sell a property for less than the amount we’ve put into it is described as “sunk cost fallacy.” Holding on until we get our money back sometimes works. More often, though, all it does is sink us deeper into a financial hole.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

Our Other Print Books and Related Information Sources:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Hospitals: http://www.crcpress.com/product/isbn/9781439879900

Physician Advisors: www.CertifiedMedicalPlanner.org

Product DetailsProduct DetailsProduct Details

Product Details  Product Details

Product Details

A Real Estate Market Update

Join Our Mailing List 

Hot or Not?

The largest real estate social network ActiveRain Corp just surveyed 1,835 real estate agents and real estate brokers in the US and Canada to understand if the real estate market and economy are poised for recovery in 2012, both nationwide and in local markets.

Source: ActiveRain

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Product Details  Product Details

A Review of Current Personal Finance and Investment Literature

Current Synopsis [Around the Literary World of Economics]

By Dr. Peter Benedek CFA

http://retirementaction.com/

Investors will grapple with more turbulence surrounding Europe’s deepening debt problems this week and the prospect of another round of dismal data on the faltering U.S. economy. So, let us listen while Doctor Benedek speaks.

Dr. David E. Marcinko; FACFAS, MBA, CMP[Publisher-in-Chief]

In the Globe and Mail’s “In an emergency, is your info safe?” Dianne Nice suggests a teachable moment associated with the recent US andOntario tornadoes, north-eastern earthquake and hurricane threat. Specifically, she suggests that we consider taking steps to safeguard our important papers, should our home be destroyed. The ICBA recommends keeping important documents in a bank safe: marriage certificate, tax returns, property deeds, birth certificates insurance policies, credit card number, and list of household valuables for insurance claims, paper or electronic copies of important computer records. Additionally consider keeping copies in the home in sealed plastic bags (Probably not a bad idea.)

Scott Willenbrock in the Financial Analysts Journal’s “Diversification return, portfolio rebalancing, and the commodity return puzzle” argues that “the underlying source of the diversification return is the rebalancing, which forces the investor to sell assets that have appreciated in relative value and buy assets that have declined in relative value, as measured by their weights in the portfolio. Although a buy-and-hold portfolio generally has a lower variance than the weighted average variance of its assets, it does not earn a diversification return. Diversification is often described as the only “free lunch’’ in finance because it allows for the reduction of risk for a given expected return. Diversification return might be described as the only “free dessert” in finance because it is an incremental return earned while maintaining a constant risk profile. The contrarian activity of rebalancing, however, must be performed to earn the diversification return; diversification is a necessary but not sufficient condition. Although an un-rebalanced portfolio generally has reduced risk, it does not earn a diversification return and suffers from a varying risk profile. The control of risk, together with the diversification return, is a powerful argument for rebalanced portfolios.”

In the CFA Institute’s Financial Analysts Journal’s “The winners’ game” Charles Ellis looks at the investment profession’s challenges and opportunities. He writes that the investment profession has made three errors:  two of commission and one of omission. He writes that “In addition to the two errors of commission—accepting the increasingly improbable prospect of beat-the-market performance as the best measure of our profession and focusing more and more attention on business achievements rather than on professional success— we have somehow lost sight of our best professional opportunity to serve our clients well and shifted our focus away from effective investment counseling. Some of the help clients need is in understanding that selecting managers who will actually beat the market over the long term is no longer a realistic assumption or a “given” … most investors need help in developing a balanced, objective understanding of themselves and their situation: their investment knowledge and skills; their tolerance for risk in assets, incomes, and liquidity; their financial and psychological needs; their financial resources; their financial aspirations and obligations in the short and long run … Our profession’s clients and practitioners would all benefit if we devoted less energy to attempting to “win” the loser’s game of beating the market and more skill, knowledge, and time to helping clients recognize market realities, understand themselves as investors, and clarify their realistic objectives and then stay the course that is best for each of them.” (Charles Ellis is the author of the must read book entitled“Winning the Loser’s Game- Timeless Strategies for Successful Investing”.)

Glenn Ruffenach in the WSJ SmartMoney’s “5 best online retirement guides” provides a list from  “One of the most comprehensive and valuable sites online is also among the least known: the Employee Benefits Security Administration.”

In WSJ SmartMoney’s “Why Wall Street’s forecast can’t be trusted” Alex Tarquinio writes that “Over the years, some market forecasters have been about as accurate as, well, weather forecasters… But some financial planners ignore the Wall Street prognostications altogether. George Papadopoulos, the owner of the eponymous financial planning firm in Novi, Mich., says most stock strategists tend to be too bullish, save a few who are “perma-bears.” Ignore the headline number, he says, and “focus on what you can control,” like finding a good balance of stocks and bonds for your portfolio.” (Now there is some sensible advice; ignore talking-heads, ‘strategists’, ‘prognosticators’ and soothsayers. Remember there are very few things that you can actually control: your spend-rate, saving-rate, investment fees and costs, asset allocation and rebalancing.)

In the Globe and Mail’s “Hunting high and low for safe yields” John Heinzl enumerates some of the available options for ‘safe yields’ and concludes that none come even close to paying off your 4% mortgage which at 40% tax rate gives you 6.67% guaranteed.

In Bloomberg’s “Homeowners on East Coast may have to pay for earthquake damage” Leondis and Ody report that “Earthquake protection is generally excluded from standard homeowners’ insurance policies, and consumers have to purchase coverage either as a separate policy…“For most of us, having earthquake insurance doesn’t make sense,” said Sheryl Garrett, founder of Shawnee Mission, Kansas-based Garrett Planning Network Inc., a network of fee-only financial planners. That’s because residents of areas where earthquakes rarely occur generally don’t need the coverage, and policies in parts of the country with frequent earthquakes are more expensive to compensate for the increased risk, she said.”

In the Globe and Mail’s “Vanguard to launch six ETFs in Canada” Shirley Won reports that Vanguard is launching “six exchange-traded funds (ETFs) inCanada. The stock ETFs include Vanguard MSCI Canada and the Vanguard MSCI Emerging Markets, as well as the Vanguard MSCI U.S. Broad Market and Vanguard MSCI EAFE, which will both be hedged to Canadian dollars. The bond category includes Vanguard Canadian Aggregate Bond and Vanguard Canadian Short-Term Bond ETFs.”

Real Estate

On the Canadian front, in the Globe and Mail’s “Most housing ‘reasonably affordable’: RBC” Steve Ladurantaye reports that Vancouver house prices are in “uncharted territory” and “it would take 92 per cent of the median household’s pretax income to own a bungalow in the city at current prices – the highest reading yet in its quarterly national survey on affordability. However according to RBC most (other) Canadian cities offered reasonably affordable” housing options in the second quarter compared to the first. Nationally, a condo required 29.2 per cent of pretax household income (a 0.8 per cent increase), a bungalow 43.3 per cent (1.7 per cent) and a detached home 49.3 per cent (1.8 per cent)… The bank’s affordability index looks at the proportion of pre-tax household income needed to service the costs of owning different categories of homes at current market values. Its standard measure is a 1,200-square-foot bungalow, and the carrying costs include mortgage payments (principal and interest), property taxes and utilities.”

However in the WSJ’s “Toronto wary of condo correction” (note this is in WSJ, not the Globe and Mail or the National Post) Monica Gutschi reports that “A condominium-building boom is lifting Canada’s largest city into the same stratosphere as London, Sydney, Vancouver and Miami, but deepening the worries about a potential tumble…Toronto is a long way from Miami, but the condominium boom north of the border has begun to evoke ominous comparisons, even among real-estate agents. TheToronto area is home to 1,198 condo projects with 210,000 units, according to research firm Urbanation. About 40,000 additional condominium units are under construction, including 16,000 set to hit the market next year. “There’s more supply coming than the market really needs, unless we have a stronger economy than we have today,” says independent housing economist Will Dunning…As many as 60% of recent condominium buyers in Toronto are investors who bought their units from developers before construction began—and then sold their condos…But buyers whose condominiums are investments are getting squeezed. Stagnant rents make it harder to cover mortgage payments.”

On the US front, in Bloomberg’s “Home prices decline 5.9% in second quarter” Kathleen Howley reports that “Home prices in the U.S. fell 5.9 percent in the second quarter from a year earlier, the biggest decline since 2009, as foreclosures added to the inventory of properties for sale…Purchases decreased 3.5 percent to a 4.67 million annual rate, the weakest since November.” Furthermore Nick Timiraos in WSJ’s  “Home-loan delinquencies rise again” reports that “The Mortgage Bankers Association said 12.87% of mortgage loans on one-to-four-unit homes were 30 days or longer past due or in the foreclosure process at the end of the second quarter, representing more than 6.3 million households. The second-quarter figure was down from 14.4% one year earlier but up from 12.84% at the end of March…While mortgage delinquencies remain highest in states hard hit by the housing bubble—such as Nevada, California and Florida—the inventory of loans in foreclosure is highest in states that require banks to obtain court approval when they foreclose on homeowners. Nationally, about 4.4% of all loans were in foreclosure at the end of June. Of the nine states that exceeded the national average, all but one—Nevada—have a judicial foreclosure process. Foreclosure rates were highest inFlorida (14.4%),Nevada (8.2%),New Jersey (8%),Illinois (7%),Maine andNew York (5.5%).”

In Florida context, in Palm Beach Post’s “Palm Beach County home sales slump in July from previous month” Kimberly Miller reports that “A Florida Realtors report released Thursday found 972 single-family Palm Beach County homes traded hands in July, a 21 percent increase from the same time in 2010, but an 18 percent drop from the previous month. The median sales price in Palm Beach County fell 17 percent from last year to $187,900 – a price not seen consistently since 2002. Statewide, sales of existing homes fell 12 percent in July from the previous month, but were up 12 percent compared to July 2010. The median sales price of $136,500 remained mostly stable…The inventory of homes for sale in Palm Beach County was down to an eight month supply in June, a 46.5 percent decrease from 2010 and down 62 percent from 2009, according to the Realtors Association of the Palm Beaches. That may change soon. Forbes, as well as Realtor Dean Hooker, owner of Pompano Beach-based Southeast REO, said banks are preparing to release more foreclosures for re-sale. Also in the PBP is Jeff Ostrowski’s article “Foreclosure-related sales’ prices fall, and the discount widens” in which ne reports that “The average price of a foreclosure sold inPalm BeachCounty in the second quarter was $116,642, down from $142,997 a year ago. And the discount for foreclosure sales compared to non-foreclosure sales widened to 38 percent this year from 23 percent a year ago. There were 3,253 distressed sales – including foreclosure sales, pre-foreclosure sales and sales after a lender has taken ownership – inPalm BeachCounty in April, May and June, according to RealtyTrac. Those sales made up 37 percent of all transactions in the county. In St. Lucie County, 701 foreclosure deals in the quarter accounted for 44 percent of all sales. Statewide, there were 34,558 foreclosure sales in the second quarter, accounting for 35 percent of all sales in the state.”

In the Globe and Mail’s “Foreign buyers see value in U.S. real estate” Simon Avery writes that with Florida prices off typically 50% since the peak, low mortgage rates, the strong Canadian dollar: ” As an alternative investment, U.S. real estate may never look so attractive to Canadians again…At the moment, the best deals in the Miami area are in South Beach, an area where the properties on average are older. There are currently 172 properties listed under $150,000 and 50 per cent of them are within walking distance to the beach. Generally, these are small, art deco-style, low rises. Their monthly maintenance fees run $320 or less and the sizes range from 240 square feet to 440 square feet.” (That doesn’t sound that cheap for an average of 340 SF units comes to about $441/SF…bargain??? You be the judge.)

Things to Ponder

In the Globe and Mail’s “Amid slowdown, Fed has few tools left” Kevin Carmichael discusses the limited remaining options available for the Fed to provide stimulus to rekindleUS growth and employment. The real problem, however, might be related to that “these aren’t normal times. When businesses and consumers would rather save than spend, as currently is the case in theUnited States, the power of monetary policy is muted. Corporations are sitting on some $2-trillion (U.S.) in profits and the household savings rate has climbed to more than 5 per cent from zero before the financial crisis, even though the cost of borrowing already is at record-low levels… What theU.S. economy needs is a massive jolt to demand that would encourage companies to hire and invest. The best way to do that, many economists argue, is through fiscal policy.”

Jack Hough in WSJ SmartMoney’s “Treasurys versus stocks: spot the safe one” provides some support to Jeremy Siegel’s arguments that “bonds are in a bubble and stocks are good deal”. Arnott says that the 10-year Treasurys yield about zero, given nominal yields of 2.1% and past year’s inflation of 3.6%; whereas the S&P 500 dividend yield is 2.3%. “Bond yields are usually larger because stock dividends tend to grow over time and bond coupons don’t, so bond buyers typically want to be compensated for this…The choice is between stocks’ higher and rising yield and bonds’ lower and flat one…The third reason is that stocks have a better chance of keeping up with inflation…Dividends have rarely looked safer…Today’s payments are 29% of S&P 500 profits. That’s the lowest level since 1900, and perhaps in history…(but) Economists have slashed growth forecasts for most rich economies, and many put the chances of renewed U.S. recession at a coin flip.” So it depends on your horizon/risk tolerance, but “savers with a decade to wait” will find the arguments for stocks persuasive. But not everyone agrees that the metrics are valid. For example, in the Financial Times Lex column’s “Equities: metrics of the trade” discusses pundits indicating that based on P/E ratios and dividend yields compared to bond yields, it is time to buy stocks. Lex suggests that “the big flaw with this approach is that current or near-future earnings are very unlikely to represent an equilibrium return from stocks… It is a fact that company returns normalise, so a much longer earnings period against which to compare stock prices is needed. Inflation also needs be taken into account, as do accounting changes over time. Robert Shiller’s cyclically adjusted p/e ratio is a step in the right direction. Such an approach holds the S&P 500 to be anywhere up to 40 per cent overvalued… Likewise, history shows there to be no predictive power comparing equity and bond yields. Why should there be? Dividends are risky and rise with inflation; coupons are risk free and do not. It is like buying apples because pears are cheap. There are good reasons why stocks might rally – flaky valuation metrics are not among them.”

In the Guardian’s “Rating agencies suffer ‘conflict of interest’, says former Moody’s boss” Rupert Neate reports that “ratings agencies suffer from a conflict of interest because they are paid by the banks and companies they are supposed to rate objectively.”This salient conflict of interest permeates all levels of employment, from entry-level analyst to the chairman and chief executive officer of Moody’s corporation,” Harrington said in a filing to theUS financial regulator the Securities and Exchange Commission (SEC), which is considering new rules to reform the agencies. Harrington claims that Moody’s uses a long-standing culture of “intimidation and harassment” to persuade its analysts to ensure ratings match those wanted by the company’s clients.” (Recommended by the CFA Institute Financial Newsbrief)

In Bloomberg’s “Baby Boomers selling shares may depress stocks for decades, Fed paper says” Vivien Lou Chen writes that “Aging baby boomers may hold down U.S. stock values for the next two decades as they sell their investments to finance retirement, according to researchers from the Federal Reserve Bank of San Francisco … Jeremy Siegel, 65, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, has also researched the link between demographics and U.S. stocks. He said that growth in developing countries should generate enough demand to absorb a baby-boomer selloff and “keep stock prices high.””

In the Financial Times’ “Inflation a danger for safe havens” Steve Johnson argues that the US/UK/German 10-year government bonds yielding in the 2-2.2% range is due to their perceived “safe haven” status from the wild swings of the markets. “But these miserly yields must also reflect investors’ confidence that inflation will be muted over the next decade. How logical is this assumption?…this insouciance about the prospects for inflation misses the international dimension, that stemming from rising import prices … (but) For the seven US recessions between 1957 and 1991, commodity prices on average fell 1.6 per cent during the period between the start of the recession and two years after its end. The equivalent figure for the two recessions so far this century is a rise of 27.3 per cent… Rather than enjoying a tailwind from falling commodity prices and low inflation rates, it may become the norm for recession-ravaged developed nations to face a commodity headwind and stubbornly high inflation.”

Assessment

And finally, in the NYT’s “In Korea, the game of trading has rules” Floyd Norris writes that “Finance ought to provide an economy with an efficient means of allocating capital. It should provide a means of price discovery of assets, whether real or financial. It should provide a safe and reliable payments system. Financial innovations are worthwhile if, and only if, they help in those areas.  All too often, players see financial innovations as providing ways to manipulate the system and make money off less savvy traders.” In South Korea things are changing. Four traders were indicted for intentionally manipulating stock prices for profit, specifically for causing a market drop. “Countries around the world felt called upon to bail out banks during the financial crisis. That made sense because a functioning financial system is necessary. But these kind of games are not necessary, whether or not they are criminal. These charges provide an endorsement of the Volcker Rule, named for Paul A. Volcker, the former Federal Reserve chairman, and included in the Dodd-Frank law in theUnited States, which sought to restrict proprietary trading by banks whose deposits are insured. If such games are to be played, let them be played by others.“ The article concludes with the need for prison terms for these traders to insure a deterrent effect  (Thanks to DB for recommending.)

Conclusion

And so, your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speakers: If you need a moderator or speaker for an upcoming event, Dr. Peter Benedek and Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – are available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

Other Print Books and Related Information Sources for Doctor and Advisors:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Subscribe Now: Did you like this Medical Executive-Post, or find it helpful, interesting and informative? Want to get the latest ME-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Sponsors Welcomed: And, credible sponsors and like-minded advertisers are always welcomed.

Link: https://healthcarefinancials.wordpress.com/2007/11/11/advertise

Product DetailsProduct DetailsProduct Details       

Product Details  Product Details

   Product Details 

About the Mortgage Electronic Registry System

Loan Help or Hindrance?

By Dr. David Edward Marcinko MBA, CMP™

[Editor-in-Chief]

According to their website, Mortgage Electronic Registry System [MERS] is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans www.MERSInc.org Sounds good, right?

State Laws

Unfortunately, property law is handled on a state-by-state basis and digital MERS may not be a legal replacement for paper. In fact, MERS use may devalue the physical paper trail and lead to lost or misplaced loan documents [aka: admissible evidence].

Assessment

As a financial advisor for more than 15 years, and a former certified financial planner for more than a decade, who resigned due to the industry’s lack of fiduciary accountability, I appreciated this issue deeply

www.MedicalBusinessAdvisors.com

Full Disclosure:

I am also the Founder and CEO of www.CertifiedMedicalPlanner.com; an online certification, licensure and educational program for financial advisors and medical management consultants working in the healthcare space; who are always fiduciary advisors.

Conclusion

And so, your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com and http://www.springerpub.com/Search/marcinko

Get our Widget: Get this widget!

Our Other Print Books and Related Information Sources:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Subscribe Now: Did you like this Medical Executive-Post, or find it helpful, interesting and informative? Want to get the latest ME-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Sponsors Welcomed: And, credible sponsors and like-minded advertisers are always welcomed.

Link: https://healthcarefinancials.wordpress.com/2007/11/11/advertise

Product DetailsProduct DetailsProduct Details       

Product Details  Product Details

   Product Details 

The “Life Cycle Investment Hypothesis”

Join Our Mailing List

Physicians Returning to Zero?

[By Somnath Basu PhD, MBA] 

How have your investments done over the last three years? If you were to ask doctors, or the myriads of people who are or even pose as professional financial advisors, they would generally say that it would depend on how well your portfolio was diversified. By this jargon, they would mean how your money (in what proportions) was invested among various asset classes such as stocks, bonds, commodities, cash etc. The more it was spread out around various asset classes, the safer they would have been.

To see how safe (or how risky) your portfolio was over the last few years, it’s useful to view how these asset classes themselves fared over this time period. That is what is shown in the next chart where the following asset class performances over the last few years are shown. The chart shows the performances of stocks (S&P 500 shown by the symbol ^GPSC, in red), bonds (symbol IEI, Barclay’s 3-7 Year Treasury Bond index etf, in light green), Commodities (DBC, Powershares etf, in dark green), Long dollar (UUP, Powershares long dollar etf, in orange; this fund allows speculating on the dollar going up against a basket of important currencies; whenever the world financial markets are in turmoil, this index generally goes up as investors around the world seek the “safe haven” status of the dollar.

Alternately, note that this index value will also typically rise when the domestic economy is in a sound condition and both domestic and international investors favor the U.S. financial markets) and the short dollar (UDN, the Powershares inverse of UUP). Note that the “Cash” asset class has been left out and returns on cash (or money market funds) have been close to zero the whole time.

There are a few startling observations from this period. The first part that arrests the eye is how commodities performed over this time period. If your portfolio was heavy in this sector, you had a heck of a ride these last three years. If you had a lot of stocks as well, heck, your ride just got wilder. As can also be seen from the picture, healthy doses of bonds and currencies would have made your ride that much smoother.

On the other hand, what is additionally startling to observe is that we all started this period close to zero returns in the beginning of 2007 (around March 2007) and in June 2010, we are all converging back to zero returns. No matter how you were diversified, you either took a smooth ride (well diversified portfolio) from a zero return environment to a zero return environment or a wilder ride. That is why diversification is so important. Another way to gauge your diversification benefit is to use a two-pronged system.

The first is what I refer to as the “monthly statement effect”. When your monthly financial statements come in, you first observe the current month’s ending balance, then the previous month’s ending balance and then have a great day, a lousy day or an uneventful day. Depending on how good or bad (how volatile the ride) the monthly effect is, it may last for much more than just a day, maybe days. The second piece is your age.

Life Cycle Investment Hypothesis

As you grow older, you ask yourself how wild a ride can you tolerate at this point in your life? Hopefully, as you age, this tolerance level should show significant declines. If it does, you are then joining a rational investment group practicing a “lifecycle-investment hypothesis” style. Finally, did anything do well during this time? Yes, and surprisingly from an asset class whose underlying asset is shaped too like a zero – mother earth and real estate. Having some real estate in your investment basket (another important diversification asset) would not only have smoothed your ride but would have made your financial life so much more pleasurable. Just take a look at this picture below (FRESX, an old Fidelity’s real estate index fund) which says it all.

Assessment

Even in the darkest days of falling real estate markets of 2008, this fund produced a positive return. Of course many other real estate indexes lost their bottoms; thus finding these stable indexes in all asset classes are well worth their salt. That is, if it is time for you to diversify.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Product Details  Product Details

Physician’s Acquiring Real-Estate

Join Our Mailing List

Innovative Funding in Difficult Times

[Staff Reporters]mortgaged-house

Real estate can be acquired by physician-investors, even in these difficult times, in many different ways. For example, through direct purchase, participation in a real estate partnership vehicle with other investors [such as general partnerships, limited partnerships, various corporate entities, and, in most states, limited liability companies (LLCs), and investments in real estate securities such as Real Estate Investment Trusts (REITs).

Section 1031

Real estate also can be acquired through tax-deferred exchanges under Section 1031 of the IRS Code, in which a client “trades” one investment property for another, deferring the taxes due on the sale of the exchanged property. This allows the doctor to reinvest “pre-tax” dollars in another real estate investment, potentially benefiting from appreciation on the larger investment. The physician may also exchange one larger property into two or several smaller properties and pay tax consequences on each one as those properties are sold as cash is needed.

Tax and Risk Management

The way a physician takes ownership of real estate will affect the tax treatment of income and profit. For example, having an LLC-owned investment property will provide him/her with the same protection from individual liability as a corporation, while allowing him/her to have much more favorable tax treatment. Real estate can be bought directly by purchasing it in the following manners:

1. Paying cash,

2. Paying a cash down payment and acquiring a loan,

3. Paying cash to the seller who is financing, or

4. Financing the purchase by using either new real estate financing, seller financing, or credit borrowing when a lender is willing to loan solely on the strength of, and the financial statement of, the borrower, or a combination of these.

Trading and Secured Loans

Real estate also can be acquired by trading other valuable assets, sometimes in combination with financing. A client can obtain interests in real estate by making loans on real estate assets that are secured by a deed of trust or a mortgage. Another method is to invest as a participating lender. In such an instance the borrower needs to agree to provide equity kickers or participation in cash flow whereby the lender (doctor) can benefit directly from the real estate performance.fp-book21

Equity Participation Plans

With an equity participation, the physician-investor can profit or gain from the sale of the property, sometimes in a preferential manner (i.e., the money the doctor loaned is returned, with interest, and a predetermined percentage or portion of the gain is given to the owner/borrower before distribution of the sales proceeds). Similarly, the doctor can participate in annual cash flow, giving a fixed or a fluctuating amount depending on the performance of the investment. As a lender, many of the benefits of ownership of real estate are not available to the MD, but the doctor should have a security interest in the property and no direct responsibility for operation of the real estate investment. Also, if possible, the borrower should provide additional guarantees of performance. The borrower could do this by providing additional security, such as the deeds of trust on the borrower’s house, other real-estate, and the acquired property; bank letters of credit; or guarantees of performance from people other than the party to whom the money is originally loaned.archway

Assessment

If a physician-investor is considering acquiring or lending on real estate, s/he should check with his professional advisors, including accountants and attorneys, before proceeding. The doctor’s attorney should review any contracts or agreements before the client signs anything. The physician also will need a due diligence review to ascertain both the relative values of the real estate on which money is being loaned and the borrower’s track record and background.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

DICTIONARIES: http://www.springerpub.com/Search/marcinko

Product DetailsProduct DetailsProduct Details

Medical Real Estate Investments

Join Our Mailing List

Physician’s Need to Understand Compensation Methods

[By Staff Reporters]

Property Managers

Medical property managers are compensated for their services on an hourly or fee basis. In addition, they may be reimbursed for expenses related to the maintenance of the property, such as materials, and they may also pay for expenses incurred by subcontractors.

Fees

Fees usually are based on a percentage of gross collected rents, but are negotiable. Property managers of larger medical complexes may receive higher fees than managers of small complexes because of the details involved in managing larger properties. Fees also are affected by the total pro-forma income stream. In general, the better a manager enhances the property’s performance, the more the manager is paid.

Barter

Some owners pay fees and provide rent-free units for resident medical managers to handle on-site leasing; or for offices for managers to take care of buildings warranting on-site property management. Bartered phantom income may be reportable to the IRS.

fp-book11

Real Estate Brokers

Each state has specific requirements regarding the sales and leasing of medical, commercial and other real estate. Every state, however, has the clear and mandatory requirement that no commission or fee can be paid to anyone who is not licensed in that state as a real estate broker, an associate broker, or sales agent if the person represents or works on behalf of another. All fees and commissions must be paid to the company employing the broker, associate broker, or sales agent. Violation of these laws can have serious consequences to both the principal and the real estate broker.

Hybrid Compensation

A medical real estate broker is usually compensated by either a negotiated fee or a negotiated commission; or hybrid of both methods. Neither fees for work or commissions earned are set or standardized in any way. The amount earned or the amount paid is the result of an agreement. The agreement or contract must be in writing, under the Statute of Frauds, just as all real estate offers and contracts must be in writing sales or on leases of more than one year.

Commissions

If a broker is working on commission, h/she is paid only when she is successful and the sales transaction closes and title is passed to the buyer. Sales commission is established either in a Listing Agreement or a Buyers Brokerage Agreement. No fee is due if the sale does not occur. Rates of commission vary widely by city, region, and state. The amount of commission usually is a percentage of the sales price or a set amount. The percentage of commission is dependent on competition; effort required; to some degree, the size of the transaction; and market activity. For example, the sale of a large regional shopping center might be a 3% commission whereas the sale of a small retail building under $1 million might warrant a 7% commission.

Lease Execution Warrants Payment

Leasing commissions are based on gross rental income over the term of the lease, are due when the lease is executed by both landlord and tenant, and can be paid at one of the following times:

  1. On execution of the lease.
  2. Partly on lease execution and partly on occupancy; or
  3. On occupancy, depending on the landlord’s written agreement with the broker.

Leasing commissions usually are a negotiated percentage of gross rents, with the percentage varying dependent on type of lease. For example, the percentage rate of commission might be more on a net lease, in which the tenant pays all expenses, than if the same lease were structured on a gross or fully serviced basis; or in which the landlord provides services within the rents due. Commission on ground leases might range up to 10% and office space might range from 4% to 6%.

Example:

Term: 5 years (60 months)         

Monthly rental rate: $1,000 per month     

Gross rental income under the lease: $1,000 x 60 = $60,000        

Commission calculation (using a 6% rate): $60,000 x 6% = $3,600           

The fees paid under sales and leases are usually split between the colleague brokers working on the transaction and are shared between the listing agent and the selling or leasing agent under a co-brokerage agreement between the brokers. This too is a negotiated percentage. It is common for commissions to be split on a 50/50 basis, but it is not the rule. How the commission is divided between brokers depends on the transaction. The commission is often shared evenly between cooperating brokers, but the split ultimately is the seller and listing agent’s decision.

Hard-to-Move Properties

On extremely difficult medical real estate properties [as is seen in many parts of the country today], incentive splits may be offered. Incentive splits offer the selling or leasing agent a greater share of the commission if he or she is successful. Under commission agreements between a seller and a broker, or a buyer and a broker, in which the broker is representing a buyer, nothing is earned until the transaction is complete and the broker has added value, unless spelled out to the contrary in the agreement or the broker is working on a fee basis. On a typical sale, commissions are paid through escrow at closing. Leasing commissions are usually, but not always, paid upon lease execution.

Other forms of payment for property managers and real estate brokers

It has become increasingly common for medical property managers and real estate brokers, particularly when representing a buyer or a tenant, to work on a contractual basis. In these instances, the parties are paid on an hourly or set-fee basis, regardless of whether the transaction is completed. In some cases, a principal may decide he wants only some of the services offered, such as a lease review, and those are also paid on a negotiated basis for the service provided.

Assessment

Combinations of fixed fees and commission incentives also are common, but in most all cases there is not a set amount or standard fee charged by all brokers.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

LEXICONS: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
BLOG: www.MedicalExecutivePost.com

Product Details  Product Details

Fractional Interests in Real-Estate

What is it Really Worth?

Staff Writers

If real-estate constitutes a large portion of your estate, as a mature physician, you should be familiar with how fractional interests are valued. This may be especially true during the current sub-prime mortgage debacle in this country.

It’s all About Control and Marketability

Fractional interests are generally subject to two general categories of valuation adjustments: [1] lack of control and [2] lack of marketability.

Lack of Control Discounts

Typically, appraisers first determine the value of the underlying real-estate asset as a single interest, applying one or a combination of approaches, including (1) the income approach, (2) the replacement cost approach, or (3) the comparable sales approach.

Determining Factors

In analyzing a fractional ownership interest, the appraiser needs to understand what investment risk and return factors change as the physician investor moves from fee-simple ownership to a fractional interest.

And, when the fractional interest is in the form of a partnership or other unincorporated business format, additional analysis will be necessary since these organizational forms are based upon contractual agreements among the investing parties, and upon state statutes that apply to each type.

It is usually somewhat difficult to obtain meaningful valuation data for fractional interests, and the total discounts realized are usually not separable into lack of control and lack of marketability factors. Numerous studies have been conducted by reputable valuation firms; with often ambiguous results.

Probably the most reliable data in determining lack of control discounts are those derived from the sale of minority blocks of stock of a real-estate corporation and those for publicly traded REITs.

Lack of Marketability Discounts

With respect to lack of marketability discounts, the best source appears to be sales of restricted stock, which show larger discounts for OTC stocks versus NYSE or ASE securities. These restricted stock studies cover a span from the late 1960s through today and traditionally indicated an average price discount of 35% until a few years ago. Today of course, this discount has increased with recent events.

Additional evidence comes from studies of IPOs by comparing the IPO stock price with the price at which the company’s stock traded in private transactions prior to the IPO. These studies indicate lack of marketability discounts of 40% to 50%, or more, in some cases today.

Assessment

Data from past studies provided appraisers, and physician-investors, with a solid arsenal of analytical weapons and data to draw from when a fractional ownership interest was to be appraised. Again, the situation has drastically changed in 2008, and into the near-future, at least.

Conclusion

Do you own any other fractional investments; like plans or boats? In today’s environment, how do you value fractional interests in real estate? Please comment and opine; the more experiential the better.

Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

Subscribe Now: Did you like this Executive-Post, or find it helpful, interesting and informative? Want to get the latest E-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Copyright 2008 iMBA Inc: All rights reserved, USA, unless otherwise noted. Use is restricted to Executive-Post subscribers only. No redistribution is allowed. To avoid violation of iMBA Inc copyright restrictions and redistribution policy, please register for your own free Executive-Post membership. Detailed information and registration links are available at:

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Referrals: Thank you in advance for your electronic referrals to the Executive-Post.

%d bloggers like this: