5 Things You Should Know About Possession-Linked Payment (PLP) Plan

Posted on October 21, 2020 by schatzi

The real estate sector is slowly saturating, and developers are coming up with attractive offers to convince customers to invest in their projects. Until recently, the most commonly used method of payment was Construction-Linked Payment (CLP). But because it has been biased towards the developers, many buyers have been opting for the Possession-Linked Payment (PLP) plan. Let’s go over the five things you should know before opting for this type of payment plan.

PLP Burdens the Developer, Not the Buyer

As per the PLP scheme, the developer bears a greater percentage of financial risk. Make sure that the developer has sufficient funds to complete the project without any hiccups. You should also check that the builder has got the necessary approvals from the local authorities. If the builder begins the development without the proper approvals, chances are, you might lose some of your money or get a delayed payment.

The Difference Between CLP and PLP

The overall investment of the property is similar under both, the CLP and PLP schemes. If there is a price difference between both the plans, the developer or builder incorporates the remaining funding cost in your PLP plan. If you are faced with such a situation, make sure you decline the offer. Such developers usually size up a premium of 10-15% above the regular rates while proposing a PLP scheme.

Just Another 80:20 Scheme?

Some of you who are unaware of the CLP or PLP plans, might assume they are the government-banned 80:20 scheme, but with different credentials. However, that is not the case. In the CLP plan, the initial cost is made from your own pocket, whereas the bank pays the remaining balance directly to the developer or builder. Under a PLP plan, the bank doesn’t play any role, and there is direct financial communication between the builder and you.

Always Read the Document Before Investing

As a buyer, it is essential for you to read the offer document thoroughly before investing. If you do not understand some of the verbiage in the document, make sure you get it clarified by an expert, as such a neglect can lead you to losing a lot of money. Also, if the builder turns out to be a defaulter in the future, there are chances that you may lose your initial advance of 20-25%.

Always Opt for the Pure PLP plan

As developers have an unquenchable thirst for money, they will try to convince you to opt for the CPL scheme. Here, you will have to take a bank loan, and the developer will pay the required amount till you are ready for possession of your property. However, such agreements are risky as the developer may not remunerate the interest. And if you do default on your loan from the bank, the accountability is wholly yours. A pure PLP plan means that there should be only two payments made from your side – one during the time of booking and the other after possession. This will protect you from getting duped, and will allow you to take control of your finances.

Creative Branding Solutions – So Why Do I Need a Logo?

Posted on October 19, 2020 by schatzi

When I think of successful logos I think of the following list of companies. Ahhh, I said logos make me think of companies, not the opposite! That is the secret to why you need a logo as part of your creative branding solutions! To illustrate that point, here are some examples. Let’s play Name That Logo:

1. I say Mickey Mouse…You think Disney.

2. I say Swoosh…You think Nike.

I could go on and on but you get the point I’m sure. Logo’s are an important piece to any creative branding solution. Keep in mind also that a logo does not have to be directly related to the actual business product or service. A local example in my area is a real estate developer who uses an anchor as his company logo. There is a subtle relationship with anchors and homes in that a home is an anchor to family life, security and our basic need for shelter…but…would you really think to use an anchor as a real estate development company logo? This company has and has been successful in incorporating it into a creative branding solution…it’s unique!

What else do you need in a logo? Well, you need to think about colors, there’s a whole psychology behind colors and the use of colors. Did you know that red cars are the most expensive to insure…true story! Red draws attention and red cars draw attention and subsequently cause more distractions which translates to more accidents meaning red car owners of the world pay higher insurance premiums because people smash into them more often then any other color car….bummer for them.

Question: How many real estate for sale signs do you see that are all red, partially red or a derivative of red (maroon, crimson, etc)? Many! Red draws your eyes to the sign and ideally the house. So you need to consider colors in your logo branding.

You see, it takes a little more than just doing a clip art search on the web to come up with a logo. It’s a big part of your branding solution and it’s something I suggest you do with a team of people so you maximize the benefits of a great logo. Most importantly, be creative and allow a team of people to help you with your logo design.

3 Of The Top 9 Reasons That The Real Estate Bubble Is Bursting

Posted on October 17, 2020 by schatzi

If you own real estate or are thinking of buying real estate then you better pay attention, because this could be the most important message you receive this year regarding real estate and your financial future.

The last five years have seen explosive growth in the real estate market and as a result many people believe that real estate is the safest investment you can make. Well, that is no longer true. Rapidly increasing real estate prices have caused the real estate market to be at price levels never before seen in history when adjusted for inflation! The growing number of people concerned about the real estate bubble means there are less available real estate buyers. Fewer buyers mean that prices are coming down.

On May 4, 2006, Federal Reserve Board Governor Susan Blies stated that “Housing has really sort of peaked”. This follows on the heels of the new Fed Chairman Ben Bernanke saying that he was concerned that the “softening” of the real estate market would hurt the economy. And former Fed Chairman Alan Greenspan previously described the real estate market as frothy. All of these top financial experts agree that there is already a viable downturn in the market, so clearly there is a need to know the reasons behind this change.

3 of the top 9 reasons that the real estate bubble will burst include:

1. Interest rates are rising – foreclosures are up 72%!

2. First time homebuyers are priced out of the market – the real estate market is a pyramid and the base is crumbling

3. The psychology of the market has changed so that now people are afraid of the bubble bursting – the mania over real estate is over!

The first reason that the real estate bubble is bursting is rising interest rates. Under Alan Greenspan, interest rates were at historic lows from June 2003 to June 2004. These low interest rates allowed people to buy homes that were more expensive then what they could normally afford but at the same monthly cost, essentially creating “free money”. However, the time of low interest rates has ended as interest rates have been rising and will continue to rise further. Interest rates must rise to combat inflation, partly due to high gasoline and food costs. Higher interest rates make owning a home more expensive, thus driving existing home values down.

Higher interest rates are also affecting people who bought adjustable mortgages (ARMs). Adjustable mortgages have very low interest rates and low monthly payments for the first two to three years but afterwards the low interest rate disappears and the monthly mortgage payment jumps dramatically. As a result of adjustable mortgage rate resets, home foreclosures for the 1st quarter of 2006 are up 72% over the 1st quarter of 2005.

The foreclosure situation will only worsen as interest rates continue to rise and more adjustable mortgage payments are adjusted to a higher interest rate and higher mortgage payment. Moody’s stated that 25% of all outstanding mortgages are coming up for interest rate resets during 2006 and 2007. That is $2 trillion of U.S. mortgage debt! When the payments increase, it will be quite a hit to the pocketbook. A study done by one of the country’s largest title insurers concluded that 1.4 million households will face a payment jump of 50% or more once the introductory payment period is over.

The second reason that the real estate bubble is bursting is that new homebuyers are no longer able to buy homes due to high prices and higher interest rates. The real estate market is basically a pyramid scheme and as long as the number of buyers is growing everything is fine. As homes are bought by first time home buyers at the bottom of the pyramid, the new money for that $100,000.00 home goes all the way up the pyramid to the seller and buyer of a $1,000,000.00 home as people sell one home and buy a more expensive home. This double-edged sword of high real estate prices and higher interest rates has priced many new buyers out of the market, and now we are starting to feel the effects on the overall real estate market. Sales are slowing and inventories of homes available for sale are rising quickly. The latest report on the housing market showed new home sales fell 10.5% for February 2006. This is the largest one-month drop in nine years.

The third reason that the real estate bubble is bursting is that the psychology of the real estate market has changed. For the last five years the real estate market has risen dramatically and if you bought real estate you more than likely made money. This positive return for so many investors fueled the market higher as more people saw this and decided to also invest in real estate before they ‘missed out’.

The psychology of any bubble market, whether we are talking about the stock market or the real estate market is known as ‘herd mentality’, where everyone follows the herd. This herd mentality is at the heart of any bubble and it has happened numerous times in the past including during the US stock market bubble of the late 1990’s, the Japanese real estate bubble of the 1980’s, and even as far back as the US railroad bubble of the 1870’s. The herd mentality had completely taken over the real estate market until recently.

The bubble continues to rise as long as there is a “greater fool” to buy at a higher price. As there are less and less “greater fools” available or willing to buy homes, the mania disappears. When the hysteria passes, the excessive inventory that was built during the boom time causes prices to plummet. This is true for all three of the historical bubbles mentioned above and many other historical examples. Also of importance to note is that when all three of these historical bubbles burst the US was thrown into recession.

With the changing in mindset related to the real estate market, investors and speculators are getting scared that they will be left holding real estate that will lose money. As a result, not only are they buying less real estate, but they are simultaneously selling their investment properties as well. This is producing huge numbers of homes available for sale on the market at the same time that record new home construction floods the market. These two increasing supply forces, the increasing supply of existing homes for sale coupled with the increasing supply of new homes for sale will further exacerbate the problem and drive all real estate values down.

A recent survey showed that 7 out of 10 people think the real estate bubble will burst before April 2007. This change in the market psychology from ‘must own real estate at any cost’ to a healthy concern that real estate is overpriced is causing the end of the real estate market boom.

The aftershock of the bubble bursting will be enormous and it will affect the global economy tremendously. Billionaire investor George Soros has said that in 2007 the US will be in recession and I agree with him. I think we will be in a recession because as the real estate bubble bursts, jobs will be lost, Americans will no longer be able to cash out money from their homes, and the entire economy will slow down dramatically thus leading to recession.

In conclusion, the three reasons the real estate bubble is bursting are higher interest rates; first-time buyers being priced out of the market; and the psychology about the real estate market is changing. The recently published eBook “How To Prosper In The Changing Real Estate Market. Protect Yourself From The Bubble Now!” discusses these items in more detail.