Making Commercial Moves

July 15, 2007

Jim on Black in Business asked “What are we known for?” For me, it seems that we’re just known for our athletic ability. In a follow up post, he suggested that “being great” should be our business niche. I think this is a worthwhile goal to have in general, but it doesn’t really help us begin to achieve wealth as a whole. As I’ve said before, the main thing holding us back is the unwillingness to work together. Once we get past that, we can all achieve so much more than what we have now.

The Black “business niche” has become an interesting idea to me. Last week, I met up with some young black professionals and we were talking about how we all need to come together. In our region, there is no reason that with our resources, we can’t have a Sweet Auburn here. But I think I have a business niche for Blacks, commercial real estate. The article about Indian-Americans controlling 43% of the hotel industry is what got me thinking about the commercial market.

Think about it, a lot of black businesses own their own barbershops, hair salons, restaurants, doctor/dentist offices, etc. These are all commercial properties. To get started, if you already own your building, you just need to start another company and transfer ownership of the building to that company. At that point, you can pay rent to your new company. In the future, this could be useful if you decided to sell your business, but still receive rent payments through your commercial real estate company.

Now, imagine if the barbershop and hair salon owners got together and bought a larger building and used a third company to own the building that they both paid rent to. You could take this income and buy other buildings. Sell those, and buy larger buildings. Eventually, you could own some of the largest commercial properties in your city or region. This would work with doctors, dentists, professional services and other businesses.

This is just an idea, and I’m sure its a tad bit more complicated than what I described. However, this is what the Indian-Americans did with the hotel industry. They started with the corner hotel that had twenty rooms and traded up. They then brought in family and friends and pooled more money and bought larger properties. Forty years later, they own 43% of the market. If they could do it, why can’t we? Why can’t we own 35% of the entire commercial real estate market? They aren’t making any more land, and real estate is an appreciating asset. All it takes is us coming together and combining our resources. This is a plan I will be seriously looking into within the next two years. Wanna join me?

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Sub Prime Lending = Foreclosure

July 12, 2007

I’m starting to see a lot more articles like this:

More than a quarter million black and Hispanic families are expected to lose their homes in the next few years due toforeclosure. For many, the financial trouble will be traceable to a mortgage they should never have been given. MarketWatch

I talked about people living beyond their means in an earlier post. It seems that this sub prime lending issue is a lot bigger than I thought. To put 250,000 families in perspective, that’s more than the entire population of Raleigh, North Carolina.

Home ownership is a key ingredient to wealth. Buying a home that you can’t afford really throws a kink into achieving said wealth. From what I’ve been reading, a lot of these people have gone through mortgage brokers to get a home loan. Now, I’m not saying that mortgage brokers are shady, but I am saying that they aren’t the only people that offer a mortgage. In my experience, mortgage brokers have higher fees and higher interest rates. They offer the lower rate to bring in the customer and then slap on the fees and fine print that makes the loan a disaster waiting to happen.

People that do not know more than how to spell “mortgage” should not be getting an adjustable rate mortgage. It’s a financial tool that should be used by people with at least basic financial knowledge. When I hear about people that didn’t know that their mortgage could go up 30% in three years, I know that they had absolutely no idea of what they were getting into.

Unfortunately, it seems that these loans were the only way minorities could see themselves achieving homeownership. The sad thing is, if they got just a little education about buying a home and how mortgages worked, they could have saved themselves a lot of heartache. It doesn’t help that minorities are targeted for these “good deals.” Like momma said, “If it sounds too good to be true…” Also, if a sub prime lender is the only one that will give you a loan, then you really shouldn’t be getting the loan.

Personally, I used to have an adjustable rate mortgage, so I understand their appeal. The difference is, I did my research and switched back to a fixed mortgage once the rates had dropped back to the level I was waiting for. Also, my home had enough equity to where I could get a loan for up to 80% and still live comfortably. My parents gave me this rule when buying a home or car:

A home should cost no more that three times your salary

A car should cost no more than twice your salary

In practice, I haven’t gone close to that high on either. If only those 250,000 families had spoken to my parents first…


They Got Theirs, We Need To Get Ours

April 19, 2007

Why is it that immigrants have figured out the path to wealth in this country but we haven’t? USA Today had an article about Indian-Americans controlling 43% of the 47,000 hotels and motels in the country. See that….43%…over 20,000 hotels and motels. And Indian-Americans aren’t the largest minority in this country, but yet they control almost half of an entire industry. Latin-Americans seem to be making headway in the home improvement industry. Black Americans? We just want to get a high paying job or play sports. However, as we move up the company ladder and hit the proverbial glass ceiling, we’re moving out to do our own thing.

Minorities are starting their own business at a faster and faster rate. I see this as a very good sign. Let’s face it, corporate American is still White America. We can’t escape racism, but we can step around it. Immigrants have figured that out and they won’t play the corporate game. They come here and start their own businesses. Black America needs to do the same. We might as well give up the hope of ever getting that 40 acres and a mule. Heck, the only thing the government is going to give us is a tax refund and welfare.

Back to the article, as I read it, a few things struck me. Indian-Americans control over 20,000 hotels. That means, they operate a business that they can literally live in. Also, buying a hotel means that they are also purchasing real estate. Have you noticed that hotels control some of the most desired real estate in the country? So that means that they have profit generating assets that appreciate over time. I wonder what the combined value of 20,000 hotels plus the land is? Almost sounds like they bought 40 acres and a mule huh. And Indian-Americans have accomplished this in less that 40 years.

Me thinks we have some work to do. Lets face it, whining about how unfair the world is not going to get us where we want to go. Blacks need to come together and help ourselves. Indian-Americans helped each other and that’s how they now control 43% of the hotel industry. The Latino community helps each other and they become stronger. The Black community pulls itself down. We’ve got to start taking responsibility for our own community. Nobody “wants” to live in the ghetto. We all want the nice house in the nice neighborhood.

Together, we can all find success. Its very hard if I just get my own and let the rest struggle. If I help the next man, we can grow together. We’ve got to get out of this selfish attitude that we have. This is why, on the Tom Joyner show, Tavis Smiley said he wasn’t concerned about Don Imus. He’s stopped trying to fix the “other” people. He’s just concentrating on getting “us” straight. Steve Harvey felt the same way. We have to uplift ourselves, because it’ll be a cold day in h*** before someone else does.


Bad Credit = No Insurance

January 12, 2007

I ran across this article that talked about insurers using credit scores for premiums. Now, I vaguely remember my previous car insurer running a credit check on me when I got car insurance. However, it never really occurred to me that bad credit could raise my premiums.

 

Can you imagine getting that new Expedition and being denied insurance because of your credit score? As if a $500 car payment wasn’t bad enough, now you have to worry about higher premiums because of a lower credit score? Oh, and in case you haven’t heard, some electric companies are starting to report to credit bureaus also. Now I don’t know about you, but its not unusual for me to be late with a utility bill or two. It’s not that I don’t have the money in my account, I just forget to pay the bill. Better believe that I’m going stay on top of this now.

 

Personally, I think all of this is really hurting minorities. Historically, Blacks and Hispanics have lower credit scores. The fact that utility companies are starting to report your paying habits to credit bureaus will only make it worse. Today is definitely the day to start getting your finances in order. There is plenty of free information out there to help you get started. A couple of sites that I like are Black Enterprise and I Will Teach You To Be Rich. Also, check out your public library. In today’s world, reading and finances are fundamental.


No Frontin’ Allowed

January 7, 2007

My wife didn’t believe me until I showed her one when we were out one day. A Mercedes 100 series. That is total comedy to me. If you have a Mercedes 100 series or even a BMW 125, I have one question for you. Why? Is having a foreign luxury car so important to your broke behind that you’d buy the lowest model available, one that has to be special ordered? Let me let you in on a little secret. Those friends that “ooohhh” and “aaahhh” at your 100 series aren’t green with envy. They’re red from laughter.

 

All that 100 series says is, “I couldn’t afford the 200 or 300 series, so I had the dealer special order the cheapest one I could afford.” The funny thing is, I never thought someone would actually want a 100 series. But lo and behold, I overhead a co-worker brag about how she was going to get her a new 100 series Mercedes. This is the same co-worker that had to declare bankruptcy about 10 years ago. I guess playing “high post” is important to some people.


How do they do it?

January 7, 2007

Today was a real beautiful day. So after visiting some of my family, my wife and I decided to go look at homes. Now I don’t know about you, but we like to drive around and look at homes in the nicer neighborhoods and dream about “one day”.

 

There is one neighborhood in particular that we like that is about a 15 minute drive from our house. These homes are in the 700K – 2 million range and they are niiiiiiiiiiiiiice. As we drove around, I noticed the kids playing and the nice cars. I also saw some of the parents. What struck me was, “hey, they’re around our age”, mid to late 30s. So now I’m wondering, what is it that they do for a living to be able to afford a house like that?

 

This area isn’t exactly known for a lot of high salaries, and since these were younger people, they couldn’t be retiring here could they? Now don’t get me wrong, there are a lot of doctors, lawyers, and other professionals in this region. But there are also a lot of high priced neighborhoods. The average wage in this region is around $30,000 while the average home is around $300,000. It kind of makes me wonder if they’re living way beyond their means. I know how much income our household brings in, and we’re just comfortable. Actually, if we had no credit card debt, we’d be sitting pretty. But I can’t fathom how someone can afford a $4000+ mortgage, credit card bills, car payments, and child raising.

 

I know most people in general aren’t well off financially, but maybe I’m missing something. Maybe all these people have their finances in order. Or maybe grandpa and grandma are paying for their grand-kids to go to private school and chipping in on living expenses. From what I hear from co-workers about their finances, I’m betting on the latter in a lot of cases.