able-capital

Is Evicting That Problem Tenant the Wrong Call? Here’s How to Tell

nate@ohkie.com (Nate Mandel) — Wed, 26 Oct 2022 16:12:26 GMT

By: Charlie N. Jones
January 2022

Evicting a tenant is never a happy experience for landlords. Evictions are the last resort to get a delinquent tenant out of your property. Apart from being a costly process, having to evict someone takes up your precious time and resources. Of course, sometimes you have no choice other than to start eviction proceedings. But are evictions always necessary? And what exactly are the cons of eviction? There are some cases when evicting a tenant can actually be a bad idea. Considering the time an eviction process takes and the costs involved, it makes sense to look for alternatives to evicting someone. For example, you may be able to negotiate with some tenants to stay in the rental unit and catch up on their late payments.

This article examines why it’s sometimes best to look for alternatives to evicting a tenant. But first, let’s look at the actual cost of evicting someone. Knowing how much evictions cost can be a powerful motivator to explore other ways of solving delinquent-rent problems.

The cost of evicting a tenant

The true cost of evicting a tenant is more than just a financial loss. However, the financial cost can be severe. According to some estimates, the total bill for getting the courts to serve an eviction notice can be upward of $4,000. Depending on the time it takes and the damage to your rental property, the cost can be even more.

But there are other factors involved in evicting a tenant. Think about the time it takes—after all, time is money. From the time you actually file an eviction action in your local court to the time you obtain the necessary court order can take up to three months. And even if you do file for eviction, there is no guarantee that the judge will rule in your favor.

Of course, it’s difficult to put a price on the toll that evictions take on your stress level.

Unfortunately, when a tenant is in breach of the lease agreement, most landlords have to start legal proceedings sooner or later. If they are months in rent arrears, have trashed the place, constantly disturb neighbors or cause the police to be called, evicting them is undoubtedly an excellent idea.

Let’s look at some alternatives to evictions and when it’s best to negotiate with your tenants.

Good tenants can fall on hard times

Sometimes it doesn’t make sense to evict a good tenant if they go through a rough patch. Maybe they lost their job or faced huge unexpected medical bills and can pay a couple of months’ rent. Of course, non-payment of rent is a breach of their lease. And technically, you have grounds to evict them. But is it worth evicting a good tenant?

Suppose you have a tenant who takes care of the unit and has historically paid rent in full and on time during the tenancy. And say they get laid off and can’t pay rent, but are actively looking for a new job. In that case, you could also work out a flexible rent payment schedule until they get on their feet again. Then you can negotiate a payment plan for them to pay the past-due rent in full.

This may mean taking a financial hit in the short term. But considering the cost of an eviction, filling a vacancy, and screening prospective tenants, it may be better to keep a good tenant in the unit rather than evicting them.

Remember to put any payment plan or rent payment schedule in writing and sign the document along with the tenant.

The process can be costly

Sometimes it makes sense to hold off starting the eviction process if it will be too costly. In most cases, landlords must pay for the legal fees involved with evicting a tenant. Additionally, there can be an expensive clean-up after removing someone from a rental unit. Even though you can sue for damages, there is no guarantee of success.

What can you do to avoid evicting someone? One solution is a “cash for keys” arrangement. Why not offer to pay the tenant to move out? If a tenant is in financial difficulty, the prospect of a cash lump sum to look for a new place can sound tempting. It is also in their best interest to avoid an eviction. After all, tenants with an eviction history find it challenging to find a new landlord.

Let’s say that you calculate that an eviction will cost over $4,000. Why not offer the tenant $1,000 to move out? Although it seems paradoxical to give money to someone who owes you money, it may be a better idea than a costly eviction

Evictions can land you in legal hot water

It is always a bad idea to evict a tenant if you don’t have any legal grounds. Generally, tenants can stay in a rental for as long as the lease allows them—assuming, of course, that they follow the terms of the agreement as well as applicable laws. So, before you start an eviction process, it is crucial to ensure that the law is on your side.

Here are a few scenarios when evicting a tenant is a bad idea:

Retaliatory eviction

Let’s say the tenant has complained to the housing authority about you, e.g., about safety issues or maintenance problems—valid, or not. It is not never advisable to evict someone just because you didn’t like what they did. If you file an eviction action within six months after a tenant makes a formal complaint, a judge may view the eviction as retaliatory (and even order you to pay something, rather than the tenant).

Discriminatory eviction

You can never evict a person based on their race, religion, family status, sex, color, national origin, or sexual preference. For example, you cannot evict a couple because you find out the wife is pregnant, and you don’t want a crying baby disturbing the neighbors.

Withholding rent

Tenants can legally withhold rent or a part of it until you resolve a health or safety issue in the building or rental unit. In this case, you cannot evict them for nonpayment of rent.

Accepting partial rent payments

If you take a partial payment on late rent, then it could be a bad idea to evict them. This is because by accepting a partial payment, you may have given up your right to evict that tenant. If you have already filed for eviction, no matter how tempting it may be, do not accept a partial rent payment; otherwise, you may have to restart the entire eviction process.

These are just some situations when it may be a bad idea to evict a tenant. You may be able to work out a payment plan to keep good, responsible tenants in your rental unit. Offering a “keys for cash” deal often helps avoid the stress and cost of filing an eviction. However, if you decide to pursue an eviction, always check the law to ensure you have a legal basis for evicting a delinquent tenant.

Quit Your Day Job and Find Financial Freedom - Here’s How to Become a Real Estate Investor (Full-Time!)

nate@ohkie.com (Nate Mandel) — Wed, 26 Oct 2022 15:58:36 GMT

By: Charlie N. Jones
Feb 2022

Today, many people I know are at a crossroads regarding whether to quit their nine to five jobs or stay put because of the perceived job security it offers them. A huge percentage of this population are African Americans who wish to attain financial freedom by making the jump into real estate investing. Why? Because real estate has some tremendous superpowers—not the least of which is its ability to help you find financial freedom and leave your terrible day job. Admittedly, it’s harder for African Americans to make a move into full time self- employment. Perhaps it just comes down to fear and insecurity of the unknown 2Despite the doubt, there’s many African American success stories of people who made the leap. Even me! (ahem).

So, If I, being a part of the minority and underprivileged African American community, could do it, so can you! Besides, wouldn’t you want to stop living from paycheck to paycheck and be financially free? That’s the life that real estate investing can give you! Do you want to travel the world? Dedicate more time to volunteer efforts? Focus on raising your kids? A thriving real estate business providing you with passive income can be the key.

But there’s a catch: To achieve true financial independence with real estate, you have to really love doing it! Just because you’re ditching the nine to five pay check doesn’t mean real estate investors don’t work. In many ways, it’s still a full- time job. You’ll just have more freedom to arrange their lives in the way that best suits them.

Start With the Basic Elements of Financial Freedom

Before digging into how you should build your net worth, let’s start with the basics: Getting your finances in order. There is absolutely no way you will attain financial freedom if you are stuck with huge debts for instance. The goal is to always be debt-free.

Debt will only hold you back from accumulating wealth faster. This is because you’re using income earned to pay debt instead of invest. This is money that you would have otherwise channeled into real estate investments. So, the faster you can pay debt off the more money you will have to invest. Here’s what to look at before you start pursuing real estate.

1) Credit Cards

Credit cards aren’t inherently bad—in fact, utilizing credit card rewards and the purchase protections offered by said cards can be a smart financial strategy! However, many Americans can’t use a credit card without overspending. This kind of debt stops you from building wealth and engaging in real estate investments. Make it a point to pay off more than the minimum amount of your credit card each month. And that’s not enough! You need to pay the credit card debt on time to build a good credit rating and save you from high interest fees.

If you’re dealing with a large credit card balance, leverage the consolidation strategy. Here, you can transfer balances to a credit card that offers a promotional 0 percent Annual Percentage Rate (APR). This will effectively buy you time to pay off the balance interest-free.

So, if you’re prone to impulse buying, consider either getting rid of your cards or pursuing financial counseling. Over time, you can change your mindset toward credit, and eventually can use these cards as intended: As excellent sources of rewards.

2) Other Debt: Mortgage and Student Loans

Apart from credit card debt, mortgage loans and student loans can also hamper your efforts of acquiring financial freedom. Though you don’t necessarily need to pay these off before beginning your real estate investment career, it is important to understand exactly how much debt you have. This will be important for lenders, too: Before lending, they’ll calculate your debt-to-income ratio. Many consider 36% the highest allowable ratio, including a new mortgage, if you need to take one out. Wrangle your debt before investing to ensure your best chances of landing a loan.

Dealing with Debt

Additionally, the personal finance experts advise very strongly against adding more debt onto existing debt. They also say to go slow on accumulating credit cards debt. In fact, do not apply for new loans or new credit cards! Instead, use a debit card for your purchases so that you only spend the money you have in the bank.

Another strategy I can recommend to you my fellow African American people is putting a lot of focus on paying off a single account at a time. The debt with the highest interest rate should be handled first. If you manage to pay this debt faster, you will pay fewer interest charges. You will then have more money to offset your remaining debts.

Have you ever heard of the snowball technique in paying off debt? It requires that you select the debt with the highest interest rate and paying it off first, while making the minimum required payments on other debts. When you finally pay it off, you can pay off another debt with money saved from paying the first debt and so on. The virtuous cycle will help you to continuously free up more money to make bigger monthly payments to the bigger debts. As a result, your debts will be paid off quicker than if you didn’t use this strategy.

To pay off the debts faster, you can consider cutting down on some luxuries until you are debt free. Some of these habits may seem hard to drop especially to us as African Americans. Yes, cutting down on your cable TV subscriptions and other subscriptions may not be too much fun. However, for every sacrifice there is a reward which is the living debt free! I too had to cut down on many ‘luxuries’ like eating out because the thought of being financially free was much more alluring.

Build Your Emergency Funds

Do you have money set aside in case of an emergency? What would happen if you lost your job—before fully executing your wealth-building strategies, of course—or you have a significant unexpected expense, like a medical bill? Emergency funds will allow you to cover all the unexpected expenses without relying on high-interest credit cards or a loan.(no more debt, remember?)

Start with a small emergency fund (many experts say $1,000 is a good starting point), then build it over time. Ultimately, you should be able to cover six months of living expenses without your primary income. One best practice you can rely on here is to create a high-yield savings account, exclusively for your emergency fund. Keeping the money in this savings account will not only offer you quick access but also pay a competitive yield.

Should You Quit Your Job to Pursue Real Estate?

Before we dive into the nitty-gritty of financial freedom through real estate, let’s discuss whether quitting your job is truly the best solution for you.

Ideally, you should find what you love to do in life more than anything else and do that for a career. If that means teaching high school math, teach high school math. If that means traveling the world, then find a job that travels the world.

So, what are some more factors to consider that can help you navigate this dilemma more easily?

Is Having Flexible Work Hours Important to You?

Working at a typical 9 to 5 job means you have very little time to do anything else. However, as I have experienced first-hand, real estate investing will give you much-needed flexibility. You can work your back off during the peak season and then take a nice, relaxing vacation afterward with your family and loved ones. Think about all your kids' birthdays that you will no longer miss, all the anniversaries that you will get to spend with your spouse, all because of more flexible work hours.

Do You Desire Income Stability?

If you require income stability, then your job represents the better alternative. It does not matter whether you are paid weekly or monthly, the fact is you know with all certainty that you will get paid. With a real estate investing gig, however, sales are not guaranteed. Many defining factors determine whether a sale is closed or not. Your client may opt not to purchase the properties you had talked about. They may also fail to get approved with a mortgage and thus make the deal go south. In addition, there is a low season, where business moves slow. If you are willing to weather the highs and lows that come with real estate investing, make the jump! However, if a stable and assured income is your preferred alternative, do not quit your day job, just yet.

Do You Love Real Estate?

Full-time real estate investors is still work—in fact, the job often feels more like a lifestyle. While there are some truly passive investments, such as REITs (or real estate investment trusts), full-time investing usually involves work. You’ll need to:

Talk with troubled homeowners
Send out massive amounts of direct mail
Network with established real estate investors.

Does that sound like something you’d hate? Everyone can, and should, create a real estate portfolio as part of their strategy for retirement and wealth building—and many current millionaires have followed that exact path. But full-time real estate is a full-time commitment.

Ready to dive into real estate investing as a full-time career? Here’s your path to financial freedom.

Educate Yourself

Before immersing yourself in the world of real estate investing, there is value in knowing a thing or two about this field. The basics will help you to get started on the right foot by:

Demystifying Real Estate Investing and Lessening Your Fear

Learning more about real estate investing will help you feel less intimidated about entering into and conquering the world of real estate investing.

Knowing that ordinary people can succeed in this field too

You will know that you don’t need to possess any special talent or large amounts of cash to succeed in real estate investing.

You can identify experts that can assist you in your investment strategy

You will get the enviable opportunity to assemble a team of experts who have expert knowledge and experience in real estate investing. If you are interested in investing in duplexes, you can learn from experts.

So, Where Do You Obtain All This Education?

You can start by reading books, newspapers, magazines, and online articles on real estate investing. One example of a good resource is the book called Loopholes of Real Estate by Garrett Sutton. It will give you insight into the legal and tax strategies you can use to acquire real estate investments and benefit from them. It also highlights some of the loopholes you can leverage to maximize your income and protect your real estate investments.

Real Estate Investing Strategies

Start by deciding which strategy will be your focus. There are a number of different types of real estate, and each type has unique pros and cons.

Wholesaling

This is the process where you locate amazing deals, put them under contract, and sell that contract to an investor or house flipper—and make a sizable profit doing so. Wholesalers master the most valuable skill for a real estate investor to possess: how to buy right.

Wholesaling works. However, while wholesaling might be fairly “simple”—it’s not easy or quick. It takes hard work, skill, motivation, and certain personality traits (like the ability to negotiate). Consistently finding deals that are worth pursuing can be a time-consuming job.

Pros

1) Fast entry

Getting started in real estate investing by wholesaling is generally easier than starting with other investing strategies. The wholesale process does not require a license, a college degree or learning how to fix up or remodel properties. It also involves fewer expenses and working parts. For these reasons, you are able to hit the ground running.

2) Simple to learn

With little research, you can easily learn the basics of wholesaling real estate including what to consider in deals and what to avoid. And, with proper guidance and knowledge, you can learn how to scale to closing multiple wholesale deals per month.

3) Quick results and returns

Wholesaling real estate provides the advantage of being paid faster. Holding land or engaging in new construction can take years before it pays off. Holding rentals offers cash flow every month while waiting to sell the property for larger returns. Although these are decent ways to venture into real estate investing, they don’t compare to wholesaling. That’s because wholesaling pays in days, sometimes even hours.

4) Location independent

You can literally wholesale real estate deals from anywhere in the world. In most situations, all you need is a laptop and phone to get a wholesale deal completed!

5) Volume potential

There is no limit to the number of properties that you can wholesale. Some wholesalers turn more than ten properties per month. Others wholesale several properties in a week. That’s more than most rehabbers handle.

6) No repairs involved

Wholesalers do not incur the cost of repairing properties because they sell houses that need repair to investors that take the risks and costs of rehabilitating properties and resell them at higher prices.

Cons

1) There are high chances of failing to get a buyer

Here, a wholesaler gets a property under contract which includes a date when the wholesaler should be able to find a buyer to close the deal. A buyer has to purchase the contract from the wholesaler for the wholesaler to get compensation. If the wholesaler gets the property under contract for a price that is considerably too high or seems greedy, buyers will be unwilling or even unable to make a deal.

2) The income from wholesaling can be unpredictable

Wholesaling is not a 9-to-5 job! There is no guaranteed check or salary as is the case in a traditional job. There are other months when you will have zero income coming in.

House Flipping

This can be an exciting and profitable way to earn income. You’ve probably seen flipping TV shows where investors turn a dump into a mansion in three weeks and profit hundreds of thousands of dollars. While this is possible, don’t enter real estate expecting this to happen to you. Make sure you understand both construction and the market before starting a fix and flip business.

Flipping houses is a lot of fun, and fantastic profits can be made. However, some of the most important considerations to make before jumping in head-first to your career as a full-time investor include:

How will you fund your flipping business if you don’t have a job?
How will you make your monthly payments if you don’t have a job?
Is your location conducive to flipping properties?

Pros

1) You can make a quick profit

When done correctly, a real estate flip can offer you attractive profits which you can get in a very short period of time.

2) You can get to learn more about construction

House flipping gives you to different aspects of construction such as repairing, renovating or remodeling a property. In addition, you will get better insight into the costs of materials, plumbing and electrical repairs. Last but not least, you get the invaluable opportunity to know how to budget better for unexpected costs arising from activities like:

Building permits
Delays in delivery of materials
Contractor disputes
3) Understand the local market

You get a good idea of what people are looking for in the area. A modern design may be popular in one part of the country, while a traditional design is a winner in another. This is why you must always do your research and target your renovation to your local market.

4) Increase your network

House flipping allows you to create many new contacts in the industry, including:

Realtors
Attorneys
Contractors
Building inspectors
Insurance brokers and other investors

Cons

1) Big Risk of Loss

The main problem with flipping a house or property is when a flip becomes a flop and you lose money. There are many factors that can contribute to money. These include including:

Unanticipated Expenses: These includes costs from building permits and contractor delays to renovations and materials you had not budgeted for. These expenses quickly add up and eat into any potential profit.
Tax Increases: Once you have completed renovations on the property, the city may increase your property taxes. This will affect you if you have difficulty finding a buyer and have to pay the taxes yourself.
Holding Costs
The longer you own the property, the more money you lose.

2) Stressful Work

Being a house flipper comes with its challenges. The main ones are:

Finding the right property
The costs involved
Dealing with contractors
Trying to meet your deadlines
Finding a potential buyer

Buy And Hold Cash Flow Investing

Buy and hold cash flow investing produces a stable of cash-flowing properties. That can add up quickly to provide significant income. This can be a great option for long-term investing, but keep in mind that you’ll need significant monetary reserves when things go wrong.

Educating yourself goes way beyond simply picking your favorite real estate strategy.

Learn about your local market, too. Are jobs growing? Incomes? What does the population look like? Network with local investors and real estate agents—and make sure to visit homes for sale in your area before you start bidding. Knowing what your market offers in different price ranges is essential knowledge for all real estate investors, regardless of your strategy.

Pros

1) Ongoing Income

Owning rental property provides you with regular income, no matter where you are or what you are doing. What's more, buying and holding real estate is a known recipe for amassing great wealth. A lot of "old money" in the U.S. and abroad was accumulated through land ownership. Despite periods of decreasing prices, land values have almost always rebounded in the long run because there is a limited supply of land.

2) Increase in Property Values

The longer you hold your investment property, the more likely you are to benefit from inflation. That will boost the property's value while the amount you borrowed for the mortgage goes down as you pay it off. Suppose you were able to purchase during a buyer's market and sell during a seller's market. Then, there's also real potential for a significant return on your investment.

3) Tax advantages

Owning a rental property has tax advantages not available to flippers. Rental property is taxed as investment income, with lower tax rates. You can also write off expenses, including repairs, maintenance or upkeep, paying a property manager, and driving to or from your property. Furthermore, you'll pay taxes at the long-term capital gains rate should you decide to sell after owning the property for more than a year.

Cons

1) Vacancy Costs

Being unable to find tenants is one of the risks of owning rental property. That is true whether you do it yourself or hire a management company to do it for you. If your property sits empty for months or years, you are responsible for covering the mortgage during that period. Before investing in a buy-and-hold property, you'll want to make sure your budget will cover one to three months of vacancy per year.

2) Management and Legal Issues

Long-term real estate ownership is a management-intensive endeavor that is outside the skill set of many investors. Some investors, especially first-time rental property owners, are ill-prepared or ill-equipped to deal with the responsibilities and legal issues that come with being a landlord. The process of finding quality tenants and meeting their needs can be a stressful and time-intensive undertaking. However, successful property management is necessary to ensure ongoing cash flows from one's investment.

How to Start A Real Estate Business

1. Create A Customized Business Plan

A business plan works like a blueprint created by an architect.

Keep in mind: This plan is doomed to be flawed, despite your best preparation and education. Expect to change your plan as your understanding of the local market—and your abilities and interests—change.

Here’s what your business plan needs to address:

The purpose and the model for your business?
How to raise capital for operations and acquisitions?
Who is your target end-user is and what do they want? Where do they live?
How do you find prospective deals and convert them to purchases?
What is a good deal? What objective deal criteria will I stick to?

Too many beginners look for answers before they even ask the right questions. Look at the major cornerstones of a business plan as questions. This will naturally lead you to try to answer them which will build the plan of the business. When you lack good answers, go back to your educational resources or local professionals.

2. Think About Your Finances, Too

If you’re ditching your job for real estate, you’ll need to plan how you will meet your living expenses with your finances. Quitting your job is a big deal—with big financial consequences. Entering the world of self-employment is a risky venture. Most startup companies fail, largely because they run out of money.

If you are looking to quit your job you are going to need to make some sacrifices—starting with your living expenses.

Do you really need cable TV?
How about that car payment?
Gym membership?
Starbucks?

If you are serious about making real estate investing a full-time gig, it’s time to cut your expenses. Decide right now what is essential and what is luxury. You can always add the luxury stuff back in later.

In addition to cutting your expenses, you’ll also need cash. Having a large financial cushion is imperative. The amount you’ll need is largely dependent on your personal situation, but try to have at least six months of savings before quitting your job.

One additional point to make here: a great sacrifice to make is your home itself. Buying a small multifamily property, living in one unit, and renting the other unit out (a strategy called house hacking) is a great way to live cheap—or free—and learn the real estate investing business.

3. Have Money Sources

Without money sources, the rest of your team members won’t matter. You can’t fix a fix and flip unless you can buy a fix and flip.

Build banking relationships with lenders who offer a home equity line of credit (HELOC), and work with private lenders to fund the balance of your capital needs. Unfortunately, finding a private lender is not easy or fast. It can take a long time of “slow dances” with potential lenders before one or more will commit their money.

You also want to partner with someone you trust, with long-term goals that align with yours. Long-term partnerships are essential to real estate investing.

4. Build Your Team and Network

Identifying and recruiting excellent team members is key to the success of your real estate investment strategy. Here is a list of my most important members, why they’re important, and how I plan to recruit the right people for this role.
These individuals include:

General contractor/project manager

Unless you’re skilled in construction, you’ll need a contractor or project manager who can analyze repair costs, avoid large problems, and manage a (rehab) project from start to finish.

Here are some qualities to look for in a contractor:

Competency: Your contractor must be skilled in the world of construction and have expert knowledge in establishing the costs and best practices for all of the trades you will be hiring e.g. plumbers, electricians, etc. They also need to have all of the proper licenses and liability insurance
Organizational skills: Can this person handle many moving parts without dropping the ball? Maybe they're old school with a planner and paper or digital. Whatever the case, look for contractor who has a strong system of working and being able to balance everything they have to do.
Honesty: Can you trust them? Do you pick up on dishonesty, even in small things? Keep a look out for these kinds of things and don’t be afraid to change your contractor until you find an honest one.
Low overhead: With a contractor you’ll not be paying for big trucks, extra office space, or fancy staff to feed your contractor’s ego. You want lean, cut-to-the-bone overhead, so hire a reasonably priced contractor.
Fun to be around: You’ll be talking to this person a lot. Will you have fun? Or will you dread having to talk with him?

Broker and the expert listing agent

You won’t make money without buying and selling your inventory. So, you need to know everything possible about how to move houses as fast as possible and for top price.

Some real estate investors choose to become licensed real estate agents—and there’s nothing wrong with that. But if that’s not an avenue you’re ready to pursue (yet), partnering with an investor-friendly agent is key. Here’s what your agent should do:

Consult with you while negotiating properties you’re buying
Providing estimates of after repair value (ARV), including lists of the best
comps
Consulting on design, layout, paint colors, finishes, and other rehab
choices
Staging the house for showing
Taking professional-quality pictures for marketing
Marketing the property through all the traditional channels, like signs, MLS, online websites such as Zillow, and networking
Being your eyes, ears, and advisor during negotiations with buyers
Handling details required to get a deal to closing

That is a pretty powerful combination, don’t you think? Having an expert team member willing to provide these benefits will give you confidence that you can have the ability to sell real estate.

Attorney

There’s too many legal paper work that goes into the transaction of a home to not have this very crucial team member. Though team members can fill expertise gaps, the business of real estate transactions can be a minefield of legal problems that you don’t want to get stuck in. So hire a trusted legal counsel.

In addition to looking for the basics, like being a straight talker, choose your attorney based upon expertise and experience in the following areas:

Real estate contract litigation: No one wants to litigate, but attorneys should be able to draw up contracts based on knowledge of how litigation will proceed. This expertise allows you to preempt problems by including specific language in contracts.
Real estate transactions and title insurance: Look for someone intimately familiar with real estate closings. It’s even better if they have a team of paralegals on staff who can help manage minor issues.
Basic entity structuring, estate planning, and asset protection: An attorney can help create a basic legal entity to perform your buy-sell business.

Accountant

Before setting up your legal entity with your lawyer, talk to an accountant about the best option for your business. That may be an LLC, S Corporation, or C Corporation—but the right answer depends on your state and business strategy.

You may also want to consider having a bookkeeper, eventually. Smaller investors can often get by using a program like QuickBooks to further organize accounting activities.

5. How to Know Is a Good Deal Is (for you)

To help guide your business, create a detailed profile of a good deal. First, you’ll want to understand the basics of deal analysis. Here’s what you should know for each deal:

Sales costs, such as commissions, closing costs, and home warranty
Desired profit How much do I want to make on each deal?
Holding costs, such as taxes, insurance, utilities, and maintenance
Rehab costs, including labor, materials, and permits
Acquisitions costs, such as attorney or title fees, closing costs, and
inspections

For example, a fix and flip or BRRRR investor would subtract these costs from the property’s ARV to find their max purchase price.

Be careful with deal analysis process because numbers can be deceiving. In other words, everything that glitters is not gold—or everything that meets your formula is not always a good deal.

You need criteria beyond numbers. You must check the assumptions behind all the said numbers.

First of all, be careful with the rehab costs and consult with your professional
contractor. This is why pre-purchase inspections are always money well-spent.

Second, be careful with the assumptions behind your After-Repair Value (ARV).

Consider making a “desirability checklist” of qualitative criteria about the house and location. If the house checks three or more boxes, consider passing. Overcoming that many negative factors can be difficult.

Problems to include on your list include:

Unsafe neighborhoods
Neighborhoods with mostly tenants and not owners
Properties too far from jobs, shopping, and amenities (10-plus miles)
Steep lots
Busy roads
Obnoxious outdoor smells or obnoxious next-door neighbors
Large power lines nearby
Extra-small house size
Two-bedroom houses, if they’re hard to sell in your market
Weird layout (e.g., walk through bedroom to another bedroom)
In-ground pool, if you’re buying in cooler areas

6. Create a marketing plan to find good deals

All of this hard work is for naught if you can’t find good deals. You want to create systems that bring you opportunities to buy deals—or leads—so you aren’t constantly chasing them down. Consider including the following elements in your marketing plan!

MLS leads

A real estate license provides access to the multiple listing service (MLS). If you’re unlicensed, your agent can help you set this up. Use daily filters to send listed properties straight to your email inbox.

For instance, your MLS filter might look like this:

Within your target location
Status of new listing, change in price, or back on the market
List price below 70% of your top retail price
Square footage above 1,200 sq. ft.

Referral campaigns

Send letters to local professionals telling them that you’re buying properties in any condition for cash. But don’t expect an immediate rush of results: You’re building relationships. Over the long run, 25-50% of your deals will come from these sources. Potential sources could include:

Attorneys handling probates, divorces, foreclosures, and bankruptcies
Property managers
Commercial real estate brokers, who can send you their small stuff
Residential real estate agents, who can send their ugly properties
CPAs
Financial advisors

Build your ant farm

Recruit your family, friends, and local contacts to be “ants” and bring morsels—or leads—back to you. Ask them to be on the lookout for vacant or rundown houses during their daily routines. If they see one, the instructions are simple: Text me the address, and I’ll do the rest.

Final Take Away

We’ve seen that real estate is an industry where everyone can be successful. If you follow the right steps and have a little courage, there's nothing stopping you from achieving your dreams as long as it starts with believing in yourself. You are capable of anything!

Building Generational Wealth Through Real Estate

nate@ohkie.com (Nate Mandel) — Wed, 26 Oct 2022 15:55:03 GMT

By: Charlie N. Jones
Mar 2022

Are you interested in building generational wealth? If so, real estate may be a great investment for you. Investing in real estate is one of the most effective ways to diversify one's portfolio. This creates wealth that can be handed down to the younger generation while maintaining flexibility.

"Real estate is a fairly unique asset class with a variety of underlying characteristics and strategies that can serve a variety of reasons for an investor," says Reuben Bianchin , Senior Portfolio Manager of Private Equity at BNY Mellon Wealth Management. The asset class has lower volatility and a low correlation to stocks and bonds, improving a portfolio's risk/return profile. Real estate investments can benefit high-net-worth families in the following ways: To compensate for a low-yielding, inflationary environment, Capital gains are protected, and the investment is tax-efficient.

Here are six key strategies for leveraging real estate investment strategies to increase generational wealth.

Compensate for Low-Interest Rates

"With interest rates at all the time lows, there is an insatiable demand for yield," Bianchin observes. "At this point, you are not seeing clients earn a lot of money from traditional fixed-income investments.”

Clients can always find stability with real estate to complement other parts of their portfolios because of the cash flow nature of the real estate, where long-term leases can enable stable occupancy that drives income yield, according to Bianchin. While some investors with a dynamic approach may want to own property directly, there are also a number of more passive options, for instance, private real estate funds and traded, non-traded real estate investment trusts (REITs), that provide similar interests for those who do not want to manage a physical property actively.

Hedging Against Inflation

With inflation expected to rise in the United States, investors are looking for strategies to mitigate that risk in their portfolios. REITs have historically outperformed the broader equity market during periods of moderate or high inflation, making them an effective hedge, according to Tim Barker, Managing Director at BNY Mellon Wealth Management.

Barker claims that the conversation has changed from a year ago because, while interest rates were and continue to be below, the "fear of inflation" is a new factor.

Due to the inherent characteristics of the asset class (rents typically rise in line with inflation measures), real estate income has increased at a slightly higher rate than inflation over the last 25 years. This contrasts with fixed-income investments, tied to interest rates and not provide the same inflationary protection.

Advance Your Exposure

Investors who are new to real estate opportunities do not necessarily need to rebalance their portfolios extensively to reap the benefits of the industry.

"Growth investing will not go away as long as interest rates remain low," says Barker. "However, for many of our high-net-worth clients, real estate exposure of around 5-7 percent of a portfolio, including liquid REITs and illiquid real estate investments, would be appropriate."

Consider Gifting Strategies

According to Jere Doyle , Senior Wealth Planning Strategist at BNY Mellon Wealth Management, real estate is a flexible option for gifting. It allows for appreciation while also providing liquidity to the asset's current owner during their lifetime. A vacation home, for instance, can be a meaningful gift with both sentimental and monetary value to future generations. Investing directly in other property types can also be a vehicle for wealth development and transfer while also avoiding estate tax headaches.

"Gift tax evaluation discounts can be acquired by giving fractional interests in real estate," says Doyle. The lower valuations of the less marginalized interests in the assets result in future tax savings for the estate owner. "The same valuation discounts at death are accessible for those who retains only a minority interest in the real estate," Doyle adds. However, real estate can be difficult to navigate within an estate plan. Working with an estate planning strategist to ensure that real estate is transferred as tax-efficiently as possible can be beneficial.

Invest in New Business Opportunities

Over the last year, we've seen the pandemic drive significant change across various property types, opening up investment opportunities.

The e-commerce boom has also created new challenges and opportunities for certain real estate property types. While physical stores have suffered, demand for property related to warehousing, supply chain management, and logistics has increased and is expected to remain strong for the foreseeable future.

Bianchin cites the Covid-19 vaccine, which requires cold storage, demonstrating how emerging societal needs can drive real estate opportunities. "We're looking at how the acceleration of business models impacts real estate and how our clients can benefit from those changes," he says.

Capital Income Leverage

According to Barker , one strategy for high-net-worth families to shelter capital gains is investing in Opportunity Zones and Opportunity Zone funds. These are designated for economically distressed communities where new investments qualify for tax benefits, including capital gain deferral.

This vehicle also serves a dual purpose: it adds real estate investment exposure to a client's portfolio. "When you consider how the equity markets have recovered, clients have a lot of unrealized capital gains," says Barker. "So this is an opportunity to realize gains, make portfolio changes, defer tax on some of those realized capital gains, and invest in real estate through the Opportunity Zone fund."

With the possibility of higher tax rates, combined with the significant tax benefits provided within Opportunity Zones—where investments in property types such as multi-family and affordable housing will be prevalent—there may be a compelling opportunity for clients to do good through a targeted real estate strategy.

Conclusion

Yes, you don’t have to be a millionaire to accumulate wealth for yourself or your children. Use these strategies to build generational wealth through real estate for your family and to be able to pass it down from generation to the next generation. The most important thing you can pass on to your children is financial wisdom. This is critical so that your energy spent in accumulating assets is not squandered by a careless generation. Be wise and plan ahead.

The Crisis Surrounding Black Homeownership: Change Starts Now!

nate@ohkie.com (Nate Mandel) — Wed, 26 Oct 2022 15:48:56 GMT

By: Charlie N. Jones
Apr 2022

To have a clearer idea of the black homeownership crisis, you have to look at the crater-sized homeownership gap between White and Black Americans today! It has grown significantly over the last fifty years. The recent outbreak of the Coronavirus did not make things easier for the Black community. Many resorted to unanticipated methods to keep a hold of their homes. Some had to get tenants to occupy the family property, as a way to be able to pay for their mortgages. The financial load associated with maintaining their homes and properties became unbearable. Therefore, many Black Americans have been pushed to the brink of selling their homes to ease their financial burdens.

Refinancing has been one of the go-to strategies that offer the black population a lifeline for homeownership. Refinancing opens up doors for them to get more affordable mortgage repayment rates. However, even refinancing becomes a challenging task when you consider that many Black Americans are unemployed! For example, the Black unemployment rate stood at approximately 7% at the end of 2021 . In such an instance, coming up with proof of income to get more affordable mortgage repayment rates is impossible. Research by the Urban Institute in May 2020 showed that Black homeowners had a higher likelihood of deferring their mortgage payments because of the financial difficulties caused by the Covid-19 pandemic. Consequently, this also contributed massively to the growing disparity between homeownership of the White and Black communities.

Statistics from the U.S. Census Bureau provide further proof of this problem. Compared with other minorities, the homeownership rate of Black Americans is estimated to be the lowest! Looking at the second quarter of 2020 as an example, Black homeownership rates lagged at around 47%. On the other hand , Native Hawaiian, Pacific Islanders, and Asians had a homeownership rate of about 61.4%, with the Hispanic Americans having nearly 51.4%. However, White Americans boasted a massive 76% homeownership rate.

The widening gap between White and Black homeownership can be attributed to the longstanding discrimination and unfair housing policies that have been practiced for many years. The Urban Institute estimates that the homeownership gap between the White and Black Americans today is about 30%. The most shocking aspect of this statistic is that this current gap is bigger than in 1960 (27%), when housing discrimination was surprisingly legal!

At the time, Black Americans were not allowed to buy homes and pass them down to their children as a way of amassing generational wealth. Further restrictions led to getting denied mortgage loans and getting shut out from living in some neighborhoods due to their skin color. It was impossible to buy and own homes in White suburbs, even if they could afford it! The bad homeownership policies at the time ensured that Black Americans were restricted to living only in predominantly black neighborhoods.

What Efforts and Policies Have Been Previously Implemented or Must Be Implemented in The Future to Address the Homeownership Crisis?

Past efforts

Over the years, there has been considerable effort to address the discrimination associated with black homeownership. For example, the Fair Housing Act that was passed in 1968 made all restrictions placed on anyone, especially Black Americans, illegal. Its primary objective was to guarantee equal housing opportunities for everyone. It sets the foundation for all housing equality efforts to be successful.

What Should Be Done Now?

Ramping up efforts to tackle rising taxes.

High taxes are one of the main reasons many people, particularly from the black community, are ejected out of their homes. These high taxes can contribute to the growth homeownership gap and it is therefore crucial to put reasonable tax regulations in place. If there are considerably high increases in taxes, landlords will have to increase rent. Since many Black Americans are grappling with unemployment, they may end up losing their homes.

Increasing access to down payment assistance programs.

Increasing access to programs such as advanceable tax credits and matched saving programs suitable for low-income homebuyers is an excellent place to start. Similarly, more should be done to ensure these underserved Black Americans have access to business and mortgage credit. It will reduce discrimination by ensuring access to capital is improved.

Adopting credit scoring practices that are not discriminatory.

Creditworthiness is an essential aspect that is used to evaluate homebuyers. A lot of emphasis is placed on credit card and loan payments. These metrics usually disqualify many Black Americans because of the misconception that Black homeowners are poor payers and thus, highly risky investments. The fact that many of them are unemployed makes the situation worse.

Relief efforts and stimulus packages should be continually offered to current and prospective Black homeowners.

It is important to address the harsh impact of the Covid-19 pandemic. As much as the increase in Black homeowners has been looking promising, the Coronavirus pandemic dented this progress. Many Black homeowners have been increasingly facing difficulties in making mortgage payments. The stimulus packages and relief efforts will help ease their financial predicaments and retain their homes.

Conclusion

The black homeownership crisis results from the longstanding racism and unfair housing policies that have been around for many years. The recent outbreak of the Coronavirus pandemic made the situation for the Black community even worse. They have found it more difficult to keep up with their mortgage payments. Therefore, retaining their homes and property has become harder. The high unemployment rate of the Black Americans has also made the homeownership gap challenging to overcome. However, past efforts such as the Fair Housing Act of1968 have tried to address the homeownership crisis and reduce this gap. Improving the Black community's access to down payment assistance programs will also help deal with this crisis. In addition, the stimulus packages introduced during the outbreak of the Coronavirus pandemic should still be provide. These relief efforts will help black homeowners to make stay on track with their mortgage payments and retain their homes. Consequently, these efforts will contribute to narrowing the large homeownership gap effectively.

Improving Inner-City Neighborhoods

Wed, 21 Sep 2022 20:06:07 GMT

By: Charlie Jones

August 2022

The economic distress of America's inner-city neighborhoods is one of the nation's most pressing issues. The lack of jobs and businesses in the disadvantaged inner-city neighborhoods fuels a continuous cycle of poverty and thriving social problems like drug abuse and crime. These problems make the inner-city neighborhoods deteriorate, and the debate on how to help them restructure has been an ongoing discussion for years.

The fact of the matter is that efforts have been made in the past decades to try to revitalize the inner cities' neighborhoods. These efforts have not fully succeeded to prove a sustainable economic base. There have been efforts to create employment opportunities and improved infrastructure. However, these still eludes the inner-city neighborhoods despite the government investing substantial resources in these cities.

The help given to the inner-city neighborhoods has also included relief programs such as housing subsidies, income aid, and food stamps. These programs only address highly visible and special needs but do not address long-term help for the inner-city neighborhoods. Additionally, programs that were aimed at development have been fragmented and ineffective.

It is time to recognize that revitalizing the inner-city neighborhoods will require a radically different approach. Without downplaying the role of social programs in continually meeting human needs and improving education, we must support and not undermine a coherent economic strategy. The real question is how businesses in the inner-city neighborhoods and the nearby employment opportunities for the inner-city neighborhood residents can increase and grow. Here is how we can improve the inner-city neighborhoods economically.

1.Creation of a Stainable Economic Base

There must be the creation of a sustainable economic base in the inner-city neighborhoods but not an economic base that is created through artificial inducements, government mandates or charity. We cannot cure the problems of inner-city neighborhoods by increasing social investments and believing that economic activities will follow. The economic model created for inner-city neighborhoods should begin with the premise that inner-city neighborhood businesses should be profitable and positioned to be competitive on a regional, national and even international level. The inner-city neighborhood businesses should be able to serve the local communities and have goods and services that they can export to the surrounding economies. Such an economic model can only be found by finding and exploiting the competitive advantage of inner-city neighborhoods, which will translate into a truly profitable business economy.

Economic activities in such neighborhoods can only take root if the neighborhood enjoys competitive advantages and are in a niche that cannot be replicated elsewhere. For example, a small but steadily growing high-tech company may be interested in contributing to the inner-city neighborhoods through the provision of its services. The competitive advantage of the inner-city neighborhoods is that they may not have a high-tech company, and the neighborhood enjoys low-cost real estate and labor. To improve such a neighborhood and stabilize the distressed individuals in this neighborhood, the city council can subsidize the operations of the high-tech company. In exchange, the company should supply jobs to the residents of the inner-city neighborhood. The inner-city neighborhood management can reciprocate to the company by offering incentives to lower costs and boost profits.

2.Establishing business relationships with inner-city neighborhood companies

Outside companies can enter joint ventures with inner-city neighborhood companies. These joint ventures will encourage the inner-city neighborhoods to engage in export and become competitive. Both parties stand a chance to benefit. For example, Dorchester-based metal fabricator company AB&W partnered with General Motors. This gave AB&W the ability to become a high-performing and dependable supplier. This symbiotic relationship is not based on charity but is mutually beneficial and very sustainable. Every major company should develop such relationships with inner-city neighborhood companies to help the economies grow.

3.Adopting the right model for equity capital investment

Venture capitalists must also consider investing in inner-city neighborhoods. The inner-city neighborhood success model may not look like the venture capital model usually created for technology companies. Instead, the success model of inner-city neighborhoods will resemble an equity fund that works in emerging economies such as Russia and Hungary, where investments are mundane but profitable. Ultimately, the inner-city neighborhood businesses that run on the principles of competitive advantage will generate adequate returns to investors. This will best be realized if they are aided with incentives such as tax exclusions for capital gain and dividends for being inner-city neighborhood businesses.

4.Government intervention through the provision of direct resources to areas of greatest economic need

The crisis of inner-city neighborhoods demands that they should be first in line for government aid. Though this statement may be a cliché, the fact still is that programs in infrastructure, land development, crime prevention, and environmental cleanup, are funded politically. Therefore, investments that will boost the economic potential of inner-city neighborhoods must be considered a priority. For example, infrastructure should first make inner-city neighborhoods more attractive business locations. These government interventions will ease critical social problems and reduce social service spending.

5.The government should increase the economic value of inner-city neighborhoods as business locations.

Stimulation of economic development requires the government recognize that it is part of the problem. The priorities of the government can run counter to business needs. The government must rethink policies and programs in different areas to achieve this. For example, growing cities like Chicago, Minneapolis, Indianapolis and Kansas have come up with successful brownfield urban areas by making flexible environmental cleanup standards depending on land use. These cities have indemnified landowners against added costs if the land is found contaminated after cleaning up. These cities use tax increment financing to aid cleanup and re-development costs.

Final Take Away

Improving the inner-city neighborhoods is a collective responsibility of the government and non-governmental business community. The government should ensure that resources are directed to the inner-city neighborhoods and have incentives for businesses to work there. In a flourishing business environment, the community and business will experience a solution where everyone benefits. This could be the answer to the challenges in the inner-city neighborhoods.

Concentrated Poverty Among African Americans

nate@ohkie.com (Nate Mandel) — Wed, 21 Sep 2022 20:06:06 GMT

By: Charlie Jones

July 2022

African American neighborhoods are often stigmatized as being riddled with crime and poverty. While this may be true in most cases, there are ways that residents and community organizations can work together to improve these areas. From beautifying the neighborhood to increasing economic opportunity, there are various steps that can be taken to be effective. In this blog post, we will explore the current situation and avenues that inner-city neighborhoods can be improved.

Current Situation
African Americans, experience challenges from racial disparities in their neighborhoods and well-being. Consider the various cases of racial discrimination and low access to quality schools and health care facilities and economic opportunities. It is not difficult to see why these neighborhoods have significant exposure to criminal activity, pollution, and congestion.

Unfortunately, it is hard to crack the vicious cycle for children who are born and raised in grinding, persistent poverty. In addition, the effects on families vary depending on race when they live in such situations for lengthy periods. It is highly likely to find that generation after generation, the families still live in the poorest communities. Being raised in a high-poverty community has long-term consequences for African Americans significantly more severely than their white peers.

The effect of Residential Segregation on Wealth Accumulation

Considering real estate as a wealth accumulation strategy, in African American areas, property value appreciation is hampered by racial residential segregation. Caucasian families are still hesitant to purchase homes in African American areas. This is because African American communities are mostly seen as less secure. They also find the neighborhoods lack the same amenities, such as well-maintained parks and health care facilities, found in the white suburbs. Real estate is therefore less appealing, even if all other attributes of the homes are the same. Segregated markets also drastically lower the values of homes in these neighborhoods. It is also difficult for a Black person to get approved for a mortgage than applicants of other races.

Effects of Residential Segregation on Concentrated Poverty

It Widens the Opportunity Gap.

Concentrated poverty levels among African American residents have increased over the past few decades, leading to a widening of the opportunity gap. A major factor in this increase has been residential segregation, which limits economic opportunities and access to resources. Segregated neighborhoods are often located in urban areas with high crime rates and limited access to jobs, education, and healthcare. As a result, concentrated poverty widens the opportunity gap by limiting economic opportunities for African Americans.

Wealth Inequality

The expropriation of land from Indigenous people, racially exclusive housing restrictions, and redlining all contributed to the emergence of this division. Segregation tendencies among other oppressed groups can be traced back too many discriminatory policies, which were primarily directed at African Americans. Discrimination in mortgage financing and restrictive zoning rules are used today to preserve segregation. African Americans have been kept out of the economic mainstream while white communities have amassed vast wealth and resources.

Steps to Improve the Neighborhood's Poverty Levels.

1.Creating a better place to live.

Step one in addressing poverty and segregation in neighborhoods is improving the community's socio-economic fabric, reducing the likelihood that these problems will remain. This is a term for community-driven initiatives aimed at boosting the economy.

Options to create a better neighborhood include:

Improving the quality of the neighborhood school's infrastructure.
Reducing crime rates within the neighborhood
Improving or making access to healthy the different food options easier
Encouraging local entrepreneurship

With the application of favorable policies, diversity and opportunity will increase, making these areas more desirable for living, working, and doing business. Housing costs could go up, and existing low-income people could be forced to leave their homes. Therefore, addressing the underlying causes of poverty must be paired with efforts to ensure that existing inhabitants and local businesses can stay and participate in an improving community.

These include:

Providing rental aid for families
Considering inclusionary zoning.
Providing incentives for developers to provide affordable multi-family housing for all income levels.

Even more importantly, local governments must help long-term residents find different employment opportunities in an improving neighborhood by promoting job training. They can as well consider improving the existing apprenticeship programs and providing incentives for employing locally.

2.Relocating.

In these communities, it is exceedingly difficult to strengthen their assets and opportunities, even if that is the chosen strategy. Making it easy for people to relocate to locations with more resources and employment opportunities is an additional critical component. Policies, such as extending rental assistance programs should make it simpler for poor families to move from places with persistent poverty to locations with better opportunities. A combination of rental aid and land-use reforms is needed to boost the supply of affordable homes for these families in more affluent neighborhoods. This is an exciting time to tighten fair requirements and demands, which would help lower-income families relocate to more wealthy neighborhoods.

3.Access to opportunities is emphasized.

Cities need to be better integrated so that more people can take advantage of their opportunities. People from diverse neighborhoods will it easy to promote the implementation of regional projects to boost the mobility of residents in the urban regions. In most cases, the expansion of an inexpensive transportation system is required. The construction of affordable homes near the urban areas and fostering more dense urban areas can help alleviate the strain of urban sprawl. Segregated and under-resourced neighborhoods have long-term detrimental effects on families. Additionally, allowing these families to relocate to places with more opportunities for better education and work availability for their families, should be beneficial.

Final Thoughts

As we have seen above, there is a high chance that the neighborhood people are raised in can affect their success in life. The concentrated poverty among African Americans can be tackled through the tips discussed above. Developing better policies that will help improve the African American communities and neighborhoods is the best way to alleviate the concentrated poverty among African Americans.

Building Black Businesses: Invest

nate@ohkie.com (Nate Mandel) — Wed, 21 Sep 2022 20:06:06 GMT

By Charlie N. Jones

May 2022

The Black descendants of enslaved Africans in the United States view entrepreneurship more broadly than just owning a business or pursuing the famous American dream. To them, entrepreneurship is the ability to participate in local, regional, and global markets, representing a dream deferred by systematic racism and discrimination. We can only demonstrate that America is a land of opportunities by allowing black business ownership.

This article aims to provide proof that black businesses can greatly grow the economy if supported by key economic players with the capital that black entrepreneurs need to start, grow and maintain their businesses. These economic players include financial institutions, corporations' money, and even political leaders' support. Keep reading to find out how.

Why Invest in Black-Owned Businesses?

To Bring About Racial Equity.

The rise of the Covid-19 pandemic saw a painful exposure to structural racism. The initial round of paycheck protection program (PPP) loans which were part of the CARES act from the federal COVID-19 relief package, was meant to give relief only to employer firms. The framework disproportionately excluded black businesses, because of the fact that 95% of black companies in the US are non-employer businesses compared to 78% of white companies. There was also bias in the geographical coverage of subsidies. Bloomberg analysis indicates that 27% of companies in districts with most white people received loan subsidies. In comparison, only 17% of companies in communities that make up minority races received loan subsidies.

We can improve this outcome by preventing these cases of discrimination within the economic markets. McKinsey and company have taken a step to look for ways that will help in building a supportive ecosystem for black businesses in the US. Investment opportunities in black industries will be a game-changer in bridging the racial wealth gap and bringing about racial equity. The steps by fortune 100 companies in committing billions to fight racial equity will ensure that money is open to black proprietors and black businesses. The availability of this money to black companies will help the development of the black lead investment firms, which will help to grow wealth for the black race, which is vital in bridging the racial wealth gap.

To Strengthen Local Economies

Communities will start flourishing when the local small businesses start blossoming. Unfortunately, banks cripple the efforts of these small businesses to thrive by discriminating against African Americans and other minority groups seeking business loans.

A study done by the National Community Reinvestment Coalition reveals that banks are twice likely to provide loans to white applicants than Black Americans. This study shows that banks are more likely to follow up loan meetings with white borrowers than with more qualified Black borrowers. When banks support Black businesses, they support families, employees, and other business owners. Supporting Black companies help in the attraction of community investors who can provide loans to these businesses.

To Foster Job Creation

Most Black businesses are likely to be sole proprietorships. The Business Owners' Facts survey indicates that 4.2% of black companies have employees. This is compared to 20.6% of companies owned by whites that have employees. If Black companies can post a similar number of employees like that as non-Black businesses, we can realize significant economic growth. Another study revealed that black companies are more likely to hire black workers. This study also confirms that black unemployment is on the rise, which hinders the development of jobs in black communities.

Studies by the Census Bureau indicate that Black companies can create ten jobs for every farm compared to the 23 jobs created for every farm by non-black firms. Suppose the average number of employees that black businesses can accommodate on every farm can increase to 23, just like non-black companies. In that case, there will be approximately 1.6 million jobs.

To Grow the Total Revenue Base

A study by the Census Bureau indicates that the US economy is losing billions of dollars in revenues for underrepresenting black businesses. The US population has 14.2% of black people, yet Black businesses are only 2.2% of the US's 5.7 million employer businesses. On average black businesses bring in $1,031,021 while white businesses bring in $6,485,334. An increase in the average income of black businesses to match that of non-black businesses will increase the total US revenue in black-owned businesses by $676,356,621,618. It is important to note that the gains in black business revenues do not come at the expense of the non-black businesses.

Increasing The Total Wages of The Black Employees

Black companies pay their staff $29,882 compared to the $51,357 that non-black businesses spend annually on their employees. If black businesses can reach this parity of $51,357 with the non-black businesses' employees in black companies, we'll see an increase in pay by approximately 25 billion US dollars.

Conclusion

Structural racism is one of the hindrances to black business growth, and as a result, both the white and the black population suffers from an underperforming economy. The only way to develop a steadily growing economy is by building an all-inclusive community when it comes to business. An all-inclusive economy means black businesses reach parity with the non-black companies in terms of the number of black businesses, the total revenue generated, the number of jobs created and the actual wages paid.

Investing in black businesses will grow the total revenue base by a huge margin and it will foster job creation with millions more opportunities for our youth to work and earn a living. Additionally, investing in black companies will help solve problems in education, housing, criminal justice transportation, and other fields that may indicate racial disparities.

Removing the systemic discrimination is the only sure way to ensure we are investing explicitly to increase the number of black business returns. This will work greatly towards solving underlying conditions that create racial disparities and undue suffering that the black communities are experiencing. Investing in black businesses is a collective responsibility for the growth of the US economy.

able-capital

Is Evicting That Problem Tenant the Wrong Call? Here’s How to Tell

By: Charlie N. Jones January 2022

Quit Your Day Job and Find Financial Freedom - Here’s How to Become a Real Estate Investor (Full-Time!)

By: Charlie N. Jones Feb 2022

Start With the Basic Elements of Financial Freedom

1) Credit Cards

2) Other Debt: Mortgage and Student Loans

Dealing with Debt

Build Your Emergency Funds

Should You Quit Your Job to Pursue Real Estate?

Is Having Flexible Work Hours Important to You?

Do You Desire Income Stability?

Do You Love Real Estate?

Educate Yourself

So, Where Do You Obtain All This Education?

Real Estate Investing Strategies

Pros

Cons

House Flipping

Pros

2) You can get to learn more about construction

Cons

Buy And Hold Cash Flow Investing

Pros

Cons

How to Start A Real Estate Business

2. Think About Your Finances, Too

3. Have Money Sources

4. Build Your Team and Network

General contractor/project manager

Broker and the expert listing agent

Attorney

Accountant

5. How to Know Is a Good Deal Is (for you)

6. Create a marketing plan to find good deals

MLS leads

Referral campaigns

Build your ant farm

Final Take Away

﻿

Building Generational Wealth Through Real Estate

By: Charlie N. Jones Mar 2022

The Crisis Surrounding Black Homeownership: Change Starts Now!

By: Charlie N. Jones Apr 2022

Improving Inner-City Neighborhoods

Concentrated Poverty Among African Americans

Building Black Businesses: Invest

By: Charlie N. Jones
January 2022

By: Charlie N. Jones
Feb 2022

By: Charlie N. Jones
Mar 2022

By: Charlie N. Jones
Apr 2022