U.S. Rental Demand Lifts Housing Sector

Posted on December 27th, 2011

Below is an article that I felt some clients might be interested in:

U.S. Rental Demand Lifts Housing Sector

Wishing you all the very best in the coming New Year!  MGA is here to assist you with your accounting, tax structuring/ planning and business advisory needs.

Regards,

Paul D. Grossbard

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Refinancing obstacles and Sugarplum Fairies…

Posted on December 6th, 2011

So, mortgage rates are low and as I have written in the past, it does seem like a good time to refinance your mortgage if you can save a percentage point or more.  Well, I took my own advice, and plunged into the refinance process.  It is true, there is very low cost money available for qualified homeowners.  The problem, as some of you have shared with me, is getting an appraisal to meet the 80% threshold to avoid PMI and T&I escrows.  After having the appraisal done and redone, I could not meet the 80% threshold.  So, having low cost capital available does not do much good if you cannot get your appraised value high enough!!!  Luckily, I had a feeling this might be an issue so I let the lender know that I wanted the appraisal done first so I was not out any additional cost.    So much for the capital markets being healthy and available to Main Street.  If you are going to pursue a refinance (which I still think is a good idea at these historically low rates), be aware of the appraised value hurdle that will need to be overcome.

Is it just me or does it seem that business is just harder?  I want to believe it is caused by the uncertainty in the markets, government regulations, and shifting dynamics of our economy and not that I am getting older!  Hey, these years of being in business should add experience that makes navigating obstacles to building a business easier.  Maybe that is true, but are there just more obstacles to be navigated?

Stepping back, I need to take a deep breath and think about the important things – the health and happiness of family and friends.  In retrospect, I am not sure it matters whether business is harder today – keeping perspective on what is important may be harder.  Hmm, something else to ponder in the wee hours of the morning.

So, as we move into this holiday season, I wish you, your family and those important to you, good health and happiness – let’s spend more time on the Sugar Plum Fairies than the obstacles in the road.

Best,

Paul D. Grossbard

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Software tool to optimize rental rates – New modality for examining pricing of services and products?

Posted on December 2nd, 2011

Technology is certainly changing the way we do business.  If you have booked an airline ticket recently, we have seen how the airlines are using variable pricing to maximize revenue depending on the level of bookings/inquiries into flight availability.

Initially, I sent this article to my real estate clients to make them aware of technology available to help them maximize revenue per door/sq.ft.  (Link to Article)  As I began thinking and pushed myself out of my box, this article is really about nothing more than telling us about a tool to help manage something we already know – balancing the demand vs. supply cycle and pricing our services and products accordingly.  As smart business owners we already know this, but too often we do not apply these principles because we let emotion get in the way.  What software tools allow us to do is to see what decisions can be made with just the facts. If we are honest with ourselves, we can then determine if the technology is looking at the entire picture and where our judgment and experience needs to be applied to modify those recommendations – or accept and implement them as computed.

As business people, we have so many more tools available to us to make decisions.  But the underlying core of those business decisions are the same – how to maximize revenue and profit,  most efficiently use assets/ resources, all with the goal of satisfying our customer’s needs and goals.

I have discussed with you before, there are two ways to make money – managing costs and increasing revenue.  In the long term, cost management is a more limited approach, while increasing revenue has much greater potential.  Especially if you are able to do so with the existing asset base!

I am here to assist and work with you in evaluating technology or any other operational aspects of your business.  Or, just brainstorming ideas – sometimes a second read gives more insight…

Regards,

Paul D. Grossbard

 

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A Potential trap your banker has not thought about – Bank Loan Covenants and Special Depreciation Deductions

Posted on June 3rd, 2011

We are finding that banks are inserting minimum net worth covenants when businesses are renewing their Lines of Credit.  So, if in the past the only borrowing base calculations required were accounts receivable and inventory, now banks are also requiring the maintenance of minimum net worth.

So, what is the issue?  You are most likely taking advantage of either or both the special expensing election or expanded Section 179 deduction for capital equipment purchases for tax purposes.  These elections are great for tax purposes but can wreak havoc on net worth.  For example, you purchases and finance $500,000 of equipment.  If you submit a balance sheet to the bank using tax depreciation, you end up with no fixed assets ($500K purchase minus $500K depreciation) and a liability of $500K -  this artificially reduces your net worth by $500K!

What can you do about this?  First, negotiate hard with your bank on a reasonable minimum net worth and make sure you understand how the bank is calculating net work (they often have certain assets that are excluded).   We can assist you with determining a reasonable minimum net worth for loan purposes.   Next, let us know about the new provision so that we can change the recording of depreciation to a Book Basis and not show the expensing of fixed assets on the balance sheets.  This does not eliminate the tax deduction, just creates a book tax difference in depreciation methodology.

I wanted to bring this to your attention as you will most likely be seeing this change when you renew your line.

As your business advisors, we are always looking “outside of the box” at the issues that may impact you and your business.

Regards,

Paul D. Grossbard

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