The apartment market has not been this hot for sellers in many years. You might be pleasantly surprised how much your investment in multifamily has appreciated due to both demand and low interest rates.  Investors have snapped up the trophy properties in the major markets and are now looking for opportunities in cities like Knoxville.

Since the start of 2012, these are some of the multifamily properties in the Knoxville area which have sold:

Bridgeway                                        218 units
Cedar Bluff                                       184 units
Forest Creek                                    71 units
Sandy Springs Townhomes           64 units
Sherrod & Dawson Street             50 units
Country View                                   98 units
Forestal                                             20 units
Evergreen                                         30 units
And many more!

Experienced real estate investors know that market timing is key to locking in real profits for the benefit of their families.  Don’t miss this window of opportunity to sell while the prices are strong and capital gains rates are still so low.

The experienced apartment brokers at Goldman Partners Realty are working with many active, well-funded buyers for all size properties and we need properties to show them!  We would be happy to consult with you about your property’s potential and what you can do to position your property to sell for the highest price.

Please call or e-mail us today to discuss your property and your situation.

Over and over we hear, “We will never see rates like this again”, and truthfully they are probably right! The financing market is offering rates that I’ve never seen in over 29 years of selling multifamily. Do you remember the days when we were excited to get a 12% fixed rate (1985)? How about when we could find adjustable rates that started at 6.75% with caps of 12.75%?

Because of the Federal Reserve’s current monetary policy, we are able to help clients find loans for 5+ units at rates ranging from 4.5-5.5% fixed for 5 years with amortizations from 15-25 years. On the 2-4s, depending on whether you use a 15-year or 30-year fixed, our clients are getting rates from 3 to 4%!  Amazing what rates like this can do for your bottom line. A 2% differential per $100,000 of loan amount saves you $2,000/year, year in and year out!

So if you are buying now, or if you’re not ready to sell but are paying 6% or more on your current loans, call us today and we will be happy to share with you the lenders that are lending NOW!

When chemists die, they barium.

Jokes about German sausage are the wurst.

A soldier who survived mustard gas and pepper spray is now a seasoned veteran.

I know a guy who’s addicted to brake fluid. He says he can stop any time.

How does Moses make his tea? Hebrews it.

I stayed up all night to see where the sun went. Then it dawned on me.

This girl said she recognized me from the vegetarian club, but I’d never met herbivore.

I’m reading a book about anti-gravity. I can’t put it down.

I did a theatrical performance about puns. It was a play on words.

They told me I had type A blood, but it was a Type O.

A dyslexic man walks into a bra and orders a martini.

Class trip to the Coca-Cola factory. I hope there’s no pop quiz.

Energizer Bunny arrested. Charged with battery.

I didn’t like my beard at first. Then it grew on me.

How do you make holy water? Boil the hell out of it!

Did you hear about the cross-eyed teacher who lost her job because she couldn’t control her pupils?

When you get a bladder infection, urine trouble.

What does a clock do when it’s hungry? It goes back four seconds.

I wondered why the baseball was getting bigger. Then it hit me!

Broken pencils are pointless.

What do you call a dinosaur with a extensive vocabulary? A thesaurus.

England has no kidney bank, but it does have a Liverpool.

I used to be a banker, but then I lost interest.

I dropped out of communism class because of lousy Marx.

All the toilets in New York’s police stations have been stolen. Police have nothing to go on.

I got a job at a bakery because I kneaded dough.

Haunted French pancakes give me the crepes.

Velcro – what a rip off!

Cartoonist found dead in home. Details are sketchy.

Venison for dinner? Oh deer!

Earthquake in Washington – obviously government’s fault.

I used to think I was indecisive, but now I’m not so sure.

Solange Velas, CCIM, has joined Goldman Partners Realty as a commercial real estate broker. She brings 30 years of experience marketing multifamily real estate and investment properties. Solange is a welcome addition to the Goldman Partners Realty team of investment brokers.

Solange has been active in commercial real estate sales since 1984. Since moving to Knoxville in 1997, she has become well known as a premier multifamily brokers.  She has been involved in the sale of over 200 properties in the Knoxville area alone.

Solange attained her CCIM designation in 2010. The CCIM designation is awarded to commercial real estate professionals upon successful completion of a graduate level education curriculum and presentation of a portfolio of qualifying experience. The curriculum addresses financial analysis, market analysis, user decision analysis and investment analysis, the cornerstones of commercial investment real estate. According to the CCIM Institute only 6 percent of the estimated 150,000 commercial real estate practitioners nationwide hold the CCIM designation.  CCIM members are held to the highest industry standards of honesty, ethics and knowledgeable dealing in all aspects of their work.

Josh Booth has recently joined Goldman Partners Realty as an Affiliate Broker.  Josh will be handling commercial real estate transactions concentrating on retail land and net leased properties.

Josh is a native of Knoxville and the son-in-law of principal broker/owner, Steve Goldman. Josh’s previous experience was in the fitness industry. Over 12 years helping people attain their fitness and other personal goals, Josh learned the value of consistency, setting goals, and reaching them. Though new to real estate in 2013, Josh is a genuine person who forms sincere relationships and gives great attention to detail.

Until you manually delete them, old email addresses will keep trying to autofill/autocomplete in Outlook, iPhones and other places. But it is easy to delete them.

Outlook
1. Create a new email message in Outlook.
2. Start typing the name or address you want to remove.
3. Use the down arrow key to highlight the desired (undesired) entry.
4. Press Del.

iPhone
1. Open Contacts
2. In the search box, start typing in the name until you see the old name entry.
3. Tap on it and confirm it is one you want to delete.
4. Tap Edit
5. Scroll to the bottom. Tap Delete Contact.

Kristopher Kendrick was well-known for his pioneering historic preservation successes throughout Knoxville’s downtown. I am proud to have been co-listing broker, successfully marketing and selling all six of their historic commercial properties to new owners over the past five years—all during the Great Recession. It’s the end of an era for the Kendrick family and these grand old buildings and an end of an era for myself assisting with their disposition. Fortunately for Knoxville, the Kristopher Kendrick Legacy lives on in these six beautiful, historic properties that he rescued and preserved.

My work with the Kendrick family started in 2007 when I made an old-school cold call to the family, asking if I could list their 5-story student housing property in the Maplehurst neighborhood.

The Kristopher Apartments student housing (Built 1910)
830 Maplehurst Court

At the time, Kristopher was in poor health and living at the Hotel St. Oliver. He passed away in 2009.

The trustees for Kristopher’s trust listed each property with us over time. The family asked that I start by listing the former Lord Lindsey nightclub on Hill Avenue which had been vacant for some time.

The former Lord Lindsey Nightclub (Built 1903)
615 W Hill Ave.

At the time, I was with Coldwell Banker Commercial and I decided to team up with my friend and fellow agent, Tim Duff. We continued to co-list each of the properties despite my later changing companies. We closed on the first sale of the Kristopher Apartments on June 25, 2009; and on the last sale, of the former Patrick Sullivan’s Saloon building, on January 30, 2013.

Patrick Sullivan’s Saloon & Steak House (Built 1888)
100 N Central St in the Old City

As we do with all listings, we treated each property as a unique challenge, adjusting our research and marketing efforts to fit the property. With each of the historically-significant Kendrick properties, we invested a lot of time building the property presentation/marketing package. It included many photos and detailed physical descriptions while including our research into the history of each property and the economic assistance available. We carefully collected maps to confirm the economic or historic districts so that we could correctly inform the potential buyers. In each case, we cited our sources and provide contact names and telephone numbers.

Boyd’s Jig & Reel (Formerly Manhattan’s) (Built 1900)
101 S Central St in the Old City

One example of a unique challenge had to do with visible mold at the Lord Lindsey. We did not want the owners to lose a single prospect to any unfounded concerns. We recommended that a professional be brought in, at the owner’s expense, to inspect the property for mold and to make a formal written report. We could then use the report to take corrective action, if needed, and, in any event, to give to our prospects. Fortunately, we were dealing with sophisticated sellers who understood why we made this recommendation and we moved forward with engaging the consultant. Fortunately, the expert concluded that there was no cause for concern and that the mold could be readily remediated.

Townhouse at 105 W Fifth Ave (Built 1900)

Other recommendations to which the owners agreed were to order a detailed ALTA survey and a title report. Like the mold report, the seller ordering these is not “local custom”. Fortunately, the sellers understood that providing such reports to a buyer before entering into a contract frequently avoids the buyer “retrading” which is renegotiating the price during the due diligence period. This strategy can work because we have made proactive disclosure and thereby taken away these excuses for a retrade.

By the way, the ALTA Survey did, in fact, show that there were some encroachments into the property which were not readily correctable—but they also were not “material”—they weren’t really going to be important defects to the day-to-day usage of the property. We were glad to be able to disclose these issues in advance and avoid a potential crisis (real or contrived), which often happens when the buyer and his lender discover these defects in the days before a transaction is supposed to close.

The Oliver Hotel (Formerly Hotel St. Oliver, Kern Bldg) (Built 1875)
407 Union Ave on Market Square

One of our goals when listing a property is to make it easy for a prospect to become excited about a property and not to stress over the details. We achieve this when possible by doing some of the due diligence work for them.

Marketing frequently gets underway as soon as the core research is complete. Our marketing efforts on behalf of the Kendrick Estate included the usual roadside signs and listings on the MLS & Loopnet. But that was just the start: Our extensive marketing package was available in print or PDF format; we posted YouTube Videos; and, by informing the media, we enjoyed both print and television coverage for several of the Kendrick properties. We participated in an open house for Knox Heritage at the Patrick Sullivans property. We even got some unexpected marketing assistance from a satirical video professionally produced for a Knox Heritage fund-raiser.

Finally, using our proprietary database of over 10,000 contacts plus new custom lists of owners in the CBD (Central Business District), we used a postcard, email and personal phone call campaign to get the word out and generate interest in each property.

We never know from where the buyer for the property will come, so we went all out to widely expose each property. In the case of The Oliver Hotel, the New York City buyer with Knoxville ties read a newspaper blog post about the property, flew in, and toured the property with me on a Sunday. Other buyers came from our personal phone calls or other agents. We know it is the right thing to do to market heavily — even though these transactions occurred throughout the Great Recession, we were able to bring multiple offers to the sellers on four of the six properties.

Along the way, my kids helped explore the buildings and look for ghosts; my wife and I responded to a midnight police call for a break-in and small fire. After one buyer’s lender backed off the loan, I made the introduction to the lender who completed the acquisition and renovation loan. Tim and I helped the Kendrick family deal with everything from arranging heating system maintenance, to broken water pipes, to public insurance adjusters while providing advice and reassurance for five fascinating years! What a real joy it has been to see renovations completed and a new useful life brought, already, to most of the buildings.

All in all, listing and marketing the Kendrick properties was a terrific adventure. Tim and I are honored to have been a part of placing the properties with the next generation of caretakers of these important, historic properties.

Steve Goldman, CCIM

Co-Insurance in a Property Insurance Policy is not at all similar to co-insurance in a Medical Insurance Policy. The co-insurance clause in a Property Policy is extremely important and must be understood. Co-Insurance in a Property Policy represents an agreement by the insured to insure property a certain percentage to “Actual Cash Value” or “Replacement Cost”, the higher the co-insurance clause, the lower the rate. The insured has the responsibility to meet the requirements of the co-insurance clause to avoid a penalty at the time of a loss.

As an example the insured purchases “Replacement Cost Coverage” insurance with the 90% coinsurance clause. At the time of loss the failure of the insured to comply with the 90% agreement results in a major penalty to the insured. At the time of loss the formula used to adjust the loss is as follows: Amount of insurance carried divided by amount of insurance that should be carried, multiplied times the loss. Use a building with a $100,000.00 Replacement Cost as the example with a 90% co-insurance clause. The building is $100,000.00 and the insured purchases only $50,000.00 of coverage. A $20,000.00 covered loss occurs. Settlement of the claim is now as follows: $50,000.00 (did carry) ÷ $90,000.00 (should have carried) x $20,000.00 (loss). Although the insured had $50,000.00 coverage the claims payment is only $11,100.00. Thus the insured is greatly penalized because the insured did not comply with the co-insurance clause insuring the property for $90,000.00 (90% of $100,000.00). There are two answers to this issue as follows:

1. Purchase the proper insurance to avoid a co-insurance penalty. This is the proper procedure and $100,000.00 coverage is appropriate and coinsurance violations would not be applicable
2. Purchase the “Agreed Amount Endorsement”.

Do not confuse market value, actual cash value, and replacement cost. Insurance companies issue most property policies on a replacement cost basis and replacement costs have not decreased even during the recession beginning in 2008.

TIS Insurance Services, Inc. has the expertise to work with our insured’s to calculate replacement costs and our Loss Control Department enjoys that expertise to avoid claims problems.
Call TIS at (865) 691-4847.
Ask for Morgan Thomas, President of Commercial Insurance Division.

Some properties for sale should be marketed quietly and not on the MLS and other listing services.

We do a “quiet sale” on properties when doing so is in the owner’s best interest and with the owner’s agreement. Typically, this is when effective marketing can be acheived through our proprietary database of the active investors and specialized agents in a market; and when exposing the property publicly would likely lead to disruption of operations or even loss of tenants.

Some properties warrant wider Exposure

When wide exposure is desired, Goldman Partners Realty places property listings on all of the most important local & national commercial listing services. Investors need to know something about each of the primary listing services and are entitled to know exactly where and when their broker will list their property.

Did you know there are two Knoxville-Area Listing Services?

Members of the Knoxville Area Association of Realtors (KAAR) have a choice of joining and posting commercial or multifamily properties on two different systems, known as the “Residential MLS” and the “Commercial MLS”.  Like it sounds, the residential MLS is predominantly for houses but there are commercial and multifamily categories in which proporties can be listed.  The Commercial MLS is solely for commercial listings. At this time, there are approximately 3,000 KAAR members of which only 284 pay to post on the CIE. Some Knoxville agents don’t belong to the KAAR at all.

On which service will your property be listed?  To best serve our clients, I subscribe to both services.  As a commercial-only brokerage, all non-quiet listings of Goldman Partners Realty go on the Commercial MLS.  And in addition, where we feel the extra exposure will help the sale, we also list selected properties on the Residential MLS.  Generally, this will be the smaller apartment or commercial properties where there is a good chance a residential agent might be working with a buyer.

What you need to know about CoStar and LoopNet

For starters, we are subscribers to both CoStar and LoopNet and list all non-quiet listings on both.

LoopNet is the most trafficked commercial real estate (CRE) website on the internet. According to their website, each month, LoopNet averages over 1.9 million unique visitors searching for commercial properties. This is many times more than the next busiest website. 65% of searches on LoopNet are tenants and investors.  We’ve sold millions of dollars of investment properties to buyers or agents who found our listings on LoopNet!

Many agents and investors don’t realize that only paid “Premium” subscribers to LoopNet can see every listing. That is just 4% of the nearly 2 million unique monthly visitors. But 100% of visitors can see our listings since Goldman Partners Realty is a Premium Subscriber. This means each of our LoopNet listings is a Premium Listing.

Many brokers avoid the LoopNet expense. So, if your agent is not a paying for a premium subscription or listing, , your property won’t be seen by 96% of the investors & agents searching on LoopNet.

CoStar is the other important CRE Service.  It gives us exposure to more brokers than any other service. And when we are searching on behalf of a buyer, it gives us a wider net; since CoStar, with 1,029,000 listings, has more than 500,000 listings more than LoopNet.

The take-away:  As part of your agent selection process, ask which services your property listing will be posted on — and when.

On January 1, 2013, Congress passed the American Tax Relief Act of 2012 (“the Act”). Also, beginning in 2013, certain taxes imposed by the Patient Protection and Affordable Healthcare Act (commonly known as “Obamacare”) come into effect. These changes to the tax code and continuation of prior tax provisions will affect real estate investments. It is important to consider the following four impacts and discuss their implications with your tax advisor prior to making any real estate investment decisions.

1. Increased Capital Gains Rates – Prior to 2013, the capital gains rate was 0% for taxpayers in 15% or lower brackets and 15% for taxpayers in higher brackets. Prior to the Act being passed, rates were scheduled to increase to 10% and 20% respectively. The Act extended the lower rates of 0% and 15% for most taxpayers in 2013. But, the maximum capital gains rate in 2013 for taxpayers who have over $450,000 in taxable income increases to 20%.

2. 50% Bonus Depreciation Extended – Bonus depreciation under IRC Section 168(k) was first introduced in 2001 after the World Trade Center attacks. Since implementation, it has continued to be a fixture in the world of tax planning. The Act extends the 50% deduction for new property acquired and placed in service through 2013. The Act also extends the placed-in-service deadline for the $8,000 increase in first-year depreciation limit for vehicles subject to the §280F passenger auto depreciation limitations from December 31, 2012 to December 31, 2013.

3. 3.8% Medicare Contribution Tax on Investment Income – This new tax originates from the Obamacare legislation and applies to taxpayers with adjusted gross income in excess of the threshold amounts of $250,000 if married filing jointly ($200,000 if filing single). This tax is imposed on the Net Investment Income for these taxpayers. Net Investment Income includes interest, dividends, annuities, royalties, rents, certain “passive” income, and capital gains less applicable expenses. The tax is calculated as 3.8% of the lesser of an individual’s 1) modified adjusted gross income in excess of the threshold amount or 2) Net Investment Income.

4. Higher Limitations for Conservation Easements Contribution Deductions – Section 170(b)(1)(E) provided that an individual’s deduction for a qualified conservation contribution of real property is limited to 50% (rather than 30%) of the individual’s modified adjusted gross income less other contributions allowable for the year. An individual that is a qualified farmer or rancher can deduct up to 100% (rather than 30%) of the individual modified adjusted gross income less other charitable contributions allowable for the year. In any case, any excess can be carried forward up to 15 years. The Act retroactively extends the higher limitations through 2013.

Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that the author of this article is not providing accounting, tax, or legal advice nor is performing any legal, accounting, or other professional service. If accounting, tax, or legal advice or other expert assistance is required, the services of your CPA or another competent professional person should be sought.

Scott Headrick is a partner at Pinkstaff, Simpson, Hall & Headrick, P.C. He may be contacted at sheadrick@pshhcpa.com or (865) 690-7010.