What Does the Crossrail Commuter Project Tell Us About Strategic Land Investing?

Land values along the Reading-to-Sheffield line in Essex have increased by 96 per cent, demonstrating the pent-up need for housing in strategic UK locations.

Crossrail, the new, 75-mile east-west commuter train line set to become operational in 2018, is highly anticipated by the people who will see their travel times reduced and made more comfortable. As land values along the new line and nearest its stations increase, so too does an awareness of how UK land and home values can rapidly increase with easier workplace access.

The line means that an additional 1.5 million people will be within a 45-minute commute of London’s key business districts. But expanding commuter rapid transport is about more than helping people travel faster. Where new commuter rails go, new homes are sure to follow. This is due in no small part to the 96 per cent valuation increase to homes in these areas over the last ten years- (note: this statistic is from eMoov, the online real estate firm, based on comparisons to when the project was first actively discussed a decade ago).

Individuals and institutional investors understand the economics fairly well. Where there is work, there needs to be sufficient worker housing. In the UK, there is a distinct shortage of homes in general but not since the post-War period has there been as stark a shortfall in the availability of housing.

Growth in employment and the availability of housing is almost never in perfect sync. Consider these two disparate factors as measured in 2012 through 2013 from the Government’s Office for National Statistics:

Job growth post-recession is robust in some places – The top ten highest job growth areas are naturally concentrated in the London metro (Westminster, Islington, Tower Hamlets, Hackney, Camden and Lambeth), but also include Manchester, Birmingham, Leeds and Milton Keynes. The occupations that are growing fastest are in the professions, science and technical fields, followed by accommodation and food services and information/communications jobs.

Housing is in abundance in the wrong places – There are too few homes in some places and many under-occupied houses in others. Where there aren’t enough homes, larger families (including multiple generations of families) occupy smaller homes and flats; there are 1.1 million households categorised as overcrowded, most in privately rented or social housing, but some in owner-occupied homes as well. And yet, there are an estimated 16.1 million households with at least one spare bedroom. These under-occupied homes are largely in the Midlands or in the north of England (Rutland, South Northamptonshire, Rushcliffe and elsewhere), while local authorities report the areas in and around London as the most over-occupied. These include Newham, Brent, Tower Hamlets, Haringey and Waltham Forest.

That seek planning authority changes to land use (converting unoccupied space to that which is zoned to residential and commercial development), these asymmetries spell opportunity. New transport lines and growing businesses always spell a shift in where people work and live. The response by investors, developers and homebuilders is to provide the kind of housing that are needed in dynamic economies.

Investors need to look beyond simply where development might provide a high yield in asset growth. They also should consider where real estate might fit within their personal wealth-development agenda. Speak with a personal financial advisor to discuss factors specific to and external of the investment.

Rehab Projects Are Often Great Investment Opportunities – Why Can They Become Huge Disasters?

A rehab project is easily seen as a great investment opportunity. You are able to purchase the project at a fraction of the replacement cost. After all the cash is invested, the total cost per square foot is far below the competition. You can see an easy path to much greater cash flow after the vacancy is filled and after the rents are increased. Unfortunately, there are a ton of issues that can throw the plan off of the expected course.

A rehab project did not get in the current condition because the owners wanted a run down dilapidated apartment complex. While the situation can be and often is the result of extended neglect, the buyer must consider that neighborhoods change, crime problems develop, basic infrastructure issues become insurmountable.

Where to begin?

First, is the property in a rentable location? Spend time understanding the schools that service the property. Look at access to employment and shopping. Find out what the crime issues are on the apartment complex. Determine what crime in the surrounding area is. Check out the demographics of the area and check with local merchants, consumer, and other sources about the reputation of the area. If too many red flags begin to develop, then you may have identified a project that could resist your best efforts to rehabilitate.

Next, if the property demonstrates solid performance, look at the physical issues with the project. Are the kitchens unable to meet expectations for today’s consumers? Is the foot print to small? What changes are required to meet utility cost expectations? Does the project require central AC? Is parking inadequate? Do the units require washers and dryers in the market and for the demographic the project will serve. What about dishwashers? Are the amenities inadequate? Are the floor plans positioned wrong for demand in the market?

In the case of infrastructure issues like those suggested for review above, the right rehab plan may well be able to resolve the issues. The key considerations are putting together a detailed rehabilitation plan that resolves the issues thoroughly for rentability. If the costs begin to rise to high for the project to be viable, you will know to abandon this prospective project. However, if you can meet the project well below your affordability considerations you have identified a potentially strong performing asset.

While the considerations above can protect against a bad decision because a rehabilitation requires repositioning the project the risk is much greater because rentup may not occur as expected. Renting costs can be too great. Rehab costs may over run. Rent rates may be weaker than expected. Management issues may be greater than anticipated. In all cases, the project can become continually more challenging and lead into failure.

Technology Increases Small Business Profitability

During times of economic struggle, most small businesses end up making cuts and changes to keep their businesses in the green. From laying off staff to decreasing business travel, reducing marketing efforts and ending bonuses and raises temporarily – there are a variety of ways small businesses look to cut their expenses. At the same time, they look for ways to increase profitability – especially when operating with reduced staff. Technology becomes even more useful as small businesses strive to increase productivity and efficiency.

There are so many gadgets and technology solutions out there that it can be easy to buy more than you need, or to buy the wrong types of products that just don’t deliver the solutions your business needs. When deciding what types of technologies can help your business reach its goals, here are a few things to look for:

Communications – technology is well known for its capability to improve the ability for people to communicate with one another. Whether you’ve got employees on the road or down the hall, virtual phone systems can route calls to cell phones and keep everyone in touch regardless of location. Instant messaging and email provide quick ways to communicate with the written word and keep documentation of these conversations for future reference. Social media and networking sites provide a way to keep in touch with co-workers, customers, and the competition at a glance.

Data Storage, Warehousing and Search – If you find employees are spending a lot of time looking for certain reports, forms or other data that they need to perform their job responsibilities, investing in network hardware and software to keep track of the whereabouts of your data can be useful.

Telecommuting – many small businesses also find that there isn’t a need for all employees to work in the same office building in order to get their work done. Having employees who telecommute requires the technology to make that happen (a secure network for employees to access data they require to do their job; improved communication systems to receive incoming phone calls at their homes or on their cell phones and the ability to keep in touch with co-workers in different locations). Having employees telecommute can save you from needing a larger office space, which keeps your overhead costs lower, too.

Customer Relationship Management – having some sort of CRM software to help you manage your database of clients and prospects is well worth the investment. Many businesses will tell you the “money is in the list”; meaning the amount of money a company earns is directly proportional to the number of people on their mailing list. Some companies use software like ACT, Goldmine or SalesForce to track their clients and leads. Others have custom-built software developed to handle unique needs that can’t be addressed with existing software.

Technology makes it possible for small business to increase productivity and compete with larger businesses on a smaller budget, thereby increasing profitability. Efficiency and organization is improved through the use of appropriate data storage, search and mining, customers are better managed through customer relationship management systems, and it is possible for money to be saved when employees telecommute from home. Before investing in any new technology, identify the unique needs of your business and determine which technology will best meet your needs.