THE ESSENTIAL ELEMENTS TO CREATE A SUCCESSFUL BUSINESS

THE ESSENTIAL ELEMENTS TO CREATE A SUCCESSFUL BUSINESS

For a small (or even a large) business to be successful requires 5 essential elements.

1.      Good management.

2.      Systems.

3.      The right staff.

4.      Top class state of the art training.

5.      “A Name”.

Looking at these in reverse order;

            “A Name”? This is the reputation of the business not necessarily the fact that it is part of a well known group or franchise. Noble has been part of enough groups to know that the while the name of the front door may be the same, the “Name” varies widely depending on the individual branches attitude to all the other elements.

            Training. There has been a variety of phases in training in our industry and I am sure this has applied in others. The governments have tried to compel training in business with varying success.

            A few home truths about training;

A.     You can’t teach anyone anything they are not ready to learn. If you force an individual to train they will actively fight the acquisition of knowledge.

B.     An employee’s attitude to training reflects directly in their attitude at work. I have never yet seen someone unwilling to train who went to the top in his career.

C.     There is a huge difference between “knowing” and “doing”. Most training is wasted because it never hits the road, but just remains notes on paper.

D.     The implementation of knowledge is more important than the acquiring.

The right staff. The best thing in the book “Good to Great” is the requirement to

“Get the right people on the bus, the wrong people off the bus, then get the right people in the right seats on the bus”. In order for a business to grow and prosper in the long term, management has to follow Michael Gerber’s plan in “The E Myth” and make themselves dispensible. This can only be achieved through management delegating and that will only occur where management has faith in the staff.

Systems The more systematic the approach to the daily functions of the business, the smoother the operation and the less stuff ups are likely to occur. Systems will also influence how quickly the stuff ups are corrected. They also overcome problems associated with key staff being on leave as their replacement will be able to operate efficiently.

Management This is the most important of the key factors as management decisions control all the other elements. The key here is for management to work towards making their people capable of running the organisation without them so the business will survive independent of any one person.

If you are an individual operator such as a real estate salesperson, think of yourself as a business and apply the same approach. The Americans love “buzz” words and they have a term for someone working as a small business inside someone else’s business. They refer to them as “intrapreneurs” rather than entrepreneurs. It still works.

In today’s world with many businesses unable to survive, it may seem too late to start down this road. Naturally the best time to have begun was when times were good but if this plan is not in place now then when will you begin?

Ross Cutten

Owner / Director

Noble Real Estate

WILL THE SECOND .25% INTEREST DEDUCTION REVIVE THE SALES MARKET?

WILL THE SECOND .25% INTEREST DEDUCTION REVIVE THE SALES MARKET?

7.12.11

The simple answer is no.

The current low demand from homebuyers compared to sellers is attributable more to a lack of confidence than the rate of interest.

Buyers fall for the trap of trying to pick the bottom of the market and they will fail, but it will not stop them trying.

The one area where the drop in interest rates may affect buyers is with investors.

We have only 2 properties vacant in our rent roll of over 500 managements which makes the vacancy factor less than .4%.

REIWA’s vacancy factor is 2.4% (average is 3-3.5%).

According to the forecasters that should lead to higher rents being charged next year, increasing returns.

We already have property with gross rentals above 5%, which is the level at which investors have bought in previous years.

So watch this space.

Ross Cutten

Owner / Director

Noble Real Estate

THE TWO TYPES OF PROPERTY MANAGEMENT

THE TWO TYPES OF PROPERTY MANAGEMENT

One of the most important questions someone looking at having their property managed should ask is; “Do you have a Tiered or Portfolio system of operation?”

What is the difference?

In a tiered system the various duties are the responsibilities are handled by a number of different people in the Property Management Department.

The viewings may be handled by one staff member, while someone else chases rent arrears and a further person is responsible for quarterly inspections.

In a portfolio system, one Property Manager looks after all the duties with the possible exception of the administrative tasks such as end of month payout.

It has been our experience that business owners prefer the tiered system while Owners and Property Managers prefer the portfolio style.

We operate the portfolio style as we are more interested in what our owners want than what we might prefer.

To find out the relative advantages and disadvantages please phone Ross Cutten on 041 9944 029 or Rebecca Cutten on 0404047205.

Ross Cutten

Owner / Director

Noble Real Estate

PROPERTY MANAGEMENT MYTHS

PROPERTY MANAGEMENT MYTHS

There are some strange ideas in the world of property management which owners pick up from various uninformed sources. I will try to address some of the most common misconceptions I have come across in over 2 decade’s involvement in this business.

“There is no need to have rental protection insurance if I use a professional property manager.”

 I cannot think of a single investment that does not involve some element of risk, whether stocks, bonds, futures or even bank accounts.

Residential real estate has a history of offering sound investment, however the unforeseen can happen and this can impact the flow of rental income. The trick is to be prepared.

Take the following for example:

Good tenant, excellent references, been employed by the same company for a number of years. For three years he is the ideal tenant and, always pays rent on time. The tenant loses his job or his wife leaves him for the next-door neighbour and he is left with children to support and no income. Now he would not be considered such an ideal tenant.

A professional property manger puts all applicant tenants through a rigorous screening process at the start of a tenancy to select the best tenants.

However, just like a job applicant, we see them at their best.

In addition, we cannot predict the future of their employer or their marriage.

Regardless of how good the property manager is or how many reference checks are done; there is no way of predicting potential complications to rental income flow.

So just like it is prudent to carry insurance against fire, we recommend owner’s insurance against these sorts of problems.

The best part is the insurance is cheap and the cost is a tax deduction.

Ross Cutten

Owner / Director

Noble Real Estate

HOUSING AFFORDABILITY FOR FIRST HOMEBUYERS

HOUSING AFFORDABILITY FOR FIRST HOMEBUYERS

Lately there has been much said about the supposed high price of homes making buying unaffordable for first homebuyers.

At the risk of sounding like a spoilt baby boomer who had it so easy, I beg to differ.

When my wife and i got married we were fortunate enough to be able to move into our own home straight from our honeymoon.

We built our first home on a modest block in Gosnells.

In order to buy it I had to have a 10% deposit and the cost of the house and land was 5 times my annual income.

Here is where the difference arises.

It consisted of a 120 square metre 3 bed 1 bath house with lounge, dining, kitchen, meals area and a built in robe to the main bedroom.

Now for what it didn’t have.

It lacked floor coverings, window treatments, light fittings, driveway, carport or garage, fencing, landscaping, patios, pergolas, air conditioning, fencing, or anything else.

We endured 2 winters on the concrete raft while we saved for the floor coverings and window treatments.

In the Rockingham district there are plenty of homes including extras available for 5 times a first home buyers income, but they aren’t prepared to accept such a modest start.

There is one other difference.

We had no credit cards.

Ross Cutten

Owner / Director

Noble Real Estate

THE HAPPINESS INDEX AND THE IDEA OF CHOICE

THE HAPPINESS INDEX AND THE IDEA OF CHOICE

I saw a new item on TED yesterday in which researchers had scored countries in terms of their level of happiness.

It was fascinating to watch and Australia surprisingly seems to rank only in the middle of the countries studied.

I also saw a programme on the ABC called Big Ideas featuring a discussion which also touched on the development of cities and people’s sense of attachment to the place where they live. The programme also mentioned people’s happiness and their sense of belonging to a community or place.

They mentioned something which has dawned on me as I have grown older and that was how people’s sense of happiness and their sense of having choices are related.

Quite some years ago I was trying to discover a simple key to what all human beings have in common and what it is that everyone is pursuing.

My conclusion; Everyone wants to be happy.

It seems simple enough except that everyone’s idea of happiness is different.

So, the conclusion I came to is that most people complicate this too much- simply find what makes you happy and do more of that- discover what makes you unhappy and do less of that.

When I have talked to people about this in the past they react in predictable ways.

Most often they provide me with a list of HAVE TOs.

You know the sort of thing, “I have to go to work, I have to take care of my kids”.

Lou Tice of The Pacific Institute pointed out years ago that you don’t actually have to do anything- life is a choice. The only thing you truly have to do is take up space. ( I am always happy to discuss these ideas directly).

The older I have become the more I am convinced that the happiest people are those who FEEL they have a sense of control over their lives and are able to choose they way they live.

If you are going to measure the success of your life by what other people are buying, doing, or pursuing then you will have no sense of control because the source of your motivation lies outside your choices. You will be a slave to others choices.

I am currently staggered by the sense of lack that exists where I live in the most prosperous times in the most prosperous State in the best country in the world, both economically, politically and socially.

How does all this relate to property?

When you are renting a home rather than bought, you cannot develop a sense of belonging to a place because, if the owner wants his property back, you are obliged to move on.

In my opinion one of the best places to start developing a sense of control is to put down roots in a place that feels like home.

Ross Cutten

Owner / Director

Noble Real Estate

LETS GET REAL ABOUT BUYING OVER THE WEB

LETS GET REAL ABOUT BUYING OVER THE WEB

I heard a discussion recently on a community radio station about how people could and were buying products increasingly over the web and the conversation concluded with the announcer declaring that retailers would “...just have to get their act together”.

I recently made myself fairly unpopular with some friends who were discussing how much cheaper they could buy motor vehicle parts from the USA and were grumping about how they were being ripped off, when I pointed out some of the realities of being an employer in Australia.

In our modern, fast paced world it seems few people have time to look behind the quick sound bite or headlines to explore what is actually going on.

First some reality about competition if you are in the business of retailing...the only means you have of competing is on price.

So let’s look at how uneven the playing field for our retailers compared to the USA.

The minimum wage in the USA Federal $7.25/hour Highest state Washington $8.67 for a 40 hour week.

Australia’s is $15.51 for a 38 hour week.

With close to parity in the dollar that means we get paid twice what workers in the USA get.

Annual leave USA under Federal law reqirements........none Usual 10 days annual leave.

Australia 20 days plus 10 public holidays plus annual leave loading 17.5% (non-existant in the USA).

Sick leave.....USA no entitlement.

Australia 10 days including compassionate leave extending from grandparent to grandchild.

Not many people can explain long service leave here in Australia even though all workers have the entitlement so I will explain.

When Australia was being settled there was no local people qualified to run things such as public works or water supply so they had to be recruited from The dear old mother country, the UK.

As an inducement these employed were guaranteed 6 months Long Service Leave every 6 months.

Why 6 months?

So they could take a trip by boat taking 6 weeks to get “home”, have 3 months at “home” and take 6 weeks to sail back.

This leave entitlement still exists even though almost no-one calls England “home” and you can be there in 18 hours by jet.

We have not yet considered maternity leave nor some of the myriad other occupational health and safety laws, unfair dismissals or other laws imposed on Australian employers that many other countries are not subject to.

Please don’t misunderstand, I am not suggesting we reverse the benefits we have.

I am simply saying that before you criticise local retailers you had best take another look at how difficult it is for these traders to compete and recognise that the playing field is far from level.

We also need to understand that the way a modern economy works each of us needs to have our customers employed to sustain our own standard of living.

If you are buying from overseas under $1,000 GST free that is 100.00 not going to your tax office.

Ross Cutten

Owner / Director

Noble Real Estate

THE AMAZING EFFECT OF TODAY’S MEDIA

THE AMAZING EFFECT OF TODAY’S MEDIA

I have been selling real estate in the Rockingham District since 1984.

When I started a typical well presented home in the Rockingham Park home was selling for around $55,000.

My father, who was in real estate for 42 of his 50 working years told me he could have bought land in Applecross just after WW2 for 50 pounds ($100).

I have just read the latest presentation from the Perth Chamber of Commerce and Industry on the future for Western Australia showing economic growth in India of 37% since June 07 of 37%, China 31%, Western Australia 23%, Australia 11% as opposed to the USA with 1% and Japan with -5% and yet people are more fearful than at any time I can recall.

I believe the level of fear is mainly attributable to the incessantly negative forecasts in the media, principally from economists who have predicted 28 of the last 3 recessions. They are the modern equivalent of Chicken Licken, running around telling us the sky is falling. My beef with them is that there is no accountability when they are wrong.

Stand by for the shocking truth....No-one can predict the future (even with a degree in economics).

Perth’s most famous valuer predicted in 2004 that the market had peaked and advised against buying. In fact the market ran on for a further 2 years.

In London and New York prior to the turn of the 19^th century all the doomsayers were forecasting both cities would drown in a sea of horse manure. How could the forecasters be expected to foresee the internal combustion engine?

Warren Buffett is quoted as saying “When people are fearful be greedy” but buyers are still sitting on the fence, I presume thinking that they will buy when the media report the market has moved up. Do they fail to realise that sellers will see the same reports and therefore will be more confident of achieving a higher price?

In the very latest news from REIWA sales are up 25% from 4 weeks ago and 34% from one year past. First home buyer demand is up 10% and is higher than any time since March 2010.

Is this the beginning of a new trend?

I have no way of knowing, but certain facts hold true.

W.A continues to receive 1,000 people per week from interstate and overseas migration.

Home building has been subdued below normal for some years.

Our rental property vacancy factor continues to be extremely tight indicating continuing solid demand (people have to live somewhere), and rental returns on recently purchased properties are showing 5% gross return or above.

Humans still buy food, then clothing, then shelter in that order and for shelter they have only 2 options....buy or rent. Either way they must be housed and cannot delay the decision.

Real Estate continues to be much safer than shares. A company can go broke and the shares become valueless. That cannot happen with housing.

So, are you going to move like Warren Buffett or wait for the herd?

Ross Cutten

Director

Noble Real Estate

RISK VERSUS RETURN

RISK VERSUS RETURN

The current Real Estate market (as well as the share market) will prove to be another shining example of why the rich keep getting richer and the poor keep getting poorer.

Throughout history it has been a truism that the riskier the venture, the higher the return.

Lessons can be drawn from history from the Spanish Conquistadors chasing gold and silver in South America to indentured workers promised land in America.

That is why the returns from depositing cash in the bank will always be less than other forms of investing. The other enemy of cash deposits is inflation (Do you understand the rule of 72?).

By far the majority of people fail to understand that doing what appears to be the safe thing and turning assets into cash when prices are down, increases greatly the risk that they will miss out when those assets rise again in value. (Remember cash ONLY depreciates through inflation, it can never be worth more than the face value deposited).

Again, historically, people have demonstrated time and again that they suffer from a herd mentality. The reason is fear.

I encourage you to separate yourself from the herd.

The first thing you need to understand is the difference between investing and speculating.

Just ask yourself if you believe that BHP Billiton or one of the big four Australian banks actually lost as much as 4% or more of their true value in a single day during the recent herd panic on the stock exchange.

Another reason to acquire real estate is that it doesn’t lose 4% of it’s value in a single day and has always increased in value. The reason is that it is a finite resource. In other words, “Get into Real Estate son, they’re not making any more of it”.

Want to discuss these ideas further? Call Ross on 959 22 222.

Ross Cutten

Director

Noble Real Estate

WHO IS ABRAHAM MASLOW AND WHY IS HIS BOOK IMPORTANT?

WHO IS ABRAHAM MASLOW AND WHY IS HIS BOOK IMPORTANT?

Number two in a series on planning your life goals

Abraham Maslow had a PhD in Psychology and from his research into human motivation he designed a five stage pyramid in which he outlined how human beings would always satisfy their needs.

It has become known as ‘Maslow’s Hierarchy of Needs’.

http://en.wikipedia.org/wiki/File:Maslow%27s_Hierarchy_of_Needs.svg

It is fundamental to human behaviour and is forms the basis of my belief that a roof over your head should be number three on your list of priorities right after food and clothing.

Despite the fashionable talk of renting rather than buying the fact remains that at the end of everyone’s working life they need to own their own residence if they are to live a comfortable retirement.

So target you owning your own home first.

Noel Whittaker, one of the most level headed investment advisers appearing in the newspapers today, says that there is no more tax efficient investment than paying off your own mortgage.

Why?  Because you are paying your mortgage in ‘after tax’ dollars.

If your tax rate is 30% and your mortgage is $1,400 per month you need to earn $2,000 per month to pay the mortgage i.e. $2,000 earnings less 30% tax or $600, leaves $1,400 to pay the mortgage.

So before you start chasing investment properties, stop and consider the ideas above.

You will not get that advice elsewhere.

Ross Cutten

Director

Noble Real Estate

ANOTHER WARNING FOR SELLERS

ANOTHER WARNING FOR SELLERS

If you are about to list your home for sale it pays to ask about any further fees which you may be liable for.

It would appear that some agents are not satisfied with just charging a commission but are looking to charge sellers for many varied sundries.

The latest we have heard of is a seller being told she would need to pay $66 to have an ‘Under Offer’ sticker placed on her for sale sign.

This is a first for us as we have never heard of that one before.

Far from charging to use an ‘Under Offer’ sticker we do not use them.

Call one of our reps to find out why if you are curious as it is not up to me to educate our competitors.

So “Seller Beware”, read all the paperwork or make sure you fully understand the whole cost of listing for sale.

Ross Cutten

Director

Noble Real Estate

COMMENTS ON ARTICLE BY TERRY RYDER

COMMENTS ON ARTICLE BY TERRY RYDER

IN THE WEEKEND AUSTRALIAN 9.07.11

In Terry Ryder’s article he shares some of the abusive mail he receives and works his way around to his concerns about “the level of misinformation about property”.

In this we are in complete agreement.

He goes on to say “In my 30 years as a researcher and writer on Australian real estate I’ve never seen a time with so many myths and misconceptions masquerading as research and analysis”.

The points he outlines next we are in total agreement about;

“We don’t have a price bubble.

Our property values will not collapse.

We don’t have a chronic housing shortage crisis.

The great Australian dream is far from dead.

Negative gearing is not causing price inflation.

The inner city suburbs do not provide superior growth.”

I have some thoughts of my own as to where some of the myths originate.

For example take the idiot who recently went into print claiming that Australian house prices were 40% overvalued and using the U.S.A as his basis for the claim.

He seems to be unaware that many mortgages in the U.S.A. allow owners to simply return the keys to their lending institution and walk away with no more commitment. At one stage so many owners were posting their keys back to the bank, it gave rise to the term “jingle mail”.

He also ignored the fact that we have a highly regulated banking system.

When Mr Ryder and I were younger we used to have forecasters, but back then they had to at least show you their crystal ball and call themselves Madam Zara or some such so at least you had some idea they were simply showmen.

My suggestion to save you from falling for these forecasters is this. Ask them to show you where they forecast the GFC, the political assassination of our previous Prime Minister, the hung parliament or even the carbon tax.

Then weigh up the value of their foretelling of the future.

As most of the soothsayers are economists who are never held accountable (only a year ago they forecast 4 interest rate rises of which we have had one) it pays to remember the old definition of an economist as someone who has forecast 28 of the last 3 recessions.

Ross Cutten

Owner / Director

Noble Real Estate

HOW CAN YOU TRULY COMPARE?

HOW CAN YOU TRULY COMPARE?

When you are just about to sell your property you must get valid comparisons.

To do this it is not enough just to compare what is happening to property in the Rockingham District.

You need to know about your suburb.

For example, according to REIWA the number of sales in the Rockingham District were down 16% between the December and March quarters.

But within that average the number of sales in Safety Bay increased by 37% while those in Shoalwater went down by 40%.

There still remains only three factors which affect your chances of selling.

1.      Presentation

2.      Promotion (Advetising)

3.      Price

If the first two are right and the property isn’t selling, the answer lies with the price.

Ross Cutten

Owner / Director

Noble Real Estate

IS THIS A GOOD TIME TO BUY ?

IS THIS A GOOD TIME TO BUY ?

People constantly ask “Is this a good time to buy?”

My answer will also cover the question “Is this a good time to sell?”

This is one of the easiest questions I ever have to answer in real estate.

The simple answer is “Look at what everybody else is doing and do the reverse”.

Is everybody selling like today?

Then it is a brilliant time to buy.

For the sellers the question is “Is everybody buying?”

Today the answer is no. Everybody is selling.

So the answer is, If you can stay out of the current market, then do so.

“How long will we have to wait?’’

I am too old and smart to get involved in predicting the future even though it is currently fashionable to do so.

All I can say is that in 27 years I have never seen a market stay down as long as the current one, so the pressure must be building.

Ross Cutten

Owner / Director

Noble Real Estate

SELLER BEWARE!

SELLER BEWARE!

Following our commitment to NO BULL real estate here is some practices you need to be aware of in the local real estate industry.

1.      Beware of agents asking for you to pay advertising. Why? Consider the fact that one of my sellers (80 years of age) was asked to pay $1,000 up front followed by a further $500. She was refunded $125 when the property failed to sell. The same agency will list properties for sale without charging for advertising. It depends on the willingness or innocence of the seller.

2.      One of our local agencies uses the for sale sign on your property to sell their services. Shouldn’t the for sale sign be about selling your property?

(Please insert a photo of ours here).

3.      You need to know which websites your property will be listed on. The fact that you are as one of the cheapest agents in town promotes “on the worldwide web” is not enough. You must be on the two sites with the most visitors. They are....

realestate.com.au       and        reiwa.com.au

4.      You must have a member of the Real Estate Institute of W.A. Why? Because it is a precondition of membership of the institute that members have Professional Indemnity Insurance. This is there for your protection.

5.      You need to have advertising in BOTH the local paper and both the West Australian and the Sunday Times. It is true that the newspapers are losing ground but they are still a good source of buyer enquiry because not everyone is on the web and only 60% of buyers live locally.

Make sure your agent ticks all these boxes as we have too many sellers and too few buyers in the current market for you to risk not covering all bases.

Ross Cutten

Owner / Director

Noble Real Estate

THE CRAZY MARKETPLACE OF MARCH / APRIL 2011

THE CRAZY MARKETPLACE OF MARCH / APRIL 2011

Wherever people realise I am in real estate these days, they immediately want to know “How’s the Real Estate market”.

This is usually asked in the hushed tones normally heard before the start of The Death March.

I am currently telling them;

We had a good month in March and an exceptional start to April, in fact we sold 15% more in the first 14 days of April than in the whole of March, which as i said was a good month.

People are looking for signs of a turnaround, as confidence is low everywhere according to the popular press.

After 27 years in the business I need to see 3 months of consistent change before I will say it is a trend.

We have already had November, December and the first week of January look like a long term change only to go quiet.

The only thing I can predict with certainty is that sellers will pick up the trend before buyers and they then become less negotiable.

That is why it is important that buyers buy prior to the trend change, to buy at the best possible price.

Ross Cutten

Owner / Director

Noble Real Estate