Monthly Archives: August 2012
One of my friends closed on her first place about a month ago. Now that she’s mostly moved in, I thought it would be a fun/nerdy thing to go over all of the expenses that she’s incurred. As I mentioned in my last real estate post, I have to hold off on thinking about making a home purchase because a down payment would consume me and I would have no money left to buy all of the things that would actually fill the house. Analyzing my friend’s expenses was a perfect chance for me to really understand that. The specifics for this place are:
- Southern California condominium
- Newer construction (2003)
- 1,200 square feet
- 2 bedrooms, 2.5 baths
- Tri-level with two-car garage
Expenses in the Form of Suede Sectionals and More
Every home purchase is different and in this case, my friend paid exactly $0 for appliances. The stainless steel refrigerator, dishwasher and oven were included with the purchase, as well as a stackable washer and dryer.
The house had a nice color scheme but the walls and paint showed a lot of wear, so she needed a painter to match the colors and paint some high ceilings in the living room, and complete a simple paint job in the two bedrooms. She received three estimates that varied wildly: The first was $2,000 for the whole job, the second was $1,300 for the whole job and a third was $2,300 for just the living room. In addition, not all of the contractors offered an itemized estimate. She did some research and went with the lowest bid that explained how the estimate was generated (showing the cost of materials and labor) and was very pleased with the results.
New Carpet: $760
The living room carpet needed to be replaced. Although the living room is fairly small, it is just wider than 12 feet and carpet is manufactured in 12 foot widths, so this became a more expensive item because of those few extra inches.
Carpet Cleaning: $300
The carpet on the stairs and in the bedroom was in better shape but still needed to be cleaned. She found a local company to complete the job quickly.
Furniture and Decorations: $3,700
Budget killer!! But seriously, my friend did not even go crazy in this department. She had to buy a lot of stuff since she was previously living with roommates and they owned most of the living and dining room furniture. So besides the little items like curtains ($100), bedding ($170), rugs ($300) and a TV stand ($150), there was a sectional ($1,100), really nice dining table and chairs ($1,080), bedroom furniture ($800) and a television, which was her mom’s housewarming present to her.
Total Damage: $6,060
$6K to furnish and ready your first place is not bad at all. There will still be little things to buy, and I didn’t include the cost of small kitchen appliances, dishes or silverware (or the Dyson vacuum which is another big-ticket item), but those purchases will continue to happen for a few months after you move into your first place on your own. If you rent your current place without roommates, you would probably already have most of the kitchenware. But then you may find you need to decorate the half-bathroom and drop a clean $200 at TJ Maxx on some unsuspecting Saturday afternoon. I know I would not be ready for all of those expenses, so getting to see my friend go through the process was an excellent lesson for me to wait until I am better prepared financially. So even though you may have saved a 10-10% down payment, don’t discount the other homebuying expenses that will start to come up after closing and moving into your new home.
Other Lessons Learned:
- Estimates will range greatly, so ask for referrals, research online where you can, or find someone you know who can confirm that the estimate makes sense.
- Use your real estate agent as a resource to locate services like carpet cleaners, painters or handymen.
- Look for local companies who can offer a discount to residents over using the “big name” company.
- Take your time in making purchases. You don’t have to buy your couch from the same place you bought your bedroom furniture. The first few months are a transition so your place doesn’t need to be instantly complete.
I have two major goals in my financial life: become a real estate owner (both for my personal home and investments) and to own and operate a business. The problem is, the business I want to own seems to change in my mind every few months (laundromat! yoga studio! green juice bar!) and I need to really start getting serious about my analysis because paying off my credit cards is actually starting to be a foreseeable reality, even in my dangerously short-sighted mind. And since I love thinking about businesses and my friends are sick of me talking about them, I’ll consider the pro’s and con’s of each of the business I’m considering in a new series I like to call: BILO.
BILO: Business I’d Like to Own
Just like a MILF, which stands for Mother I’d Like to…., uhhh, you know, BILO is an acronym for a Business I‘d Like to Own. And there are so many of them! And one of the ones I have always thought is a good idea is a seasonal restaurant.
What is a Seasonal Restaurant?
The seasonal restaurant is a mainstay of places with a busy season. The most successful seasonal restaurants I have seen are up and down the Eastern Seaboard, from Maryland to Maine. Think of the lobster place in Maine, a casual food joint in Rehoboth or Ocean City, Maryland, and all types of restaurants in the beach towns of New Jersey and New York. In places with temperate weather and tourists visiting year-round, like California, few restaurants are only open for the summer. The population in California really doesn’t swell in the summer the way East Coast beach towns do, especially on the holiday weekends from Memorial Day to Labor Day. Vacation and tourist towns all over the country from the Outer Banks to Block Island have tons of thriving seasonal restaurants. I’ve met the owners and managers of a few of these restaurants in the past 6 years.
Pros of Owning a Seasonal Restaurant
1. You are only in business part of the year. ….Obviously. This is the number one factor that makes this business attractive. For anyone who gets antsy in one place or could see the burnout risk factor in operating a high-volume, successful restaurant 12 months a year, imagine the possibilities and rewards of a full-time income packed into 5-7 months of the year. Of course, the “season” is hardly just one season of exactly 3 months. One of the restaurants I know best is a seafood place in a New Jersey beach town (not Seaside Heights). The restaurant owners are back in town in early March and the restaurant starts operating on weekends around mid-April and stays open through the end of October or first week of November. They’re open 7 days a week from June to September, with their busiest season from the 4th of July to Labor Day. So that’s 7 months of operations plus at least one month of preparation and closing down at the bookends of the season. But if you manage your cash flow well, you have 4 months before you need to open the restaurant again!
2. Your expenses are minimal during the offseason.
While you’re still paying your lease, you aren’t operating on days where you have a full staff and no customers in the dining room. It costs a restaurant $X per day just to open their doors in terms of payroll, operating expenses and food costs, and if you are only open when the population of your town swells between 5 and 10 times the off-season population, you are going to have a full house more often than not. You’ll also be paying little or nothing in utilities when the restaurant’s doors are closed.
3. You have the off-season for planning ahead, making changes, recruiting staff and reviewing the past season’s strengths and weaknesses.
If you’ve ever worked full-time in a busy restaurant, you know there is little time for sitting around with your staff to discuss challenges and opportunities. You might get 10 minutes to discuss which meals to recommend that evening but the rest of the evening goes by in a quick succession of tables, meals, meltdowns and closeouts. Everyone is exhausted and ready to go home (or out to party). But while your season will be even busier and more harried, the off-season will give you time to do a thorough analysis of food costs (and menu plan around more profitable dishes), meet with vendors when they are in their own off-season, review staff needs and anything else related to the business. Having been away from the action will allow to see it with a different perspective and make better decisions as well.
Cons of Owning a Seasonal Restaurant
1. You’re working when everyone is having fun.
Restaurant ownership is hardly passive income. And most of the seasonal restaurants I am considering are dinner-only spots where you will be working very late and on every holiday. 4th of July and Labor Day may well be your biggest weekends. Every Thursday, Friday and Saturday night are nights when you need to be working and you may not want to. There’s no time for ladies night or guys night or maybe even date night because you need to be at the restaurant.
2. Banks and lenders are wary of your business.
Turns out banks are not dying to lend money to small business owners in cash-based, seasonal businesses. Especially if you are buying a restaurant at a 3X multiple of 12 months’ net income (the max that most banks want to lend), and you need a loan for a majority of that purchase, the bank wants to receive the same amount on a monthly basis and may not feel that you have the ability to provide that. Personal funds, private investors or family loans may be the easier options to obtain, but could be more expensive or place a strain on relationships. Or maybe you would like to put real property up as collateral for that bank business loan?
3. You might not like working in a restaurant.
I would never buy or start a restaurant without an intimate understanding of food service and the restaurant business. That 9 out of 10 statistic might be off, but 60% of restaurants close or change ownership within the first three years. So not only do you need to really know your business and have experienced managers and chefs in place, but will you be able to handle the work, day in and day out for seven months of the year? This last one is the biggest question for my own situation. I’ve worked in restaurants for a few months at a time when I was younger, and it’s physically demanding and requires a thick skin. Nobody is sending you emails like “When you get a chance, please be sure to fold the napkins for tomorrow. Thanks so much for all your hard work!” It’s more like “Yo- napkins, now” and you get to it. Of course as an owner/manager, you’ll be in charge of making sure everyone is showing up for work, doing their work, hopefully not on too many drugs and keeping the customers happy. You’ll work with the same group every day and become intimately acquainted whether you want to or not. Some of your staff will come from the fringes of society. Are you comfortable with that? Can you handle working with all kinds, not just middle-class people with more or less the same lifestyle as you? On the other hand, can you treat all of your guests with the same level of service, whether it is the billionaire in town from NYC or the locals? Sure, you appreciate the billionaire taking care of your waiters but do you know how to take of your regular customers who can come to make up a large percentage of your business?
So that’s BILO #1. I am still interested in the seasonal restaurant model. If you go into business with owners with current, successful restaurants or acquire a restaurant with an established presence in a seasonal town, your odds of success are much better. With really strong market research and concept development, restaurants can be an excellent business. But it’s no easy job, it’s still risky even when you think you have a market on lockdown, and you can lose popularity quickly if a new player comes into town.
If you are interested in small business, would you consider owning a seasonal restaurant? What about any other type of seasonal business?
The financial world offers a lot of lending opportunities and strategies for those that require instant money for their businesses, homes and emergency expenses. While banks have been the traditional source of relief for all these financial needs, today, to borrow cash fast is the quicker resolution for many in these days of automation and digital technology. Processing on line quick loans is the newest financial product that has caught the fancy of the working people who have considered instant coffee, instant noodles and quick melt cheese as the lifestyle to adopt to maximize the use of time. This loan is called the payday loan.
Bank Loans No Longer the Best Option
To borrow cash fast, borrower needs to consider the best option possible. Otherwise, the purpose for the loan will be defeated. Today, direct lenders for payday loans in UK are readily available to extend loans for those with legitimate and active payroll accounts. The payday loans are easy to process and do not require the complicated processing of voluminous files like the regular bank loans. Instead, these online quick loans can be easily found on the Internet through the websites of accredited loan brokers who cater to those who need to borrow cash fast. They can always do it as soon as they reach the house from work and search the Internet for brokers who advertise for payday loans. After filling out the required information, the brokers will be able to forward your loan requirement to the best lending companies or private lenders which they think will best meet the borrower’s requirements or needs.
Payday loan brokers can simplify the selection for you by forwarding your requirement to a number of direct lenders for payday loans. All you need to do is go online, fill out the required information, and you will get your responses and options immediately, sooner than you think. What is more important is the fact that brokers gives you a well-screened selection of lenders to choose from.
Fast Release, Easy Repayment Method
Direct lenders for payday loans make it a point to make processing and repayment an easy method. This is basically due to the fact that payday loans are short-term loans not exceeding 31 days; and second, because it only involves up to £1,000. Therefore, apart from credit standing, direct lenders for payday loans mostly require the presence of an active payroll banking account and nothing more. Upon approval and verification, the loan amount is transferred directly to your payroll bank account and you may withdraw the amount immediately.
This borrow cash fast system also provides for an easy repayment plan through the use of a debit card within receipt of the loan amount in the bank account. This is designed to make the next pay as the full payment of the loaned amount plus at least 25% interest.
In the event a problem arises during the time of the repayment, borrower may negotiate for an extension of the loan. In most cases, the full interest rate will still have to be paid. And the same amount of interest will still carry over in the next payment period.
This on line quick loan is so flexible and uncomplicated that it has become an instant favorite of many a stop-gap funds solution seekers. You just simply have to be a legitimate UK citizen with an active employment or job, and a corresponding payroll bank account. Then, fill out the required details on line and they will give you a quick assessment of how much you can loan. This is of course with the understanding that it is payable immediately on the next payday.
The smart and data-friendly folks at DQYDJ.net and I have collaborated on an article over at their site! That article considers construction spending as a percentage of GDP, and whether that metric means anything at all. It’s an interesting read, so go check it out. In the meantime, I am very interested in understanding the construction industry (since I work in it) and what economic trends change for builders. Residential construction is looking up, with a notable increase from 2011 in both permits and actual starts. But commercial and public construction projects are also worth considering, since those projects are often in our backyards, from transportation (light rail, airports), new schools, commercial centers and public infrastructure that needs regular maintenance and updating. The activity in the public and commercial sector has increased since 2009, but contractors are still not rosy in their outlook. Competition is fierce for each new project, with large numbers of contractors bidding on jobs. Contractors are well aware of this situation, but for the first time, I heard a public official of a very large LA public agency comment on the situation at a recent construction event. He acknowledged that while their organization had had a great few years in terms of building, it had been at the expense of contractors who had sometimes underbid so severely that they hadn’t been able to finish the project. All of us in the contracting community already knew all that, but I was amazed to hear a public official address the situation so frankly and openly. Even though I’ve often been dismissive of government agencies and assumed all of them to be slow, top-heavy and process-oriented versus results-oriented, this frank discussion of the main concern for contractors was exciting and groundbreaking. If key players on both sides can talk about how we can achieve great building results with reasonable margins for contractors, then progress for both sides is possible, not just major profits for contractors at the expense of public agencies or excellent savings for agencies at the expense of contractor livelihood.