Our #FinanciallyFocused panelist, from left, Leo Williams, investment advisor; Dennise Williams, host of FF, Janice Robinson Longmore, investment executive; Karla Henry, CEO of Lead Mortgage Brokers and attorney at law, Robert Taylor.
Watch here and enjoy our transcript below!
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Dennise Williams (DW) 00:31 : Real Estate has always been on the priority list when it comes to money-making. It has been a culture, that we feel our life incomplete without owning a piece of Real Estate. Having a safe roof over our head is what we need; additionally, we can find numerous benefits with Real Estate. This is one of the most important investment decisions that you will ever make in your life.
Before we get into Real Estate strategies, I’m your host Dennise Williams, with Financially Focused. We have a great panel that’s going to help us talk about what’s happening in the Real Estate market. Up first is Leo Williams who has been instrumental in bringing Jamaica’s first Real Estate investment trust re Kingston properties to the Stock Market. Welcome, Leo.
Leo Willaims (LW) 01:20 : Pleased to be here.
DW 01:21 : Then we have Karla Henry, who recently transitioned from just your average everyday mortgage broker to the CEO of LEAD. She’s going to tell us more about that.
Karla Henry (KH) 01:32 : Thank you.
DW 01:33 : Then we have Robert Taylor, Attorney at Law, who has specialized in Real Estate, and he’s going to tell us about how muKH he loves Commercial Real Estate, huh, Robert?
Robert Taylor (RT) 01:42 : Absolutely.
DW 01:44 : Panel, cranes are everywhere in Jamaica. It’s amazing to see how many large structures are going up at one time, and there are these wonderful luxury properties going up. Robert, I start with you, what’s driving this market? We’re all making all this money and can afford these high-end properties?
RT 02:04 : The cranes seem to be our new economic indicator. What I would start by saying is it is possible and likely that we had a pipeline of demand whiKH was not being satisfied and being deployed into the market, mainly because of planning and approval reasons. Very recently, the planning authorities have shifted their approaKH to planning approval, and one of the recent advents is increased density.
DW 02:35 : What does that mean?
RT 02:36 : what it basically means is that, for example, a developer who is putting together a development has limitations. In the past, you would probably only be able to build 35 rooms per acre, in some instances, 55 rooms per acre. The agencies have now, in some instances where there is public sewage, they have increased densities to 125 rooms per acre. What that allows for is a developer to invest in multi-family or multi-story dwellings. In the past, while there may have been a pipeline of demand, a developer may have been restricted to three stories and would need to plan and invest in a land bank in.
several pieces of land, wait a year, two years
DW 03:32 : It’s more expensive.
RT 03:33 : More expensive. So the cycle time for being in and out of a development may have been longer. Now, with increased densities, a developer can now put a 10- story tower up, and that can absorb a significant amount of demand and provided the needed supply in the market. So, I believe that’s one of the main drivers.
DW 03:56 : so, it’s actually cutting the bureaucracy?
RT 04:00 : The development cycle time, if you put it that way.
DW 04:04 : Karla, with all this density, there are now more apartments, so there is more need for your services.
KH 04:10 : Absolutely.
DW 04:10 : Tell me about your services.
KH 04:12 : I’ve kind of created, with my partners, a kind of one-stop-shop, and I was kind of doing that before, where I had these contracts with the banks. Right now, it’s a free service to eaKH person. We try to find the right bank for the person. People tend to want to be driven by rate alone, but there are so many areas that you have to focus on. We have to look at your debt, we have to look at your picture, we have to look at your long-term goals as it relates to you buying your first property or your second property, or an investment property, as it may be. Some people know, and some people don’t, you have a relationship with the NHT, so if you’re looking at your NHT benefit and need an additional piece of loan, you can get that through our service as well because the banks have a relationship…
DW 05:01 : So, you’re handling my paperwork?
KH 05:03 : Handling the paperwork? Yeah, you have to fill out some of it, but we try to assist with that piece as well. Not all of it is a lot of work for you, it’s really about reading and endorsing what you have read. The biggest part of the process is getting pre-qualified, so at least you know what your borrowing power is, and also for the realtor to know what kind of property to show you.
DW 05:28 : Leo, you’re the money guy, you’re the implementation guy. Where’s all this investment money coming from to fund. Karla has more work, Robert has more work because he’s saying that the development cycle has been expanded, and shortened in some cases. Karla is saying that persons who need to be pre-qualified are coming to her, so there’s money, it would appear, to be on the retail side and on the development side. Leo, you know all things; where is the money coming from?
LW 06:03 : Generally, over the last few years, interest rates on other fixed-income investments have been falling, so investors are still hungry for good returns. They are looking to shift their funds into opportunities that can grow, so there might be more funds coming in from that end. As Robert was describing, other high densities will drive development into the higher-end of the market, so that’s probably bank-driven. If it’s not bank-driven, it could be driven by a number of private firms.
DW 06:40 : Like pension funds?
LW 06:41 : No. Firms like Signas, Proven, like other groups of pooled investments that are actually looking to take positions in some of these growing opportunities.
DW 06:53 : That brings me to my next question. Robert, is it safe to buy any type of property because Real Estate always increases?
RT 07:02 : Safety is a relative term. Real Estate has traditionally been a reliable store of wealth, but like any other asset, it is susceptible and vulnerable to economic cycles. We saw the period of the late 90s with the intervention in our local banks by FINSAC. We saw a period of credit restriction and the demand for property became virtually nonexistent- prices plummeted. In the early 2000s, property prices recovered. Property prices, certainly at my experience in the last year since demand has surged, we’re seeing property prices in some localities move as muKH as 30 percent.
DW 07:55 : Like where? Where is moving to 30 percent?
RT 07:57 : Certainly within what we call the golden triangle. In the communities where the is increased demand. Primarily communities that have the infrastructural requirements to support community development. So, in the Liguanea area where there are sKHools, there are the hospitals, there are the embassies, there is shopping. The Liguanea, Kingston 6 area, Kingston 5 area, we’re seeing a surge in demand. We’re also, hopefully, seeing some resurgence and interest in the Downtown area as the availability of property for commercial development, as the economic cycle shows improvement.
DW 08:41 : Karla, in your experience, let me be clear, are you mainly retail or are you across the board?
KH 08:46 : Across the board.
DW 08:48 : So, in your experience as a mortgage broker, in a period of rising prices, what are you telling people to do? Am I going to qualify for the house I want? Prices are going up.
KH 09:02 : It depends on eaKH person’s situation, and you find that a lot of the loans I’m getting are usually two people or more, so you’re pooling income together. plus you’re getting your NHT benefits whiKH are actually at a really reduced rate. It’s a good enough amount that you could actually use your NHT benefit alone if it’s more than one person applying. It also offsets the cost of the mortgage because you have those two benefits coming in, up to three. Basically, it really starts with us looking at your picture, your income and expenses per month, and also, in that essence, to maybe direct the client because a lot of times if you have a proper conversation with them, some of their debt, you may find out that they’re about to pay it off in the next two months. Therefore, you ask them to wait, or by that time it should have been cleared off, so it increases their borrowing power based on the ratios that you are guided by.
DW 10:06 : I want to switKH from the new developments that we’re talking about to foreclosures. Leo, is there any opportunity for me to save 30 percent if I looked at foreclosures rather than new developments?
LW 10:21 : Yes, you can, but you have to be focused on identifying the real opportunity. You probably need a lawyer to help you make sure that what you’re buying or investing in is actually what you think you’re investing in. Karla will support that as well. But, certainly, out of the misfortune of someone having had a foreclosure, you can provide a financial opportunity to the investors, the banks, or the people who were behind that foreclosure. You can get the opportunity to place your funds in a very risk-protected area if you do the right due diligence.
DW 11:01 : Robert, I throw it to you. Foreclosures, is that big savings, fire sale?
RT 11:05 : Selectively. I think there are two ends in a market. One, certainly in our jurisdiction, there is a statutory obligation on the part of the mortgagee that they’ve taken best efforts and all steps to procure the highest and reasonable market price. Unless other markets like the US where we see drastic reductions in the market price, the lenders here have to be very careful. They have a fiduciary obligation to their clients and the borrowers. As Leo said, there’s also the issue of due diligence. Most instances where the bank exercises its power of sale, you’re not able to inspect the property, so you have to do some due diligence. Where I think there are opportunities are at the higher end of the market- properties with higher values that have less potential buyers.
DW 12:02 : So I can negotiate.
RT 12:04 : So, with less buyers, there is less competition for a price with higher end residential properties and commercial properties.
DW 12:12 : Karla, before we go to our break, I want you to share some of the strategies because, from your perspective, employed persons just need paperwork going through HR, but for an entrepreneur, what do they need to know to access your services?
KH 12:28 : The first thing is that your documents need to be in order. You need to have financials. When we’re looking at companies, we want to have at least the three most recent years’ finances. Your business needs to be operating for a minimum of three years. You want to ensure that your company documents are in order, that you’re in good standing with the Registrar of Companies. That’s the basic stuff that we’re looking at. We need to also see your memorandum of association, all those documents. I can’t really recall all the names. Also, if you have more than one director, you have to go over it with your attorney, something that is called a borrowers resolution, as to who is borrowing.
DW 13:12 : Karla, I’m a hairdresser, I don’t [inaudible 13:13].
KH 13:14 : As a hairdresser, I’m going to separate that, that is for a business. If you’re a sole proprietor, then you still need a financial statement. You still an accountant to have done and gone through your books. We also want to see your bank records for the last twelve months to kind of reconcile back what the accountant has done. That’s the basic thing that you need to have in place; we have to see your income.
DW 13:36 : I can’t just come and tell you?
KH 13:37 : No, you can’t, and you can’t say, “Well, I told this person this way, and another person something else.” No, it doesn’t work that way. And cash cannot be verified. You must pass your cash through your bank account. Even if you put it in at five o’clock, and at 5:05, you go and withdraw it, I must see that it went in. I cannot verify cash.
DW 13:58 : Leo, you want to say something. I saw your pained look without cash.
LW 14:02 : It’s a fact what Ms. Henry is saying. Also, the economy is moving into new ways of funding and cash, cryptocurrency and other types of mobile money.
DW 14:14 : Do you take cryptocurrency?
KH 14:15 : Yeah [inaudible 14:15].
DW 14:16 : Do you take cryptocurrency for legal fees?
KH 14:19 : We’re not taking cash, so what do we buy?
LW 14:23 : It’s important to have documented sources of your funds, but opportunities are coming.
KH 14:31 : I also wanted to add to that. With our local market and overseas diaspora, it’s the same requirements, but we’re also going to want to see your credit history. That plays a big part in the whole analyzing of what it is.
DW 14:46 : You mean, if I walk up and down and owe people, I may not get my dream home?
KH 14:49 : Yes, correct. Not necessarily, unless it is reported to the credit bureau. That’s the only way I’m going to know, but yeah.
