July/August

President’s Message

Welcome to the new bi-monthly Association newsletter. Today's pace of business is hectic and as active and successful REALTORS®, the volume of information we must keep up with in our professional life can sometimes be overwhelming. I hope a bi-monthly newsletter lightens your load just a bit.

One of the most fundamental freedoms we enjoy in this country is the right to own property. It's easy to take this for granted.

For the 17th century colonists that traveled to the new world, land ownership was a dream that had been denied to them under the feudal system of land allocation.

The very sophisticated system of laws and regulations for owning and transferring real property in the US is an inspirational model for less developed countries. The ability to improve one's lot in life through ownership of land is recognized universally.

One of our vital missions as a REALTOR® organization is to promote and defend private property rights. Thank you to the many who responded to the Red Alerts last month regarding rent control legislation bills being considered in our State Legislature.

Our elected representatives must hear our voice. Many times they are unaware of the issues surrounding a bill about to be voted on. They welcome and encourage communication from their constituents with formal meetings like Legislative Day or simply letters and phone calls.

I encourage you to sign up online at CAR.org to receive email updates on legislative activities. Our clients and co-workers will benefit by having a more effective and informed agent on their team.

Welcome to our 89 new Association members in 2003. This brings our total membership to 1,172. I look forward to seeing you all at Association events, around the office and in my next transaction.

Have a sizzling summer of sales. I'd love to see you at the Association annual Golf Tournament on the 15th of August. Come for dinner and the raffle even if you don't play golf.

Ronnie Trubek

2003 President

Inside

- Stepping Outside the Box

- New REALTOR® Members

- Taxes and LLCs

- Affiliate Member Spotlight

- Workforce Heroes Can’t Own Homes

- Commercial Property Mgmt

- RE InfoLink “Tip of the Day”

- Median Price Up to Record in June

- Health Plan Bill Passes House

- 2003 Profile of Homebuyers and Sellers

- NAR Calls for Greater Credit Disclosure

REALTORS® MAKING A DIFFERENCE...

We applaud Louis Plunkett, with Sherman & Boone Associates, for his contributions to our community.

Louis Plunkett, "The Family Man", is a real estate broker and owner at Sherman & Boone Associates in Capitola.

In his spare time, Louis likes to work as a member of the school board and as the president of the parent-teacher organization for VHM Christian School in Santa Cruz.

He also works very heavily with the Big Brothers/Big Sisters of Santa Cruz County. He organizes the real estate industry's portion of the annual Bowl For Kid's Sake, which is their biggest fundraiser of the year. Each year, teams from the different real estate offices, lenders, and title companies go head to head in this event. All proceeds raised during this event go directly to support the Big Brothers/Big Sisters.

If you would like to help out with Big Brothers/Big Sisters please call them at 464-8691, or call Louis at 464-5030.

STEPPING OUTSIDE THE BOX: SELLING OUR CLIENTS ON INVESTMENT PROPERTY

Contributed by Linda Murphy, Union Planters Mortgage.

If you could identify one extra area of expertise that could increase your sales, your referrals and your bottom line, would you take the time to learn something new? What if this same knowledge could also contribute to your personal net worth, and your retirement income?

Investment property has the potential to do all that, and if it is not yet on your mind, be assured it is on the mind of the baby-boomers you service. The stock market started it's decline in 2000, and it has finally occurred to your neighbors and friends that they had better be looking around for something to replace those 12% returns they expected. More media attention is being paid to buying rental property, and more 'average' people are considering it. This three-part article will start you down the road to becoming the expert in investment property that your clients will trust, come back to, and refer their friends to.

What do our clients want? They want a great house in a good neighborhood with a high-achieving school just the right age level for their 2.4 kids. They also want a nicer lifestyle than they have now, with the same monthly payment. But, what do they need? Some of them need income on a monthly basis to pay for that great house. Most of them could use more tax deductions. Almost all of them need an investment that appreciates as it pays for itself.

Real estate has three huge advantages: it is highly leveraged; historically it has generated a high rate of return; and it is a relatively safe investment. It is our job, as real estate professionals, to educate our clients that real estate is the true 'buy-and-hold' investment vehicle. After Enron and World Com, real estate has even more attractive selling points: it's an investment you can see and understand, you can directly affect it's value by the attention you give it, and it won't disappear because of some CEO's greed and dishonesty. Our clients fear of and disgust with the stock market is working in our favor. That's why we want to start now. There has never been a better time to pre-sell an idea to our clients.

How do we educate our pipeline? There are many ways to begin the process. On the New York Times bestseller list for many years is Robert Kiyosaki's Rich Dad, Poor Dad. In this book, he asserts the idea that the house we live in is a liability, not an asset, because it doesn't produce income. Investment property, he asserts, can help you afford your dream house, not the other way around. Ralph Roberts, the "best selling Realtor in America" (Time Magazine, 1995) has written a very complete guide to building a real estate investment portfolio called, Real Wealth by Investing in Real Estate. The book info states: "Roberts presents practical, systematic advice that walks the non-professional through each step of the process-covering everything from finding capital and researching properties to making the decision about whether to buy and rent or fix up and sell". Buy, Rent, Sell by Robert Irwin is another source for good information. After you identify those in your pipeline ready to begin investing, send them an audiotape of these or any other of your favorite real estate books, with a letter telling them how excited you are by the prospect of owning rental property. Search the web (Wall Street Journal, Money Magazine, Smart Money, etc) for articles on investing in real estate, and email them to your clients. Or, write a 'teaser' letter to your entire pipeline describing the benefits of investment property, and invite those that are interested to call you to talk about it further. You'll be surprised at the response you get. Your clients are ready to hear about a way they can have the retirement they thought the stock market took away.

Next issue: What are some resources for investment money, and where do we find affordable properties?

NEW REALTOR® MEMBERS for May/June

Bo Baker, Bailey Properties, Inc.

Marcene Baker, Bailey Properties, Inc.

Alice Tarail, Coldwell Banker Jackson & Mann

Linda Hadreas, Network Alliance Real Estate

Judy Tollner, David Lyng & Associates

Jennifer Graham, Bailey Properties, Inc.

D. Rex Kuns, Thunderbird Real Estate

Luis Alzamora, Network Alliance Real Estate

Brigitte Eaton, Century 21 Lad Realty

Brian O'Connor, Wilson Bros. Commercial, Inc.

Russell Brown, Unique Homes & Land

Barbara Erbes, Coldwell Banker Carl Conelly REALTORS®

Suzanne Hood, Coldwell Banker Carl Conelly REALTORS®

Kevin Lohrey, Sherman & Boone Associates

David Poague, Help U Sell Santa Cruz Properties

C. J. Parke, Thunderbird Real Estate - returning member

Dennis Casey, Thunderbird Real Estate

Lyn Smock, Century 21 Award Real Estate

Susan Azar, Help U Sell Santa Cruz Properties

Tammy Escobar, Sherman & Boone Associates

Ben Tallai, Network Alliance Real Estate

Tony Balistreri, David Lyng & Associates

Gregorio Magana, Bailey Properties, Inc.

Tim Zoliniak, Bailey Properties, Inc.

Ross Swalve, Capitola Realty

Beth Mariano, David Lyng and Associates

Enrico Trinchero, REALTOR®

Gerald Sato (Secondary), Referral Realty

Maggie Smith, ReMax Pioneer

Michael Bloch, Sherman & Boone Associates

Comments about an applicant’s admittance should be submitted in writing to the Santa Cruz Association of REALTORS®, 2525 Main St., Soquel, CA 95073.

Affiliate Spotlight

Bailey Property Management

Contact: Rachel Shaffer

106 Aptos Beach Drive

Aptos, CA 95003

Phone: (831) 688-7009

Fax: (831) 688-1523

Rachel Shaffer has been a resident of Santa Cruz County for 24 years. She is a proud mother of two very athletic daughters; both high school and College bound this coming fall. Rachel obtained her real estate license in 1985. From 1986-1989 she worked for Shaffer and Associates and was a member of the Santa Cruz Board of REALTORS® (before it became the Association). In 1990 she went to work for the Santa Cruz Association of REALTORS® until 1998. After leaving the Association she worked for Bob Bailey Real Estate in Property Management for 2-1/2 years. She joined Bailey Properties in November 2000. With over 16 years of Real Estate experience, her responsibilities include recruiting new business and assisting current owners and tenants with their needs. Please contact Rachel Shaffer or Debbie Bennett for any information regarding Property Management needs for your clients.

IF YOU WANT TO SAVE TAXES, YOU DON'T WANT TO BE A LIMITED LIABILITY COMPANY

This information is being provided as a public service to the members of Santa Cruz Association of REALTORS® by the Law Offices of John N. Kitta.

The minimum annual franchise tax due to the State of California is $800.00 whether your business is a corporation, a limited liability company or limited partnership.

Unfortunately, the State in connection with limited liability companies has adopted a gross receipts fee calculated on a company's gross revenues without taking into consideration expenses and profitability. These fees can be as high as a staggering $11,790 per year.

The best way to avoid this situation and minimize your business taxes would be to create a California Limited Partnership as well as a separate distinct LLC. Your LLC will serve in the capacity as a General Partner in the Limited Partnership with a 1% ownership interest. You will be a limited partner in the Limited Partnership with a 99% interest in this entity. Thus, you are afforded with all the protections from personal liability as by and through the creation of your limited partnership and LLC.

By the creation of a limited partnership to hold ownership of the property, this enables a business owner to minimize the LLC fee. On this basis, the LLC fee would be calculated on 1% of the gross revenues of the Limited Partnership. If ownership was held solely in the name of the LLC, you would be taxed in the entire gross proceeds.

The above scenario no results in the business owner having to pay an $800 minimum franchise tax for each of the two entities resulting in a total payment of $1,600 per year.

In summary, based on the State of California's decision to significantly increase gross receipts, tax due and owing by a LLC entity, it is important that all business owners are cognizant of his or her annual exposure and take whatever steps which are necessary to minimize the annual tax contributions. The dual entity structure described in this article has been utilized on a more and more frequent basis by business attorneys for the benefit of their clients.

Save The Date

SCAOR Annual Charity Golf Tournament

Friday, August 15, 2003 at DeLaveaga Golf Course. Call 464-2000 for details.

"Workforce Heroes" Can’t Afford to Own a Home in Communities They Serve

A recent study by the Homeownership Alliance found on average the nation's workforce heroes -- firefighters, nurses, police officers and teachers -- working in central cities have less than a one-in-three chance of finding a home they can afford. In the surrounding suburbs, the opportunities deteriorate to around three in 10.

The metropolitan areas with the lowest homeownership opportunities for this group are Dallas, Seattle and Washington, D.C., followed closely by Milwaukee, New York, San Francisco and San Jose. Relatively better homeownership opportunities can be found in the metro areas of San Antonio and Cleveland, followed closely by Detroit and New Orleans.

RE InfoLink “Tip of the Day”

Avoid a fine for misuse of remarks on the MLS! Websites, contact information, and/or confidential info, such as phone numbers, names, security codes, combinations, etc., shall ONLY be entered on Line 4. (Line 4 may be used for marketing info, if not used for confidential info.) FOR MORE INFO SEE SEC. 10.5 OF THE MLS RULES AND REGULATIONS BY CLICKING ON "HELP DESK" at www.REIL.com .

Commercial Property Management

Whether you are new to commercial property management or have been at it awhile, find practical guides and information concerning leases, safety, marketing, and maintenance for commercial properties in the online NAR library collection on commercial property management. To access, Go To: http://www.realtor.org/libweb.nsf/pages/fg412

C.A.R. Reports Median Price Up 15.6% to Record $369,290 in June

The median price of an existing home in California in May increased 15.6% and sales decreased 7.7% compared to the same period a year ago, C.A.R. reported today. "Low mortgage interest rates coupled with continued strong demand for California real estate drove the median price upward in May," said C.A.R. President Toby Bradley. "But with the median price of a single-family home posting double-digit increases in 22 out of the past 24 months, affordability concerns are increasing for many families in California."

The median price of an existing, single-family detached home in California during May 2003 was $369,290, a 15.6% increase over the revised $319,590 median for May 2002, C.A.R. reported. The May 2003 median price increased 1.5% compared to a revised April 2003 $363,960 median price.

NAR Calls for Greater Credit Disclosure

NAR supports amending the Fair Credit Reporting Act to require greater transparency and disclosure in the consumer credit scoring and reporting system. In a letter delivered to both houses of Congress, NAR President Cathy Whatley explained that, because insurance companies are now using credit scoring in their coverage decisions, consumers are experiencing delayed or cancelled home settlements due to the unavailability of affordable insurance. Amendments to FCRA, which is up for reauthorization this year, would shorten time frames for consumer reporting agencies to investigate and correct consumer credit reports; create stronger penalties for repeatedly providing incorrect information to consumer reporting agencies; create fairer treatment of consumers' multiple inquiries for the best mortgage or insurance rate; and mandate one free consumer report and credit score annually upon request. For more information, go on the Internet to: www.realtor.org/publicaffairsweb.nsf/Pages/NARFairCreditRpt

Association Health Plan Bill Passes House

Last week, the House passed the Small Business Health Fairness Act, H.R. 660, which would allow bona fide business and professional associations to create and administer association health plans and offer health benefits to association members through either fully insured group pools or self-insurance plans. The Senate has yet to take up the companion bill, S. 545, where it is anticipated to encounter strong opposition. For more info., call Marcia Salkin at 202/383-1092.

2003 Profile of Homebuyers and Sellers

The 2003 Profile of Home Buyers and Sellers is now available for purchase. This information-packed industry profile can help REALTORS® sharpen their print and electronic marketing efforts, better determine who their clients are, and improve their products and services based on the wants and needs of today's buyers and sellers. Order for your board store today, and get your exclusive AE discount--20 reports for $35 apiece, a savings of $15 per profile. To order on-line, go to http://www.realtor.org/prodser.nsf/pwebres?openview or call Information Central at 800/874-6500 and ask for product #186-4503-LN. For more information, please contact: Steve Kim, at 202/383-1021, or skim@realtors.org .

Women’s Council of REALTORS® Top Producer Panel

Want an opportunity to “Sharpen your Saw?” It’s our pleasure to have six of the Top Producing Agents in our County discuss what keeps them on top. Joining our panel discussion for this exciting meeting are:

Dan & Lyn Sedenquist, Bailey Properties

Cara DeSimone, Coldwell Banker Jackson & Mann

Joanne Foxxe, David Lyng Real Estate

Lela Willet, Unique Homes and Land

Tom Brezsny, Monterey Bay Properties

Wednesday, July 16, 2003 at 11:30 a.m. - 1:30 p.m.

$25/Members $28/Nonmembers Westcoast Santa Cruz Hotel

R.S.V.P. to Jennifer Walker by Friday, July 11th

wcrsantacruz@yahoo.com or 831/345-3675

City of Santa Cruz Water Conservation Office

For information about the new plumbing fixture regulations in the Santa Cruz City water service area, or to obtain forms, please contact: Francesca or Toby at 420-5230 or visit www.ci.santa-cruz.ca.us/wt/wtcon