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Protect Your House From Wildfire

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | August 8th, 2014

Wildfires like the one last summer that killed 19 elite firefighters in a blaze near Yarnell, Ariz., can't be stopped. But there's plenty homeowners can do to protect their properties.

If you don't think you should take remedial action, think again. One-third of all houses are located in what fire safety officials call wildland urban districts, which are near or among areas prone to wildfires.

Worse, perhaps, wildfires have ravaged houses in three-fourths of the 50 states. And with more and more people choosing to live in rural areas closer to nature, the chances are greater than ever that someone you know -- maybe even you -- will lose a house to a fire.

Indeed, on most days, a wildfire is burning somewhere in America. Over 33,000 fires have burned 1.6 million acres already this year, according to the latest count by the National Interagency Fire Center in Boise, Idaho. And the state with the most fires isn't California, Arizona or another place in the West. It's Georgia.

Fortunately, wildfires are covered by standard homeowner's insurance policies. But the best insurance is prevention. Here, gathered from a number of sources, are some steps you can take to protect your house, improve its fire resistance and shield it from indirect exposure:

-- Choose a firewise location. Canyons may offer a beautiful view, but they tend to act as chimneys, drawing the fire and accelerating the speed at which it spreads. A level site is better than a sloped one. A grass fire moves up a slope four times faster with flames twice as high as fire on level ground, because hot gases rising in front of the fire preheat the up-slope vegetation.

If you're building new, you can avoid this kind of topography. Also, find out about prevailing winds, seasonal weather conditions and the local fire history, so you can plan your landscape design accordingly.

-- Implement landscape safety zones. Work on your surroundings so the landscape will not bring a fire to your door. Do this by creating three safety zones, the combined extent of which will depend on your property lines and your risk level. In high-risk areas, even a zone reaching 200 feet from the house may not be enough.

The first zone should be a well-irrigated area that circles the structure for at least 30 feet on all sides. If your house is on a slope, though, a clearance of between 50 and 100 feet may be necessary, especially on the downhill side of the lot.

Plantings in this area should be limited to carefully spaced indigenous species. Beware of "ladder fuels," or vegetation that serves as a link between the grass and treetops and enables the fire to climb into trees or onto your house.

Trees and shrubs are fine in the first zone, as long as dead or low-hanging branches are removed and the height of ground vegetation is controlled. But the more grass, the better, because a wide lawn can serve as a fuel break just as much as a driveway. Ditto plants with a high moisture content.

Your irrigation system should also reach the second zone, which can contain a limited number of low-growing plants and trees spaced at least 10 feet apart. Dead or dying limbs should be trimmed away, and no live limbs should come within 10 feet of the structure. On trees taller than 18 feet, prune away branches that are less than six feet from the ground.

In zone three, thin selected trees and remove highly flammable vegetation such as dead or dying shrubs and trees.

-- Consider your roof, walls and windows. The landscape zones you construct around your house should keep all but the most ferocious wildfires at bay. But if one does happen to break through this protective zone -- usually from wind-blown embers or firebrands, sometimes more than a mile away -- ignition is most likely to occur on the roof.

Fire officials say eye-catching, untreated wood-shake roofs are the No. 1 cause of home losses in wildland areas because they can catch wind-blown sparks. If local rules allow, a better choice is factory-treated shakes. But consider using such noncombustible or fire-resistant roofing materials as Class A shingles, metal, cement and concrete products, or tile made from slate or terra cotta.

Fire-resistant subroofing also can improve survivability. But don't be fooled into thinking an expensive roof sprinkling system will stop a fire. You need a large volume of water to make a roof safe, yet water pressure is generally at its lowest during a fire. Also, the electricity needed to run the system is likely to fail, and the high winds that usually accompany a wildfire often divert the spray away from the roof.

Walls, too, should be made of fire-resistant materials such as stucco or masonry. Vinyl can soften and melt during a fire, offering little or no protection.

If you're building a new house, minimize the number and size of windows on the downhill side, the side most likely to be exposed to a fire. Smaller windows perform better than larger panes, according to the National Association of Homebuilders Research Center, and double-pane or tempered glass are more effective than single-pane glass. For greater protection, windows, sliding glass doors and skylights should have nonflammable screening shutters.

To prevent sparks from entering your house, screen your chimney with noncombustible wire mesh. Also cover exterior attic and under-floor vents with wire mesh -- plastic or nylon screening will melt -- no larger than an eighth of an inch. Screen under your porch, too, as well as any other areas below the ground line.

Also, locate your under-eave roof vents near the roofline rather than near the wall to prevent heat or flames from becoming trapped inside. For the same reason, the eaves themselves should be boxed or designed with minimal overhang.

Finally, inspect your house occasionally, looking for breaks and spaces between roof tiles, warping wood or cracks and crevices in the structure where fire or sparks could enter.

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How to Spot a Bad Deal

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | August 1st, 2014

Crowdfunding has found real estate. More than a handful of outfits have sprung up to collect small amounts of capital from a large number of individuals to finance their deals. One New York company is even selling stock in a single building in the nation's capital.

Until the JOBS Act of 2012, real estate investing was mainly the province of high-net-worth individuals: so-called "accredited investors" who earn more than $200,000 a year and were protected somewhat by the Securities and Exchange Commission.

Large-scale investors can, and sometimes do, put their money into losing propositions. But at least the SEC requires full disclosure, so investors won't be tripped up by hidden, undisclosed details.

But with little or no SEC oversight for crowdfunding investments, how do small, mom-and-pop investors with only a few hundred or thousand dollars to risk determine which deals are shrewd and which are lewd -- that is, which are destined to be a financial success and which are failures from the get-go?

"The key to successfully investing in real estate is performing a thorough due-diligence analysis," says David Manshoory, founder of AssetAvenue. The company is just one of several crowdfunding real estate platforms that seek to connect investors with real estate professionals offering access to high-yield deals.

Seasoned investors know the importance of investigating all aspects of a transaction. But Manshoory says novices often "get excited about acquiring part of an investment property and lose sight of the mechanics of knowing what they are buying."

Here, from AssetAvenue, are some tips for rookies to spot a lousy real estate deal:

-- Market conditions. Two major factors are the keys to underwriting an investment in income-producing property: the market and the property. But of the two, local market conditions trump everything else.

Put simply, a great property in a declining market is generally a bad investment because no matter how you try, you can't change the market. But a poor property in a good market can be improved, becoming a good property in a good market.

"Analyzing the demographic trends of population growth, income and employment in the local market will tell you whether opportunity or risk lies ahead," Manshoory says. "It will also show which property types are in demand or oversupplied."

-- Misleading financials. The bottom line can be manipulated into whatever will make the deal work. So investor beware. Many sellers will overestimate revenue and/or underestimate expenses, making the property appear more profitable than it really is.

According to the AssetAvenue founder, it is critical to get the real operating numbers, not a projection of potential rent and estimated expenses. "Confirm and verify every element of income and expense," he says, "and make sure your offer is based on the actual financial performance of the property."

-- Poor-quality tenants. Leases are the most important documents attached to an income property. They produce the income, so it is critical to review every lease and understand the financial strength of the tenant behind each lease.

In an apartment building, tenant files with poor or nonexistent credit reports and lack of references are a red flag. If the building is filled with tenants who have a history of making late payments or being evicted, your vacancy, management and legal expenses will be higher than anticipated.

The same screening mechanism takes place with tenants in shopping centers or office buildings, where examining rent rolls, payment histories and credit files of existing tenants can be enlightening.

-- Hidden property conditions. The seller always knows more about the property than the buyer. So to make an intelligent investment decision, the buyer's job is to dig for the information the seller may not want to volunteer, or perhaps isn't aware of.

Part of your due-diligence checklist involves inspecting the property's condition, including physical items such as building systems, environmental matters and structural components. Hire the right professionals to give you estimates on the maintenance costs of these items, their lifespans, and how much it will cost to replace them when needed.

The condition of the property will determine how efficiently you will be able to manage it, Manshoory says.

-- Legal challenges. Intangible items, such as title, survey, zoning and land-use regulations, are important, too.

Sellers sometimes market their property indicating that it can be zoned for another use and has the development potential to add additional square footage. As a buyer, the burden is on you to make sure what the seller is saying is true. Do not assume that the proposed use of the site will be permitted as advertised.

-- Investing online. When it comes to facilitating your investment activities online, be sure to choose a credible platform that only does real estate deals, is backed by a team with years of deep experience in real estate investing, and has people available to answer your questions.

The team should strongly vet their deals, set realistic expectations and have a consistent track record of delivering solid returns.

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Labor Shortages More Acute

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 25th, 2014

If your builder is late delivering your new house, don't be too upset. You are not alone. New homebuyers almost everywhere are probably experiencing the same thing.

Ditto if you're having trouble getting your builder to come back and fix those sticky doors, loose floor tiles or the dozens of other little nuisances that always crop up in new homes.

Builder tardiness is not occurring because they've gone on a massive, countrywide strike to achieve some legislative goal in Washington. Rather, it's simply because they are unable to move has quickly as they once did.

The culprit: labor -- or more precisely, the lack thereof.

The economic downturn has driven hundreds of thousands of craftsmen and laborers away from housing and into other industries, and they have yet to come back. Indeed, according to the latest survey from the National Association of Home Builders, the labor shortage has become "substantially more widespread" since last year, when the housing recovery took hold.

"The incidence of reported shortages is now surprisingly high relative to the current state of new home construction," says NAHB economist Paul Emrath in the report.

But "the most distinctive aspect" of the survey results is not that there is an uptick in the share of builders reporting labor shortages, Emrath adds. It's "how widespread these shortages are relative to historical experience ... and to the current state of the home building industry," which is still struggling to regain its full stride.

About 2 out of every 3 builders reported paying higher wages due to the shortage, and almost as many say they have raised their house prices accordingly. Three out of 5 also reported difficulty in completing their houses on time; one-third said rising labor costs had made some projects unprofitable; and 9 percent said they lost or canceled sales as a result of higher labor costs.

On average, builders said their direct labor costs -- employees -- have increased by 2.9 percent over the past six months, while subcontractor costs increased 3.8 percent over the same period. Extrapolated over a full year, these increases would be 5.7 percent and 7.7 percent, respectively -- much higher than the roughly 2 percent year-over-year increase in the overall Consumer Price Index.

In other words, says Emrath, "the data show that builders' labor and especially subcontractor costs are rising faster than general inflation."

Subcontracting accounts for the lion's share of the work in residential construction. On average, single-family builders employ 25 different trades when building a house. More than half of all builders subcontract at least 75 percent of the construction work, the NAHB says, and more than 95 percent always contract out some jobs, particularly the heating and air conditioning work.

Builders were specifically asked about 12 trades in the recent survey, and 63 percent reported a dearth of rough carpenters, who build the supports and temporary forms used on the construction site. But well over half the builders reported shortages in all three so-called "hammer and saw" categories: rough carpentry, framing and finish carpentry.

Not all builders reported shortages. Indeed, several responded explicitly that there were no shortages in their respective areas. But averaged across all 12 trades, 41 percent of builders reported either some or serious labor issues.

That's up sharply from 28 percent last year and 20 percent in 2012.

The other nine trades builders queried about were: bricklayers, plumbers, painters, roofers, electricians, weatherization workers, HVAC professionals, excavators and building maintenance managers.

So what can buyers do? Little, except be patient. It's not that your builder doesn't care, or doesn't want to do right by you or their other customers. They do. But most subs and suppliers worth anything are extremely busy.

Most builders require that the subcontractor who did the original work follow up on call-backs. Not the same tradesmen, perhaps, but the same company. So if the sub is having difficulty finding quality workers in the first place, they will have even more trouble finding the time to double back to make repairs.

Large builders often send their own maintenance crews to handle call-backs, so they should be able to take care of those issues more expeditiously. But if the number of call-backs are on the rise, they, too, will have a hard time keeping up.

So try to remain rational and realistic. Separate the emergencies from the non-emergencies. And again, be patient.

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