a|r|e Winter 2018

CELEBRATING 15 YEARS

Drowning in Debt Student Debt in America Student debt in America is rising at an unsustainable rate, and it’s holding back the next generation of homebuyers

Winter 2018

Greece’s Golden Visa / Language of Trust / Condo Leaseback or Fractional Ownership? / The Bohemian Vagabond in Lebanon W I N T E R 2 017

1

Proud supporter of AREAA

Let’s work together. Here’s how we help make home buying better: Experienced lending specialists who understand your local market and will help your clients every step of the way

Easy ways to build financial know-how through engaging, self-paced videos at BetterMoneyHabits.com

Competitive rates and a broad range of loan options that can meet the needs of many different buyers

Connections to local down payment and cost savings programs for your clients at bankofamerica.com/downpaymentcenter1

The Home Loan Navigator™, which helps homebuyers track the status of their home loan application, upload and sign documents electronically, and more

The Affordable Loan Solution® mortgage, which offers a down payment as low as 3% with no mortgage insurance required (income limits apply)2

Contact a Bank of America lending specialist, or visit bankofamerica.com/neighborhoodlending today.

1

Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply.

2

Available for fixed-rate purchase loans with terms of 25 or 30 years and on primary residences only. Certain property types are ineligible. Borrower(s) must not have an individual or joint ownership interest in any other residential property at time of closing. Maximum purchase loan-to-value is 97% and maximum combined purchase loan-to-value is 103%. For loan-to-values > 95%, any secondary financing must be from an approved Community Second Program; ask for details. Homebuyer education may be required. Restrictions apply regarding co-borrowers. Maximum income and loan amount limits apply.

Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. Bank of America, N.A., Member FDIC. Equal Housing Lender. ©2016 Bank of America Corporation. | AR5FRX45 | AD-08-17-0234.C | 08-2017 THIS INFORMATION IS NOT INTENDED OR AUTHORIZED FOR CONSUMER DISTRIBUTION.

Last year, foreign buyers spent

$235 BILLION on U.S. properties

$103 BILLION RESIDENTIAL

$132 BILLION

According to NAR’s 2016 Profile of International Activity in U.S. Residential Real Estate

COMMERCIAL According to Real Capital Analytics

NAR’s resources can help you capture this lucrative clientele: NETWORK

EDUCATION

RESOURCES

3,000 Certified International Property Specialist designees

Certified International Property Specialist designation

NAR Research on international buyes and sellers

5,000 International REALTORS®

At Home With Diversity certification

Realtor.com/international translates listings

Cooperating Associations in 66 countries President’s Liaisons to each country

Stay connected! realtor.org/global narglobe@realtors.org 1.800.874.6500

W I N TE R 2 018

Vo l u m e 9, I s s u e 4 ON THE COVER: Drowning in Debt: Student Debt in America

F E AT U R E S 28

Drowning in Debt: Student Debt in America We sit down with NAR’s Jessica Lautz to discuss the impact that growing student debt is having on the housing market.

34

14

Agent Profile: 8 Questions with Lisa La Lisa La has built a powerful reputation as an agent who can get things done in Denver.

We sat down to ask about her work philosophy, and how her upbringing by Vietnamese parents has helped her carve out a niche in the city’s commercial market.

34

4

WINTER 2018

Dedicated to advancing homeownership

Homeownership is an important step in creating financial stability for individuals and communities. We’re committed to enabling and advancing sustainable homeownership through financing more homes, supporting and providing financial education, and ensuring our team reflects the communities we serve.

To connect with your local team, contact: diversesegments@wellsfargo.com

Count on us to provide: Extensive home financing options

to meet the needs of more homebuyers

Homebuyer education resources both online or in-person

Career opportunities

to expand skills and advance careers

Information is accurate as of date of printing and is subject to change without notice.

Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. Š 2017 Wells Fargo Bank, N.A. All rights reserved. NMLSR ID 399801.

AS3703279 Expires 07/2018

14

20

24

CONTENTS

14

Encouraging Homeownership by Easing Student Loan Debt

20

Student debt is increasing at an unsustainable rate, and that’s bad for homeownership.

16

Becoming the Most Valuable Player in Your Client’s Home Buying Process Knowing about the different products and services offered by loan officers can help your client get into the home of their dreams.

By Dottie Sheppick

6

WINTER 2018

Finding Gold in Greece: What is the Greek Golden Visa?

38

AREAA Global has launched an exciting new investment opportunity for our members that brings with it an incredible perk.

AREAA Commercial Chair Kurt Nishimura explains the differences, both good and bad, between these three types of ownership in a property.

By Frederica Tassis

24

The Bohemian Vagabond: Lebanon a /r/e's globetrotting contributor Jacki Ueng takes us to one of her favorite destinations on earth: the Jewel of the Mediterranean, Lebanon.

The Commercial Brief: Condo Leaseback or Fractional Ownership: Is This Just a New Marketing Spin on Time Shares?

36

Ask Mehta: How to Help a Client with Student Debt Resident real estate guru Rob Mehta walks you through the different steps you can take to help secure a mortgage for a client being held down by student debt.

ADVERTISERS

22

D E PA RT M E N T S

10

www.areaa.org/acres

Page 19

AREAA Education Foundation

www.areaafoundation.org

Page 18

AREAA Global Exchange

www.areaaglobal.com

Page 23

AREAA Global + Luxury Summit

www.areaa.org/summit

Page 11

AREAA National Convention

www.areaa.org/convention

Page 42

AREAA National Policy Summit

www.areaa.org/policy

Page 33

Bank of America

www.bankofamerica.com/neighborhoodlending

Gina Duncan, Fine Island Properties

www.FineIslandProperties.com

Page 7

National Association of REALTORS® Global

www.realtor.org/global

Page 3

Radian

www.radian.biz

Page 9

RE/MAX

theremaxcollection.com

Page 13

RISMedia

ace.rismedia.com

Page 13

Wells Fargo Home Mortgage

diversesegments@wellsfargo.com

Letter from the Editor AREAA Executive Director Hope Atuel talks student debt, AREAA’s 15th year, and the anniversary of the Fair Housing Act of 1968

22

2018 America - China Real Estate Summit

a / r / eats!

Kat Chen brings shares her favorite Lu Rou Fan recipe that is sure to satisfy your comfort food craving.

Contact us to find out about ADVERTISING OPPORTUNITIES:

ads@areaa.org

Pages 2 + 12

Page 5

WINTER 2018

7

WINTER 2018 Vo l u m e 9, I s s u e 4

EDI TOR

Scott Berman

DESI GNERS

Jazz Miranda Howard Shen Praveen Sharma

is a publication of the Asian Real Estate Association of America (AREAA), a national nonprofit trade organization dedicated to increasing sustainable homeownership in the Asian American community.

For more information visit: http://areaa.org. Š2018 by the Asian Real Estate Association of America.

Reproduction in whole or part without permission is prohibited. Opinions expressed by individual authors are not necessarily the opinions held by AREAA. Interested in advertising or contributing? Contact us: ADVERTISING | ads@areaa.org EDITORIAL | Scott Berman sberman@areaa.org Office: Asian Real Estate Association of America 3990 Old Town Avenue #C304 San Diego, California 92110 619.795.7873 Phone contact@areaa.org Previous issues available online at: http://areaa.org/a-r-e

For additional web-based content, please visit: www.areaa.org.

8

WINTER 2018

EXPAND OPPORTUNITIES FOR YOUR CLIENTS WITH MORTGAGE INSURANCE. Mortgage insurance (MI) can be a smart financing tool for your clients! Whether they’re first-time homebuyers or current homeowners, Radian MI can help your clients in a variety of ways: » Purchase a home sooner with less money down, and start gaining equity » Avoid the risk of rising home prices and interest rates in the future » Afford a larger home with their savings, or preserve some savings instead of spending it all on a downpayment » Financing second homes, investment properties or renovations Visit AchieveTheDream.com for more information about financing options available to your clients, as well as homebuying tips and tools you can share.

Contact MJ to learn how Radian can help you educate your clients and bring in more business!

MJ Watkins | Director, Multicultural Business 980.213.9974 | mj.watkins@radian.biz

www.radian.biz 877.723.4261 © 2018 Radian Guaranty Inc.

From the

Director According to the Chinese Zodiac, 2018 is the year of the Dog - and its characteristic word is ACTION! According to

Chinese mythology, the year of the Dog will accelerate the initiation of all things - pretty prophetic for AREAA’s 2018.

This year, AREAA sets into action several policy and program initiatives that are at the core of AREAA’s mis-

Estate Professionals NAGLREP). And if that is not enough, AREAA is also celebrating our 15-year anniversary with our 17,000 members and 39 chapters across the United States and Canada!

In this issue, we are highlighting an important piece of the American economy – student debt. The $1.4 trillion of student loan debt carried by Americans is a strain on the economy. In a recent study by NAR and the SALT Institute, it was found that student loan debt is delaying homeownership for millennials by an estimated seven years. Because of this, we have partnered with Better Homes and Gardens Real Estate to come-up with solutions to address this particular issue. Not only will you be reading it in this issue of the magazine, but it will be discussed throughout the year at AREAA events across the country.

...student loan debt is delaying homeownership for millennials by an estimated seven years sion – sustainable homeownership for the AAPI community. Build Your Nest, a digital campaign targeting millennials will be launched this year to raise awareness of the home buying opportunities and benefits to this demographic. We are also going to work with several agencies such as CFPB and the FHFA, as well as our lending partners, in the implementation of the ruling on the Preferred Language Data Field checkbox on the Uniform Residential Loan Application Form (URLA). In addition, we are commemorating the 50 year anniversary of the signing of the Fair Housing Act along with the National Association of Realtors (NAR), National Association of Real Estate Brokers (NAREB), National Association of Hispanic Real Estate Professionals (NAHREP) and National Association of Gay and Lesbian Real 10

WINTER 2018

2018 is the year of ACTION, so I invite you to take action and engage with us in several national and chapter events throughout the year. A engaged member is an loyal member, so our goal is to have 100% of our membership engaged this year and in the future.

See you in Seattle!

HOPE ATUEL

AREAA Executive Director

AREAA’s annual Global and Luxury Summit is widely regarded as one of the premier real estate events of the year. The Summit gives hundreds of international and luxury focused professionals a platform to discuss ideas, network, and raise the standard of their industry to new heights.

To be held at the Fairmont Olympic Hotel in Seattle, the 2018 Summit will highlight how smart and green technology are reshaping the world of global and luxury real estate and bring experts from around the world to share their insight about these fascinating and profitable developments.

Raise Your Bar. Join us at the 2018 Global and Luxury Summit.

REGISTER TODAY AT WWW.AREAA.ORG/SUMMIT

For Partnership Opportunities, please contact concierge@areaa.org *Please select NON member as the registration type when using AREAARIS1 code.

HOMEOWNERSHIP / BETTER CONNECTED A down payment as low as 3% with no mortgage insurance required1 Your modest-income borrowers may find it more affordable to buy a home with the Bank of America Affordable Loan Solution® mortgage. This fixed-rate loan offers a competitive rate and a down payment as low as 3%.

More details about this affordable program: • Non-traditional credit (CLTV and DTI limits apply) • Boarder income from a one-unit primary residence may be considered as stable monthly income provided it meets requirements

More help for homebuyers

• Allows co-ops as an acceptable property type • Allows non-permanent resident aliens under the same terms and conditions as U.S. citizens • Homebuyer education may be required for first-time homebuyers through a HUD-approved counseling provider or Connect to Own®, Bank of America’s nationwide network of counselors • Maximum income and loan amount limits apply (varies by location) Get personal guidance from a dedicated lending specialist Buying a home is an important financial decision. A Bank of America lending specialist can help guide your clients through the process so they’ll feel confident every step of the way.

Down payment or cost savings programs can help make buying a home even more affordable.² To search for programs, visit bankofamerica.com/ downpaymentcenter.

Get started today Visit bankofamerica.com/neighborhoodlending

Bank of America is a proud supporter of AREAA and we look forward to connecting you to resources that can help you grow your business.

1

Available for fixed-rate purchase loans with terms of 25 or 30 years and on primary residences only. Certain property types are ineligible. Borrower(s) must not have an individual or joint ownership interest in any other residential property at time of closing. Maximum purchase loan-to-value is 97% and maximum combined purchase loan-to-value is 103%. For loan-to-values >95%, any secondary financing must be from an approved Community Second Program; ask for details. Homebuyer education may be required. Restrictions apply regarding co-borrowers. Maximum income and loan amount limits apply.

2

Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify.

Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply.

THIS INFORMATION IS NOT INTENDED OR AUTHORIZED FOR CONSUMER DISTRIBUTION. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend.

Programs, rates, terms and conditions are subject to change without notice.

Bank of America, N.A., Member FDIC.

Equal Housing Lender. ©2017 Bank of America Corporation. | AR5FRX45 | AD-08-17-0234.D | 08-2017

Your new pied-à-terre is calling. Find it with a professional who has an affinity for matching successful clients with incredible properties.

That’s the sign of an agent with The RE/MAX Collection®

© 2017 RE/MAX, LLC. All rights reserved. Each office independently owned and operated. 17_149489

theremaxcollection.com

Encouraging Homeownership by Easing Student Loan Debt

Debt from student loans has risen steadily in recent years, and currently totals $1.4 trillion, according to Student Loan Hero. That’s nearly three times what was owed in 2006, making student loan debt the largest non-housing debt class today.

40%

As real estate professionals know, student loan debt is often cited by potential buyers as the number one reason they are delaying life choices such as marriage, parenthood, and buying their first home.

In fact, Millennials have the lowest homeownership rate for their age group of any in history. But it’s not just Millennials. Anyone with student loan debt could be affected.

Students with Debt still live with parents

Tapping into Home Equity

Homeownership of 30 year olds

The key to easing student loan debt burden could be home equity.

There’s $13.3 trillion in home equity in the U.S. That’s a resource that homeowners could leverage to pay off student loan debt - either their own or debt they’ve co-signed for.

Fannie Mae introduced its Student Loan Cash-Out Refinance in 2016, and recently made the option widely available through Desktop Underwriter®, an automated underwriting system used by most lenders.

The Student Loan Cash-Out Refinance allows homeowners with 20 percent equity to refinance their mortgage and use the proceeds to pay down or pay off a student loan.

14

WINTER 2018

2004

2016

Getting the Word Out Fannie Mae surveys have shown us that there are a lot of misconceptions about home buying, from how much you need for a minimum down payment to how lenders calculate your debt-to-income ratio or DTI. Fortunately, education and outreach programs can help. Framework Homeownership offers an online course that includes information about calculating how much someone can afford, how to choose a real estate agent and shop for a mortgage, home inspection basics, and the closing process.

Let’s Support the Next Generation of Homeowners - Together Our industry needs to work with real estate professionals to help young adults achieve homeownership. With 44 million borrowers burdened by student loan debt, this is a huge opportunity.

Student debt is now the largets source of non-mortgage debt in America

$1.4 This spring, two additional updates went into effect to help expand the number of people who can be helped.

• Calculating Student Debt - Fannie Mae has updated how it asks lenders to calculate debt-to-income ratios for borrowers with student debt. Historically, Fannie Mae required lenders to consider a fully amortizing payment for every student loan in the debt-toincome ratio calculation, regardless of whether the borrower was in an income-based repayment plan (which can significantly lower monthly payments). With the recent updates to policy, lenders can now use the lower income-based payments for DTI calculations. This policy change could have an immediate effect on people’s ability to purchase a home since 10 percent of federally insured student loan debt holders are on an income-based repayment plan, and that percentage is likely to grow.

• Debt Paid by Others - Some graduates are fortunate to have help with paying their bills, including their student loans. Often this help comes from a parent, but it could be a spouse/partner or even an employer. In the past, debt paid by others would be included in the graduate’s DTI ratio. However, under the new policy, debt paid by others will not be calculated in the borrower’s DTI as long as the borrower evidences the other party has been satisfactorily paying the debt for the past 12 months. This reduces the borrower’s DTI. For lenders, this change widens borrower eligibility.

Trillion

$1.1 Trillion

$785 Billion

The information in the article is from a recent report co-authored by AREAA and Better Homes and Gardens Real Estate. You can view the report at areaa.org/studentdebt.

WINTER 2018

15

Becoming the Most Valuable Player in Your Client’s Home Buying Process

By Dottie Sheppick Finding the right house for your client is one of the best parts of the job. But watching them struggle to qualify for financing can be one of the more frustrating parts of the job. We’ve all heard about the tight credit market, but according to the Mortgage Bankers Association, credit is more widely available today than in the past several years, with credit availability increasing consistently since December of 2012. To become the most valuable player in your client’s home buying process, you just need to learn some of the little-known financing terms and flexibilities.

For your first-time home buyers, check with the banking institutions, such as Bank of America, Chase, Citi and Wells Fargo and ask about their Community Reinvestment Products. Some of the terms can seem too good to be true, but they are real. Some offer lower interest rates, some have reduced or no mortgage insurance and most

16

WINTER 2018

Don’t let potential home buyers rule themselves out just because they are not a first-time home buyer, or have had a past foreclosure, bankruptcy or short sale. The common definition of a first-time home buyer simply requires that they have not owned a home in the past three years. And today, you can generally qualify to buy a home after a foreclosure, bankruptcy or short sale in 2-7 years.

For those home buyers who need to save up for a home purchase, advise them to check with their credit union, bank or a community bank in their area to see if they offer an Individual Development Account (IDA.) IDAs are structured so that for every dollar the potential home buyer saves, the bank will match it. Some match 3 to 1 and others 4 to 1. The accounts are usually restricted to first time home buyers, but what a great way to leverage savings!

In summary, just because a buyer doesn’t have the traditional 20% down and 700 or higher FICO doesn’t mean they cannot obtain home ownership. Work with a loan officer who is willing to work on the hard deals, find solutions and take the time it requires to coach a buyer through the process.

205 185 165 145 125 105 85

Source: Mortgage Bankers Association; Poerred by Ellie Mae's AllRegs Market Clarity

Today, almost all lenders have a 97% conventional loan product and the little-known fact is that the 3% cash does not have to be from the borrower. It can be a gift, grant or unsecured loan from a government agency, a nonprofit, employer or family member. Your client may be able to access funds from these eligible sources of down payment and keep their savings for after they have moved into their home and they wind up facing unexpected costs, or they may choose to make the upgrades they envisioned when you first showed them their new home!

have flexible underwriting to allow boarder income and pooled funds. Credit scores at 640 or higher may be accepted and even nontraditional credit histories are usually allowed for those with limited or no credit score.

Your

Connection Gina Duncan

REALTOR® RB-21124 R, PB, ABR, CIPS, CRS, e-Pro, GRI, RSPS, SFR, AHWD, BPOR Direct: 808.250.9858 | MauiGina@gmail.com 275 W Kaahumanu Ave #2CA1 | Kahului, HI 96732 FineIslandProperties.com

President 2019

TO STAY C U R R E N T AND ACCESS

DISCOUNTS,

AREAA!

@areaa areaanational

EXCLUSIVE

FOLLOW

President Aloha Chapter 2015-2017

/areaa.national www.areaa.org

CONTACT US to find out about ADVERTISING OPPORTUNITIES

Rates beginning at $188/issue

ads@areaa.org WINTER 2018

17

Equipping the next generation of AAPI leaders in real estate.

Find out how at www.areaafoundation.org

2018 AMERICA - CHINA REAL ESTATE SUMMIT H o u s to n - S e a t t l e - Va n co u ve r April 5 - 12, 2018

The Asian Real Estate Association of America (AREAA) and the China Real Estate Association (CREA) present the 2018 North America-China Real Estate Summit, an unparalleled forum for business leaders and government officials to discuss and explore real estate and economic opportunities between the United States, China, and Canada.

Attendees will gain a firsthand understanding of these dynamic markets, share professional experiences, and network with top industry professionals from both sides of the Pacific. Do not miss this opportunity.

TO REGISTER OR FOR MORE INFORMATION, PLEASE VISIT AREAA.ORG/ACRES

HOUSTON

SEATTLE

HOUSTON

VANCOUVER

AREAA Global is going back to Greece, June, 2018! We invite you to join our investment tour and see first-hand the abundance of opportunity this country has to offer. Dates to be released soon. areaaglobal.com

Investing Abroad

Finding Gold in

Greece

What is the Greek Golden Visa?

By: Frederica Tassis

Greek Golden Visa Program: Launched in July 2013 the Greek golden visa program grants a five year residency visa in return for an investment in real estate. There is no minimum stay requirement and children up to the age of 21 are included in the family application. The visa is granted for five years and renewed every five years if the property investment is retained. It is not necessary to live in the country in order to retain and renew the investor visa.Â

The application process takes approximately 40 days from the time of investment until the Residency Permit is issued. The majority of investors in Greece come from Asia showcasing their belief that Greece has extraordinary potential. An excellent option to consider when presenting to your international investors.

20

WINTER 2018

shutterstock.com/turtix

While the program is offered in a number of European countries, Greece has the easiest requirements offered to people of means who want the ability to travel without passports in the European Union Schengen area. Purchased property can be located anywhere on the Greek mainland or the islands, can be either residential or commercial, and can either be a single or multiple buy as long as it surpasses the 250,000 euro threshold.

shutterstock.com/Karl Allgaeuer

Why Would a Foreign Invest or Buy Real Estate in Greece? ++ Title is free and clear ++ Greece has experienced three (3) consecutive quarters of GDP growth ++ For the first time since 2009, home prices rose in 2016, but are still down massively since start of the recession ++ One of the safest countries in the world ++ Greece is strategically located at the crossroads of Europe, Asia and Africa ++ Greece is synonymous to natural beauty. Crystal clear blue waters, small picturesque islands and white sandy beaches

++ Greece is considered the birthplace of western civilization; Residing in Greece offers the unique opportunity to discover ancient sites that are spread throughout the country ++ Due to its richness and diversity, Greek diet is considered one of the healthiest in the world and is linked to the reduction of cardiovascular diseases and thus, longevity ++ Greek summers can last well from May to September allowing one to enjoy the sea and the sun (over 300 sunny days per year!) to the fullest

FREDERICA TASSIS is a member of the AREAA Boston board of directors, Broker/Partner of Century 21 Premier Group, and a Certified International Property Specialist (CIPS). For more information on real estate opportunities and the Greece Golden Visa, please contact Frederica at fredericatassis@gmail.com | +1 617.999.6422

WINTER 2018

21

a/r/eats! with

KAT CHEN

滷肉饭

LU ROU FAN

‘Tis the season for comfort foods! One of my favorite things about winter is eating foods that warm me from the inside out. For my American friends, it’s usually a bowl of chili, beef stew or gumbo.

For me, I don’t think there is any debate that Lu rou fan (滷肉饭) is one of THE most beloved comfort foods in a Taiwanese home, second perhaps only to a piping bowl of beef noodle soup (and even then, a very close second). There are 2 variations to Lu rou fan, the other uses ground pork instead of pork belly. This is a recipe I begged my mom to give me in college when I was missing a taste of home. As an added bonus, pork belly is a very inexpensive cut of meat, easy to make in bulk (freezes well) and perfect for anyone on a budget.

Serves

INGREDIENTS:

4

++ 1 pound pork belly

Prep Time

15

min

Cook Time

2

hrs

++ 2 tablespoons cooking oil ++ 2 large shallots (or 1 small onion), finely diced ++ 4 garlic cloves, minced ++ 4 thick discs peeled fresh ginger ++ 2 star anise ++ 4 tbsps rock sugar or packed brown sugar

++ 1/4 cup shaoxing wine ++ 2 cups water ++ 1/2 cup light soy sauce ++ 1/4 cup dark soy sauce ++ 2 dried shiitake mushrooms, soaked and finely chopped (optional) ++ 1 teaspoon fivespice powder (optional)

INSTRUCTIONS: 1. Remove any bone and cut the pork belly into thick pieces about 1 1/2 inches long.

2. Heat the oil in a large saucepan medium-high heat. Arrange the pork belly pieces in a single layer in the pan so that each piece has direct contact with the bottom of the pan.

Cook without turning until just lightly browned on one side, about 30 seconds. Flip the pieces over and brown on the opposite sides for just 1 to 2 minutes more.

3. To the same pan, add the shallots, garlic, and ginger and shiitake mushroom and stir until just sizzling and fragrant, about 30 seconds. Add the sugar and cook, stirring, until bubbling, 1 to 2 minutes. Add the shaoxing wine and bring just to a boil, stirring to incorporate the sugar. Add the water, light and dark soy sauces, star anise, and five-spice powder and return to a boil. Reduce the heat to a gentle simmer. Cover and cook for until the pork is very tender and red-stained, at least 1 hour, preferably 2 hours.

4. Serve with rice.

22

WINTER 2018

shutterstock.com/Jade Y

Taiwanese Braised Pork Belly with Rice

Introducing The AREAA GLOBAL EXCHANGE

BUILD YOUR SECONDARY INCOME AND REFERRAL NETWORK THROUGH THE AREAA GLOBAL EXCHANGE AND CONNECT YOUR NETWORK OF CLIENTS TO TOP REAL ESTATE OPPORTUNITIES BOTH DOMESTICALLY AND ABROAD! AREAA Global presents the AREAA Global Exchange .. an exclusive marketing platform for AREAA members that hosts all approved real estate offerings and development projects from our strategic partners.

As an AREAA member you have exclusive access to the AREAA Global Exchange. AREAA members are granted instant listings and real estate investment opportunities to build your portfolio and client offerings. Members can access partner-run webinars to learn more about select development projects, engage with development representatives & access customizable marketing templates and e-blasts.

Do you have development connections or a project you would like to see included on the Global Exchange?

We encourage members to submit proposals for AREAA Global’s review and approval to contact@areaaglobal.com.

www.areaaglobal.com

EXCHANGE

shutterstock.com/Jeremiah Castelo

By JACKI UENG

L

ebanon is a stunning little country unlike what most of the world would envision it to be like until actually setting foot in this land. Located on the Mediterranean coast, a perfect blend of the West and the Middle-East, Lebanon truly takes the best from both the old world and new. At just 4,036 square miles, Lebanon is the smallest recognized country on the Asian continent; but despite its size, the country has a robust cultural diversity, full of pride, rich in history, deep in religious roots, art, music, full of gastronomical flavors and, most of all, the people are full of life.

24

WINTER 2018

I had heard time and again from friends that have visited Lebanon nothing but wonderful experiences of how fun this country is, how delicious the food is, and how lovely the people are. I showed up to the country curious from a nightlife standpoint as well as a cultural and political standpoint. The Lebanese people I have met in America have seemed more liberal than those from neighboring countries and one after another are all successful entrepreneurs – defying the typical stereotype you tend to seem presented in the media. I had to travel there to uncover the mystery that makes this country so special.

T R A V E L I N G with THE BOHEMIAN VAGABOND

A Beautiful Mix of the West & Middle-East It takes no more than 4-5 hours to drive from the north to the south of the country. Like Los Angeles, one could go skiing in the mountain in the morning and be lying on the beach getting ready to paddleboard by mid-afternoon. The coast is lined with sexy beach resorts, ancient Roman ruins, and a powerful history lesson to discover in every corner. Lebanese people love the outdoors and being in the sun - so don’t forget to pack beach clothes, a bikini, running shoes and sunblock! They just as much love food and the nightlife too. It's a 24-hour entertaining marathon in this small, yet electrifying country.

As modern and developed as much of Lebanon is today, the richness in history and level of classic Arabic hospitality remains. Meet a friend’s friend or even a stranger on the street and within minutes, you become friends for life. It’s a sharing culture, no one orders their ‘own food’, it’s always family style like in most of Asian culture.

Where to Travel in Lebanon

WINTER 2018

25

Beirut, the capital of Lebanon has been known as

“the Paris of the MiddleEast”.

Located right in the center of the western coast, the city is home to about a third of the country’s population.

Must Do: MusicHall Beirut

Zaitunay Bay

Book a table at this theatre style concert venue with friends, order drinks and appetizers and enjoy an eclectic mix of live performances ranging from traditional Arabic Music to Modern female singers using a variety of musical instr ments and dance techniques.

Walk around the port to people watch families, tourists, smoke some hookah, dine, and gaze in wonder at million dollar yachts and fivestar hotels.

Jacki Ueng

Downtown Beirut Where most of the action of Beirut is with high-end shopping, outdoor malls, rooftop bars and hotels. There is never a dull moment here. shutterstock.com/Diego Fiore

26

WINTER 2018

shutterstock.com/Anton Ivanov

BEIRUT Where to Travel in Lebanon

T R A V E L I N G with THE BOHEMIAN VAGABOND Jacki Ueng

BATROÛN

Batroûn is a coastal city 50 km north of Beirut and one of the oldest cities in the world. It has been recorded that one of the earliest human civilizations existed here over 5,000 years ago and was one of the most important Phoenician cities in the region.

Today, there is only a population of about 45,000 people in this safe, surfer, hippie town with an exhilarating nightlife along the sea.

Sites to Visit for ½ day (Accessible within an hour from Beirut):

Jeita Grotto One of the best caves in the world and a famous natural world wonder of the Middle-East. The cave system expands approximately 6 kilometers into the 18 kilometers northeast of Beirut. The site is divided by the upper cavern accessible by cable car and the lower cave, the best part, is to be explored by boat which is simply magical.

Byblos aka “Jbeil” in Arabic

shutterstock.com/Yulia Grigoryeva

Spend a day & night in Byblos, a beautiful fishing port with an ancient harbor. Rent a bike to explore the archeological sites: Crusader Castle, Byblos Archeological sites, Roman Theatre, Early Settlements and more. Hire a boat by day and have drinks along the port by evening with live music at the Old Souq (Arabic for ‘market’).

Accommodations Lebanon fits the profile of any type of traveler. You can go 5-star all the way or go mid-range. Along the Zaitunay Bay Marina in Beirut, there are Four Seasons, Sofitel, Mövenpick and more. Budget to Mid-Range hotels are available to travelers at small boutique hotels or AirBnB’s. In Batroûn, I stayed in a brand new Yoga Guesthouse for just $50 a night.

JACKI UENG is the VP in Business Development for Ticor Title in Los Angeles. When she’s not issuing Title Policies, she is traveling the globe in search of her next exotic food dish and cultural encounter.

As the Bohemian Vagabond, she's a travel blogger who inspires others to travel and experience the customs, cultures and foods of destinations across the world.

Follow Jacki's travels at:

JackiUeng.com

Connect with Jacki:

/

AREAAnewsNetwork

@JackiUeng

WINTER 2018

27

DROWNING IN DEBT – STUDENT DEBT IN AMERICA With Jessica Lautz

Can you give us quick briefing on where we are as a nation in regards to student debt?

The aggregate amount of student loan debt has now reached $1.4 Trillion, according to the Federal Reserve Bank of New York. It is second only to mortgage debt in the U.S. economy, which means it has surpassed both auto loans and credit card debt.

If the amount of debt held is not dramatic enough of a number, it may be more shocking to know that this is an increase of 170% since 2006. One in five Americans hold some amount of student loan debt. About 70% of college graduates moved into the workforce with some debt,

with the average amount being approximately $34,000. Of further concern: $34,000 is a jump of 70% in the last decade alone.

During the same period there has also been job growth, but wage growth has been slow for recent graduates. Along with high rental costs, this makes it difficult to pay down the debt in a timely fashion. Many borrowers opt for an Income Based Repayment Program which allows them to pay an amount monthly that fits their budget. In some scenarios, however, the loan may be in

Income-Based Repayment (IBR) is the most widely available income-driven repayment (IDR) plan for federal student loans that has been available since 2009. Income-driven repayment plans can help borrowers keep their loan payments affordable with payment caps based on their income and family size.

IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.

28

WINTER 2018

"If the amount of debt held is not dramatic enough of a number, it may be more shocking to know that this is an increase of 170% since 2006"

negative amortization as the loan balance increases monthly. Some borrowers knowingly must opt for this plan or they would be forced to default on their loans if they had to convert to a fixed payment plan with higher payments.

Currently, 11.2% of borrowers are 90 days delinquent on their debt, but approximately 55% are current on their student loan debt. Others fall into forbearance, default, are in a grace period, or are still in school. Notably, while students are still in school, dependent on their loan type, the interest continues to accrue.

39% of borrowers are under 30 years old. The debt burden is not just held by millennials, however, but all generations have accumulated student loan debt. For example, while there are fewer borrowers age 30 to 39 with student loan debt,

the balance held by this age group is actually the highest amount of debt among the generations. Generation X-ers and Baby Boomers took on debt themselves, perhaps to obtain a graduate degree or attend a two-year degree program during the recession but not at the level seen by millennials. However, Generation X and Baby Boomers also obtained student loan debt from their children who attended college and needed a parent to sign a Plus Loan. Parents are unlikely to turn away their child’s education and are willing to take on the extra debt to help advance their own children’s future.

"while there are fewer borrowers age 30 to 39 with student loan debt, the balance held by this age group is actually the highest amount of debt among the generations"

WINTER 2018

29

How will this accumulation of student debt affect the economy?

For the last two years, the National Association of REALTORS® has partnered with American Student Assistance to conduct a survey and research report entitled Student Loan Debt and Housing Report 2017: When Debt Holds You Back.

By surveying those who are current in their repayment, we have learned how the lives of borrowers are impacted by their student loan debt. The 2017 report focused only on millennials who have student loan debt and are current in repayment. 82% of borrowers were contributing less to their retirement than they wanted, or were not able to contribute any towards their retirement at all. If borrowers did not have student loan debt payments, they would opt to contribute more to long-term savings, investments and the purchase of a home. Not saving for retirement not only has an impact on the borrower’s life and safety net,

but also has implications for the wider economy, as they would need to stall retirement and that can reduce the jobs available for future generations.

Aside from the financial well-being of the borrowers, their lives were also impacted in the decisions they made to take vacations, purchase a car, continue their education, move out from a family member’s home, start a family, and even own a pet. The good news is that among the borrowers surveyed, 84% are working fulltime and only 4% are unemployed.

However, some borrowers would like to start a business but their student loan debt prevents them from doing so. All of these decisions have an impact on the economy. From family formation to starting a business to adopting Fido, these restrictions hold back both the economy and the borrower’s life.

"Not saving for retirement not only has an impact on the borrower’s life and safety net, but also has implications for the wider economy, as they would need to stall retirement and that can reduce the jobs available for future generations"

What are some of the factors that led to the dramatic rise in student debt over the last 10 years?

A few factors have caused the aggregate amount of student debt to increase so dramatically: 1) There are simply more students taking out loans; 2) The loans they are taking out are for higher amounts as the cost of tuition has increased; 3) Students who may have had help in the past from parental savings to pay for tuition find that savings pays for less now than it had in the past; 4) Some parents who intended on helping pay for tuition during the recession were unable to help, as tapping into home equity or savings was not a viable option;

30

WINTER 2018

5) While the students are forced to take out loans, parents also take out Plus Loans or private loans when the maximum loan amount does not cover the cost of tuition and living expenses; 6) The repayment rates have also slowed down; 7) It is difficult for borrowers to pay back high loan balances in a short 10-year period; and 8) Some loans expand the loan terms to 20 or 25 years, allowing a borrower to make on-time payments

How have rising levels of student debt affected the ability of younger generations to purchase a home?

Unfortunately, a drop in homeownership among younger adults is one of the side effects of the rise in student loan debt. The share of first-time home buyers remains suppressed at 34%. Historically the share of first-time buyers among primary residence buyers was 39%.

From the Student Loan Debt and Housing Report, 42% of millennial borrowers who are making payments on their student loan debt were delayed from moving out of a family member’s home because of their debt. 80% are not homeowners. Among those, 83% believe student loan debt has delayed them moving into homeownership. They expect their delay to last up to seven years. The reasons cited for the delay were the inability to save for a downpayment, not feeling financially secure enough because of existing debt, and the inability to qualify for a mortgage because of their debt to income ratio.

Among the 20% who are currently homeowners, 28% would like to move to another home but cannot due to their student loan debt. They believe it would be too expensive to move and upgrade homes, that their credit was impacted by their student loan debt, or they are underwater in their home because they were only able to make the bare minimum on mortgage payments.

I did an in-depth analysis this year taking data from recent home buyers. The housing affordability crisis is shutting out many buyers who want to purchase a home but cannot because of rapid price acceleration. Those who can enter the market with student loan debt have higher incomes as they are able to pay towards their loan, reduce the amount of debt they hold, and keep their credit in check.

Looking at data from recent successful buyers, and accounting for home size, area, and other buyer demographics, if a buyer had student loan debt, they had to purchase a home that was 4% to 9.3% lower in price than a buyer identical to them in every other way. The difference in price of homes purchased will shut buyers out of the market who want to purchase but see homeownership slipping out of reach as prices rise.

"Looking at data from recent successful buyers, and accounting for home size, area, and other buyer demographics, if a buyer had student loan debt, they had to purchase a home that was 4% to 9.3% lower in price than a buyer identical to them in every other way"

WINTER 2018

31

What are some options for people who have student debt and are ‘on the bubble’ for qualifying for a home loan? Are there any programs they should be aware of that could help them qualify?

I would suggest aspiring buyers consult their local mortgage broker and REALTOR®, who will know of local programs available to help them get into a home of their own. Your local mortgage broker and REALTOR® will be up to date on the latest information and mortgage rules as they pertain to student loan debt. You may be surprised to find that the cost of buying is less than your monthly rent in your area. I would also suggest checking out https:// www.hud.gov/topics/buying_a_home, which has a link to state and local home buying programs. Your local expert may also be able to point you towards neighborhoods that may be overlooked by other buyers but are more affordable.

Also, know that as a buyer with student loan debt, you are not alone. 41% of first-time buyers had student loan debt last year. A large share of these buyers needed to make sacrifices to save for a downpayment, but in the end, they were able to purchase a home.

32

WINTER 2018

Jessica Lautz is the Managing Director of Survey Research and Communications.

Jessica started at NAR in 2007. The core of her research focuses on demographic trends for both NAR members and housing consumers.

Jessica graduated from the American University Masters of Public Policy Program and has undergraduate degrees in Political Science and Law and Justice from Central Washington University. She is pursuing her doctorate of Real Estate from Nottingham Trent University.

2018 is the 50th Anniversary of the Fair Housing Act. While we have come a long way since then, we still yet have far to go.

Help us tell Congress what our community needs.

ONE MISSION ONE VOICE 2018 National Policy Summit May 15-17th www.areaa.org/policy

Agent Profile

Eight uestions with RE/MAX Lisa La

Language of Trust Denver standout Lisa La fulfills clients’ dreams with English-Vietnamese fluency

Born and raised in Denver, Lisa La earned her real estate license in 2005. In March 2016, she joined RE/MAX Professionals, an organization with 420 agents and eight offices serving the Greater Denver area. Her production over the ensuing 10 months earned her Rookie of the Year honors. In 2017, La more than doubled her production, closing 25 transactions. La’s parents were Vietnamese refugees who arrived in the U.S. in the 1970s. Her fluency in Vietnamese has been one key to her success, as she serves a client base she estimates is 90 percent Asian.

Q: Describe your parents’ experience and how it influenced your outlook and ambition.

My parents had nothing when they came here -- $20 in their pocket. They lived in the projects, and then a trailer home. My mom ended up going to Community College of Denver and earning her degree in technical drafting. My dad stayed in the landscaping business until he retired. They've worked hard to climb higher their whole lives. They set a great example of what you can accomplish.

Q: What led you to real estate as a career?

My family is very entrepreneurial; we’ve always been small-business owners. At one point in the 1990s, we owned four Subway franchises. At age 18 I was going to college and running a Subway shop on my own. I earned my degree in business 34

WINTER 2018

management and started in real estate after that. I wanted to help people improve their lives.

Q: What distinguishes real estate from other entrepreneurial pursuits?

America is where dreams are made. Once people own a house, it’s theirs. I know it's hard to understand, but I really don’t do this for the money. I do it to help people realize their dreams.

That's the real payoff.

Q: What best describes your approach to serving clients?

Last year, I redid my billboard and put up my real estate slogan: “#HomeOwnershipForALL." And when I say, "for all," I mean it literally. I believe everybody should be treated exactly the same, whether they have money for an $80,000 condo or a milliondollar house. They deserve my best effort in helping them buy a home that's right for them.

Q: You closed your first commercial transaction last year.

How did that go?

The buyers were a lending group from Texas/Louisiana looking to expand into the Colorado market.

Because they also serve a lot of Vietnamese-speaking clients, it was a good match for us to work together. I had a very short time frame ( just hours) to put together a list of showings for the big boss who was flying into town that day.

Needless to say, within weeks, I was drafting a LOI (Letter of Intent) and we closed very quickly on this lease.

Q: Did that make experience make you even more interested in commercial real estate?

We own several commercial buildings within my family, so I've managed commercial tenants.

Within the Asian community, I see a lot of opportunity in retail shops, liquor stores, and all sorts of restaurants and markets. In Denver, there are many people who mostly speak Vietnamese, and not that many Vietnamesespeaking commercial agents serving them. Commercial is a market I’d like to tap into – not just within the Asian community, but with everybody.

Q: How valuable has your Vietnamese fluency been to your career?

Very valuable. Even dealing with the younger generation – the Gen Xer’s and millennials – a lot of the down-payment money is coming from parents and the grandparents who still speak Vietnamese only. Many times, I translate everything for them.

Working with people who are like my parents has been my bread and butter. I relate to them and their ambitions.

Q: What’s the most valuable career lesson you’ve learned?

There was this family that I probably showed 200 houses.

It was a challenge. Finally, we walked into a house and the mother immediately said, ‘This is it.’ It had the perfect feng shui. She and her family left the projects to live in that house.

When I closed that deal, I had the aha moment of my life – an epiphany. I thought, "This is why I’m doing this; this is why I work so hard." I realized it’s more than a career; it’s a calling to serve my community.

Lisa La facts: Licensed: 2005 Leadership positions: Treasurer, Asian Real Estate Association of America, Greater Denver chapter Board Member, Community Alliance Task Force, Denver Metro Association of Realtors Board Member, School Advisory Council, Notre Dame Parish School Member, Asian Chamber of Commerce (Colorado) Diamonds and Pearls Asian American Women Leaders Award 2017: Presented by Denver Mayor Michael Hancock and First Lady Mary Louise Lee

WINTER 2018

35

By Rob Mehta

"41% of collegeeducated Americans with student loan debt say those student loans in fact are keeping them from buying a home"

Happy 2018 Readers, I hope it’s off to a fantastic start so far! We have had so many interesting questions come up this past year, and though we are trying to get around to as many as we can, I have one that keeps coming up time and again. It goes a little something like this: “Rob, I have a millennial client that wants to buy, but is struggling to qualify for a mortgage! What do I do now?”

Well, did you know that about 41% of college-educated Americans with student loan debt say those student loans in fact are keeping them from buying a home? And, millennials who don’t already own homes are delaying purchasing a home on average for seven years! The culprit is all of this student debt which is affecting these individual’s ability to save and a whopping 85% of those folks said that their student loan payments were preventing them from building any meaningful savings too, and of those 52% said that their DTI (debt-to-income) was too high to qualify for a mortgage.

Rob Mehta is the owner of Rob Mehta+Partners, and specializes in education and consulting with a focus on business development, brokerage operations, marketing, agent recruiting and retention, and international development. He has served as President of the Minnesota Association of REALTORS, Director for both AREAA and NAR's Young Professionals Network and a member of AREAA's inaugural "A-List." www.robmehtapartners.com 36

WINTER 2018

So there it is, the numbers are very discouraging and the obstacle seems insurmountable, but, I do have some solutions: Last year, Fannie Mae announced three significant changes to their underwriting requirements specifically for consumers with student loan debt. Two of the aforementioned changes assist the borrower in obtaining a mortgage, and the third helps homeowners that are still carrying that student loan debt. I can already hear you screaming, “Tell me More Rob, my people need me!”

The new rules: 1.

If your client is participates in one of the federal repayment plans (IBR/IDR/PAYE/REPAYE then the actual monthly payments, as reported to the credit bureaus, will count toward debt-to-income (DTI) ratio calculations. In a nutshell, that can greatly reduce your monthly debts for DTI purposes. Before these changes, lenders were required to factor in 1% of the student loan balance as the monthly payment on the student loan, even though the borrower was only paying a fraction of that.

2.

If your client has credit card, auto, or any other nonmortgage related debts that are being paid for by someone else -- for instance, a very generous family member might be paying monthly credit card balances (I need one of these if any one has any extra family members that’s willing to adopt) -- then these amounts are will no longer be used to calculate DTI, as long as those payments are made on a steady basis for at least 12 months. That alone can greatly influence the DTI of these buyers trying to obtain their first mortgage.

3.

Lastly, for those borrowers who own and are ready to move up, decent equity in their home may allow a refinance scenario to pull funds to repay some or all of their student loans. Fannie Mae is eliminating the extra fee it charges for cash-outs, as long as those funds that borrowers withdraw are used to pay off student loan debts. And, these new rules also give borrowers the same rate on the amounts used to pay off student loans as for the new mortgage, their kids' student debts, and parents who have co-signed for their children's student loans.

So, if you find that you’re having this discussion with your client, know that although it’s possible to get a mortgage while you have student loans, the borrower needs to start paying close attention to their bottom line, that their monthly debt payments will impact the ability to qualify for a mortgage, payments on credit cards, auto loans, student loans, and other debt is the basis for what’s considered. If they’re not on a repayment plan with their student loans, suggest that they negotiate an income-based repayment plan, as lenders will want to see that the individual is consistently paying on the debt. Discuss their debt-to-income ratio, generally their overall monthly debt-to-income ratio must be below 43% to qualify for most mortgages. Perhaps they need to consider refinancing their student loan debt to lower their DTI - the new loan could have a lower interest rate and a lower monthly payment, which can decrease their DTI. If this is something they choose to explore, make sure they do so early on with plenty of time to recover from the credit ding.

And lastly, factor in how much they can save for a down payment. Committing to a larger down payment will make them more attractive to lenders, but if they can’t afford that, it’s worth investigating whether their individual situation would be a good fit for an FHA loan.

So there you have it. With slightly more relaxed credit standards, and more product in the mortgage marketplace today than even a year or two ago, there are options. It is your job now to help your buyer to discover what options exist for their scenario and if the time is right to take advantage of such solutions.

WINTER 2018

37

Commercial Brief

The Condo Leaseback and Fractional Ownership – Is This Just a New Marketing Spin on Time Share?

The differences between the 3 property types explained

By Kurt Nishimura RE/MAX Excalibur

Having served as a senior asset manager for the hospitality division for a private equity real estate company during the hotel cycle from 2001 to 2008, I was presented with numerous potential property acquisitions or new developments which often incorporated some version of either condo leaseback, fractional ownership or a time share development associated with the property being marketed. In many cases, these theoretical value additions to the purchase price was needed to justify the risk/reward measurement that all successful investment firms go through when creating a pro forma for a potential acquisition. These value additions usually meant the broker was having difficulty pitching the investment based upon the property by itself and needed to add a value to kicker to make it more attractive to a developer.

If you are not sure what the differences between the 3 product types you are not alone. Why to developers often add these to an 38

WINTER 2018

existing development? Which product type is best for the consumer who these products are being marketed to? What is the difference? There are several iterations of each but the most common are the condominium with a sales leaseback option, a fractional ownership development, and a time share development.

The condominium leaseback is when the developer builds condominiums for sale with the specific purpose to have the owners put their condo back into a rental program with the hotel/resort.

While participating in the rental program is usually not mandatory (due to local real estate laws), the buyer is incentivized to put it back into the program so they can offset some of their ownership costs by getting rental income when they are not using the property. The buyer likes the program because their cost of ownership is offset by rental income and the property is professionally managed by the

resort staff when so the property is being looked after by another group. There is usually a rental share agreement between the two parties which varies but a 70/30 split is not uncommon. Some owners will manage their own rather than accept the terms given by the operator. AIRBNB and VRBO have made this more accessible but they still need someone on-site taking care of laundry, check in and check out of guests. Since the owner is responsible for repairs and maintenance, some hotel operators do not like to have these leasebacks properties associated with their brand since it is difficult to enforce renovation and reinvestment back into the property.

The fractional ownership often similar to a sales leaseback. Some fractional ownership do not have a leaseback program for the buyer to put the property in a rental program when it is not being used. The more successful fractional ownerships are with strong brand/operators when the fractionals are sold at a significant premium due to the branding associated with a 4 star or 5 star company like Four Seasons or Ritz Carlton. The people who can afford these prices often do not need the rental revenue so a leaseback program may or may not be provided by the developer. The developers that do offer a rental leaseback program associated with a high end brand will often have

stipulations built into the rental participation programs to enforce the owners to maintain the same standards set by the brand in order to create a seamless experience for the hotel guest whether the guest stays in a hotel room or is staying in a fractional unit.

The time share development is very different from condo leaseback and fractional ownership models which became popular after 2000 although the purpose from the owner developer was the same.

A time share is not an ownership interest in property but a right to use the property in the future dictated by the terms of the time share agreement. The time share which have been around for several

decades were popular because it was a low cost way for consumer to finance a vacation to a popular destination they may not otherwise be able to afford It became less popular once consumers realized the on going costs related to annual maintenance fees and other charges related to the time share they may not have been aware of. Furthermore, as consumers got tired of going to the same destination, the resale market for time shares were very limited and difficult to transfer to another person. The major hotel brands began to enter the market and gave the right to trade to other locations where they had another branded hotel. The independent WINTER 2018

39

Commercial Brief timeshares companies created partnership to create location transferability which helped keep the product viable but in many consumer eyes there is still some negative connotation related to time shares because of the lack of a resale market.

Given the somewhat negative connotation to time share product and to a lesser extent the condo leaseback and fractional ownership

product, why is it that developers continue to create these type of real estate developments? It is because the development is a proven way for the developer to lower the cost of the initial acquisition cost or cost of development when it invests in a new property. Over the course of the lifetime of a hotel, the owner constantly has to reinvest money into the property to maintain the brand standards of the hotel to remain competitive

with other properties. Some portions of the property become obsolete and can be redeveloped into something else the developer can build and increase their return on investment. Tennis courts used to be an amenity for any resort destination but with interest in the sport declining many developers have redeveloped the land to add additional hotel rooms which can be sold as condos, fractional ownership or even time share

Difference between Condo Fractional and Timeshare Condo / Leaseback

40

Fractional Ownership

Ownership Structure

All rights associated ownership like building equity, ability to use as determined by the owners with some limitations if it is part of a lease back agreement.

Sold in ownership fractions depending upon the developer's determination of marketability Usually 4-12 fractions of the same property

Customer base

Usually wealthy clients in areas where there is strong demand for 2nd home ownership

Marketed similar to condo/leaseback customers who frequent the same location

Customer use of the property

Use of the property determined by the owner but occassionally had use restrictions by devloper in a leaseback programs

Use of the property determined by the fractional interest purchaed with some restrictions by devloper in a leaseback programs

Financing Availability

Mortgages for 2nd homes is available but the loan amount will vary when it is part of a leaseback program because it is considered to be investment property

There are special finance companies who lend on fractional ownership properties. The term and rates vary by project

Transferability of the property

The property can be sold similar to any other fee simple property. The resale value is directly related to the desirability of the area and the property.

Fractional ownership generally sold as a branded product related to a hotel or resort. The market for resale influenced by the strength of the brand and operator of the hotel/resort.

Ownership benefit by the purchaser

Fee simple ownership with ability to get financing and rent out when the property is not in use

Fractional ownership with ability to get financing and rent out when the property is not in use. Lower purchase price entry point than full ownership

Benefit to the Developer

Developer of the hotel or resort property can add more room inventory but profit from the sale of adding condominiums but get to use the additional rooms through a leaseback program.

Developer of the hotel with fractional ownership can sell property at a premium with a strong brand/ operator.

WINTER 2018

Commercial Brief units. Not only does the developer get the benefit from the sale of the newly developed units, they get the future revenue and profit generated from additional guests coming to the property to use the hotel restaurants, spa, golf, retail and other amenities the guests use to pay.

The benefits of the condo leaseback, fractional ownership and time share definitely add

value to the developer of a hotel/ resort property, it is important for the consumer to know the differences of each of the product types before they purchase since each have their own benefits and drawbacks associated with each type. Hopefully, this article will help distinguish the differences of the three types so consumers can make an informed decision.

The hotel industry is constantly evolving and there will always be

new product types the consumer will need to weigh their options.

One area that is changing the landscape for developers is AIRBNB and other sites like this which allow the small investor to compete on the same stage as the developer. It will be interesting to see what comes next in the hospitality industry and its overall effect on the real estate market.

Time Share

Commentary

Usually sold in 1 week increments so 50-52 weeks per year. Right to use the property but not tied to specific property but ties to certain unit type

Condo Leaseback and Fractional ownership actually own either the entire or a portion of the property. Time share is just a right to use property annually in the future

Marketed more towards middle class or cannot afford 2nd home but frequent the same location

Condo/Leaseback and Fractional Ownership is usually associated with higher end resort properties offering 4-5 star level service.

Timeshare usually full service hotel but not considered luxury

Restricted to the amount of the time share purchaseed. Some rights to trade use at other locations are incorporated in the program

This is where the major difference is between being a owner of a property lies and the rights associated with a time share.

The developer will has financing in place for interested buyers. The interest rate tends to be high since the buyer has not equity in the property

There is financing available for all three product types but the terms and rates vary greatly. In general, the more equity ownership the purchaser has the better the rate and terms.

Time share property does not have a very strong resale market and most people will have to discount the price in order to sell their time share rights to another person

Condo Leaseback and Fractional ownership actually own either the entire or a portion of the property. Time share is just a right to use property annually in the future so it is difficult to resell

Least expensive way to insure right to use property on recurring basis without the hassle of ownership

Rights of equity owenrship associated with both full ownership and fractional ownership. Time share benefit limited responsibility for on-going ownership costs.

Developer of the hotel with time share gets the benefit of profit from the sale of time share from the sale and in the future gets the revenue from guests frequenting the restaurants and amenities of the resort.

Developer of the hotel or resort property like all three products because it significantly reduces the cost of development by selling part of the property in the early years while gaining additional revenue from guests returning in the future using their other

WINTER 2018

41

INTRODUCING THE NEW AREAA LUXURY DESIGNATION IN PARTNERSHIP WITH THE INSTITUTE FOR LUXURY HOME MARKETING.

Take the first step in earning The Institute’s Certified Luxur y Home Marketing Specialist™ designation with a first of its kind luxur y course geared toward the AAPI community and available exclusively to active AREAA members.

Expert trainers Bill Hensley and Terri Morrison, celebrity author of Kiss, Bow, or Shake Hands, will deliver never before seen content designed for those working with affluent clientele from many cultures.

An immersive journey into luxury real estate sales, this course provides the foundation for what can be a successful future representing some of the most prestigious properties in your marketplace. It can help position you as an experienced, talented, and vetted specialist in the industry, and serve as a signal for affluent clients that they are working with an exceptional real estate professional sensitive to particular cultural cues.

WHEN: THURSDAY-FRIDAY, MARCH 15-16, 2018 WHERE: ASIA SOCIETY & MUSEUM 725 PARK AVENUE, NEW YORK CITY REGISTER: WWW.LUXURYHOMEMARKETING. COM/AREAANYC

Course attendees receive a one-year membership to The Institute for Luxury Home Marketing and gain access to a variety of tools and resources to help them excel in the luxury residential market. From ProxioPro to WE Prospecting on Online Wealth Lookup, attendees gain knowledge, skills, and the information they need to succeed.

W I N T E R 2 018

2