Giving Back

Service Above Self

That is the Rotary motto, and our University District Rotary Club exemplifies its spirit. I just returned from a weekend in Vancouver, British Columbia with the Rotary District 5030 clubs - of which our club is a member. My neighbor and landlord Ezra Teshome was this year's District Governor, and he is pictured here addressing this weekend's district conference.

Ezra has been personally responsible for eradicating the disease of polio in his native country of Ethiopia, leading trips of Rotarians to immunize children there every year for twenty years. Only three countries in the world have not eliminated the disease - Nigeria, Afghanistan and Pakistan. Until they do, the world is not safe. Rotary has led the effort to eradicate polio, in partnership with many others, including the Bill and Melinda Gates Foundation. Bill Gates Sr came up from Seattle on Saturday night to address our Rotary conference on this topic. I learned the world is "this close" to eliminating polio.

I learned from the many other speakers in plenary and break-out sessions this weekend, that Rotary has changed lives around the world. Rotarians who funded an infant girl to get the surgeries she needed to grow up and walk again on prosthetic legs; the many villages in Guatemala, Mexico, and across Africa that have clean drinking water and new school houses thanks to Rotary; the disabled children in Nepal who are given dignity and wheelchairs; the children in poor communities here and abroad that have safe playgrounds built with Rotary dollars; the Rotarians who funded a 12-year old boys plans to end child slavery around the globe. Rotarians are changing the world through these acts of service above self.

And in this blog by and about real estate investors, the goal is to leave the world a better place for our having lived here. To learn to build community through ethical investment, and through compassion for those whose lives are being changed. To have the ability to "give back" after profiting from one's life work. This is truly to have lived, and lived well.

Happy investing.

Real Estate Ethics - Lease Option Transaction

Buyer Beware!

I just had a client back out of a lease purchase transaction, because the seller - a real estate investor - had failed to pull any permits on the remodel of the house. My client is a builder and general contractor. He spoke with the City to find out about the permits. Without permits, any buyer would not be protected by insurance for a house fire or other problems covered by non-permitted work.

When I shared this information with the listing broker - who happens to be a Managing Broker/Owner (meaning he has the authority to hire and supervise other real estate brokers) - he actually had the audacity to inform me that any buyer who wants to know details (eg. get an inspection) of a house they are optioning to buy is not a good candidate for a lease-option!!! He typically works with buyers who have no professional representation.

I agreed that knowing whether permits have been pulled on a house one is renting or buying is a material fact that might influence a tenant/buyer's decision to rent or buy.

I told him that this spoke VOLUMES about his business model, and that, thank you very much, this is NOT the way I do business.

The Ethical Investor

The Ethical Investor
Dishonesty and unscrupulous behavior may succeed in the short term, but ultimately everyone loses when an investor is unethical. As in the recent devastating housing crisis that caused honest and dishonest investors alike to struggle and now bear the consequences of increased regulation, the backlash of poor ethics affects us all.
Some questions are harder to answer than others when it comes to ethical investing. Is it ethical to promote no money down deals that may save someone from bankruptcy, but the buyer may be naïve in his understanding? Should a landlord rent to all people who have the ability to pay, or should he make judgmental decisions on the kind of neighbor this tenant would make? What should be the guide?
These questions are simple when they apply to cases of obvious misleading or fraud. If there is a rule or regulation, it needs to be followed to the letter and spirit of the law. If that means investment returns are reduced on that transaction, so be it. As soon as law abiding becomes subjective, a society collapses. In investment decisions that are not as clear-cut, as in the above examples, a good rule may be to put yourself in the prospective client’s shoes. If you would feel correctly advised, informed, and fairly treated with the same tactics, then you may likely proceed with a clear conscience. If it is a deal that you would not accept were you to know all the facts, then it is likely a transaction with ethical issues.
Ultimately, the crux of the question is whether real estate investing is an honest endeavor? If you believe it is, then you should proceed to make deals that reflect that integrity. If not, then get out of this business and shine shoes. Your soul is too precious to throw away.