Friday, November 16, 2018

Five Contiguous Zip Codes May Have Vastly Different Location Values

(Click on the image on enlarge)

Housing market is primarily about "location, location, location." Most first-time homebuyers do not understand the impact of location on home values; instead, they tend to get carried away by the size, age, grade and condition, ignoring the biggest contributor to the value, i.e., location.

The above spatial graphic shows how the five contiguous Zip Codes have vastly different residential location values, ranging in value between 0.50 and 2.0 -- a whopping factor of four. In other words, a $500K house in Zip 32808 would jump to $1.68M in 32804 and to $2M in 32789 and so forth.

One of the easiest and quickest ways to understand the residential location value is to study the published median home values by the Zip Code. Of course, another step is required to derive (a simplistic form of) location value for the Zip. The Zip-wise median home value needs to be normalized (divided by) by the median heated area (square feet) so the location value comparison becomes apples-to-apples.

I picked the above graphic from as I own and operate it, to avoid having to deal with any unintended copyright issues. My LocValu site is totally self-directed (no modeled values), totally free (no strings), and requires no registration/log-ins whatsoever. Please use the site/system that works best for you. 

Disclaimer: This analysis is strictly illustrative. Any commercial or legal use of it is totally prohibited.  Always consult a Tax Attorney on statutory requirements.

Thursday, November 15, 2018

Income Disparity is at an All-time High. What should we do about it? (Part 2 of 2)

At the Local Level

Economic OpportunityEconomic OpportunityEconomic Opportunity!

   1. Implement Laureate Yunus’ Microcredit Model to Create Economic Opportunities in Inner Cities – Most inner cities in the western hemisphere lack economic opportunities resulting in poverty, often rampant poverty. Thousands of bright people are stuck in poverty in inner cities due to local governments’ inability to create meaningful economic opportunities. One size fits all economic model does not work there; instead, the local governments should try Laureate Yunus’ Microcredit Economic Model, thus financially empowering the local entrepreneurs (“are too poor to qualify for traditional bank loans”) to turn their neighborhoods around. Though this bottom-up economic model was developed for poor villages in third world countries, it has tremendous potential for our inner cities. In order to maintain the uniformity of the program, it needs to be federally (HUD) funded/insured, with a dedicated chain of private financial institutions operating and managing it, in line with the existing SBA program. Again, for the program to successfully work, government must not be involved in running it.
   2. Proclaim all Small and Mid-size Downtowns Enterprise Zones – Downtowns of many small and mid-size towns around the US suffered heavily with the out-migration of population to suburbs. While the theme of revival and revitalization of downtowns has been gaining momentum, it needs to accelerate and become more widespread. In fact, all such downtowns must be proclaimed as Enterprise Zones, enticing businesses and builders to return to take advantage of the long-term income and property tax abatements. Sales tax subsidies could be offered to entice consumers to return to shop in revitalized downtowns as well. Public parks could be privatized in an effort to convert them to esthetically-decent yet income-producing family-oriented amusement and entertainment centers. A well-planned nationwide downtown revival initiative will create enormous economic opportunities and jobs; in fact, it could complement the much-talked about trillion dollar Federal Infrastructure Plan, creating much better synergy than approaching them mutually exclusively.

   3. Build Water and Sewage Treatment Plants – Returning to the poorer countries, providing clean water along with effective sewage system is life’s basic necessity. In fact, providing clean water to citizens is as important as the basic education and preventive healthcare. Therefore, investing in water and sewage treatment plants must also be viewed as preventive healthcare, helping people avoid unnecessary trips to health centers and emergency rooms due to easily avoidable water-borne diseases and lack of sanitations. Private companies must be enticed to build and run these plants in exchange for long-term tax-free revenue. Upon expiration of the initial contracts, governments must auction off the maintenance and revenue rights for lump-sum and upfront revenue. This could be one of the best investments in keeping people healthy while reducing overcrowding at the ER, thus freeing up doctors and nurses to provide more critical medical services. This rising tide will incentivize private companies to make bigger and better (AI and robotics) investments in water treatment and recycling technology, striving to lower overall development and maintenance costs.

    4. Develop a Fair and Equitable Property Tax/Assessment System – Property tax is often the major source of revenue for Cities and Towns. The young and prospering cities and towns around the world must follow the US property assessment system so their systems become fair and equitable from the get-go. A poorly built haphazard assessment system tends to be regressive, thus heavily favoring the rich. Under such a biased system, poor and middle class homeowners subsidize the upscale and high-end properties. While rebuilding the assessment system, the major cities in those countries should seek the help of US consultants, to avoid having to deal with such bias which unfairly shifts the burden on to the poor. Obviously, an unfair system discourages home ownership at the rank and file level. A fair and equitable system spontaneously entices foreign property developers, both residential and commercial, to explore those markets. Likewise, major developers tend to avoid cities and town in third world countries with poorly developed and/or unpredictable assessment systems. Build it right from the get-go.

   5. Develop a Competitive yet Investment-friendly Business Climate – States/Provinces down to cities and towns must develop an investment-friendly business climate and learn to compete with one another in order to entice significant domestic and foreign investments, leading to persistent and long-term economic prosperity and an ever-expanding job base. Political leaders must also realize that a marketable local economy requires a marketable labor force along with an attractive business climate comprising lower corporate taxes, growth-friendly corporate and environmental regulations, separation of church and state, developed financial institutions, low crime, cooperative and functional government, etc. Furthermore, in order to attract major corporations to help take the city/town to the next level and reshape the economic landscape, local governments must be as forthcoming and accommodative as possible, considering the epoch-making economic impact of such an event could bring about (Case in point: the reaction of cities and towns across the US to the proposed development of Amazon’s HQ2).

   6. Build more Long-term Care Facilities, not Jails and Prisons – The young and reinvented cities around the world should rethink and redefine crime and punishment from a moral high ground. The lack (perhaps absence) of economic opportunities often forces poor people to commit petty offences, resulting in jail terms. Instead of sending them to jail, they should be assigned to the local clergies, rabbis and imams to perform community service. Similarly, in a civilized world, building juvenile detention centers does not pass the muster of moral hazards. Those kids should also be supervised by the local spiritual leaders. This holistic approach will be a much better deterrent than the traditional jail terms. They will thus remain as normal and productive citizens without the useless stigma of jails and detentions. In return, the participating religious institutions must receive government aids and grants for maintenance and conservation. People committing the so-called “more serious crimes” must be sent to high-security long-term care centers under the care of qualified psychologists and psychiatrists. If we decide to move to a “merit-based immigration,” top-notch psychologists and psychiatrists from around the world must top the merit list alongside STEM professors. This humane approach will help save a ton of taxpayer dollars, hopefully finding ways back into those poor communities.

   7. Make College Education Free for STEM Students – Poorer countries need to emphasize science and technology education to be globally more competitive. Government colleges must provide free STEM education to qualified poor students. In order to get into the free STEM programs students must compete and qualify for the available seats, ensuring the acceptance of the best and brightest. Students pursuing other essential disciplines like nursing, teaching, etc. must receive subsidies as well. All other majors irrespective of the students’ financial needs must pay full tuition, thereby forcing the otherwise needy to pursue vocational education in line with the market demand. Again, vocational education must carry full financial aid for the needy. While the local governments must always ensure that the financially disadvantaged students are never left behind, they must simultaneously understand the marketability of the labor force. Taxpayer dollars must never be squandered on education that is contrary to the market demand.

                   At the Individual Level

   8. Richest 1% Needs to Accept the Generational Reset – According to a recent Credit Suisse report the richest 1% now owns 50.1% of the world’s wealth. Given this absurd concentration of wealth, we need this 1% to be self-convinced (like Mr. Warren Buffett) that they are just temporary custodians of the wealth. When a big chunk of their billions remains wastefully invested in unproductive and ostentatious wealth like $50M yacht and $300M in multiple mansions, it hardly benefits the human race. They must therefore come to terms with the generational reset meaning, at the end of their lives, they must return a sizeable portion of their wealth back to the society, pulling tens of millions out of abject poverty each year. In other words, the success or failure of the human race is largely dependent on them. If they are honest and honorable enough to accept this harsh reality, the advancement of the human race will gleefully continue; absent which, millions more will continue to drift away in utter poverty. Hopefully, this voluntary return of wealth – and not forced redistribution of wealth – will become a self-fulfilling prophecy in arresting the ever-widening income disparity and mitigating world hunger and starvation. We just want them to be more humane in feeling the pain and anguish of millions of mothers watching their children go to sleep hungry.

   9. Apply the Same High Moral Standard for the other 99% – We must learn to put the interest of the human race ahead of our own. So, the rich and poor alike must also come to terms with the generational reset, voluntarily returning a big part of our wealth back to the society. Perhaps, we need a universal ringtone ‘Mom, I am hungry. I can’t sleep’ that will constantly remind us that millions of children are hungry and that their mothers are starving. That nightly sound is the Via Dolorosa for those mothers. Just never ends. We must never forget that these are our children and their mothers are our daughters and sisters. They are inseparably part of us.

         Thank you.
    -Sid Som MBA, MIM
    President, Homequant, Inc. 

Income Disparity is at an All-time High. What should we do about it? (Part 1 of 2)

 At the Country Level

Economic Opportunity! Economic Opportunity! Economic Opportunity!

  1. Develop Basic Infrastructure with Private Cooperation – A country with well-developed infrastructure can attract more high quality foreign and domestic investments than their counterparts who are struggling to ramp up their infrastructure. Therefore, the poorer 3rd world and developing countries should intensify the development and expansion of the basic infrastructure – instead of selling out their natural resources – by enticing private companies (well-known local and foreign) to provide the leadership in that sector. For example, those companies could be encouraged to build new toll highways and bridges, railroads, metro/light rail, ports, airports, rural electrification, tele-communications, etc. shouldering all costs in return for all revenues (at pre-negotiated resell rates) from those projects for the first 15 to 20 years. It would be win-win. With the rapid growth of infrastructure, the credit ratings of those governments would improve. On the other hand, companies investing in infrastructure would get a steady and predictable revenue stream (revenue for 12 to 18 years post completion).

  2. Let the Revenue Cycle Continue – When the ownership returns to the government, they can once again auction off those projects (revenue rights/maintenance obligations) generating significant upfront revenue to reinvest in derivative infrastructure, e.g., schools, hospitals, national/state parks, etc. In order to maintain the tempo of growth, governments must not get into the business of “running” any basic infrastructural services. Of course, they should be in the front-end (deciding on the location, type, extent, etc.) and back-end (audit and oversight), but not in the mid-end (actual “running” of the services). At that point, the toll, utility and transportation rates would be much lower (considering they would be paid for) benefitting all consumers, including the new arrival of businesses needing better and faster transportation and communication services.    

  3. Avoid Bridges to nowhere – The participation of the private sector will help avoid building non-productive bridges to nowhere as they will conduct their own feasibility studies with rigorous cost-benefit projections. With the expansion and renewal of the basic infrastructure, those countries will become more attractive for foreign investments. Of course, they are inherently foreign exchange poor so enticing foreign investments with more competitive infrastructure will be the path forward. As the multi-national companies find out the growth of investment-friendly infrastructure in those countries vis-à-vis their surrounding peers, they will be more eager to explore direct and joint venture investments there. Needless to say, they are also constantly looking for new markets to explore and penetrate!
  4. Entice Neighbors to Follow the Successful Example – Of course, with the rising prosperity comes the border issue. A good leader sets examples others are enticed to follow. Today, we live in a world of economic cooperation and free trade so building a Chinese wall around the country’s border does not lead to lasting economic prosperity; rather, successful countries must encourage the poorer neighbors to follow the successful example and shore up their own basic infrastructure, thus paving the way for a concerted regional revitalization and growth. This is how the refugee problem (from the neighboring countries) is best avoided.

  5. Develop Regional Economic Zones – As the regional renewal gains momentum, countries must work together on creating their own economic zones, letting goods and services flow freely across borders without the costly and unnecessary taxes, tariffs and barriers. With economic zones in place, it would be easier to convince corporations to build toll-ways, bridges, waterways, etc. across borders, offering better scalability and enhanced economy of scale. Countries must experiment with and use (economic) growth models that are sustainable. In fact, G-7 down to BRICS must aid and cooperate with the countries that become signatories to an economic model emphasizing regional growth, renewal, cooperation and development of economic zones.   

  6. Create Tax-free Enterprise Zones – With the rapid growth and expansion of the basic infrastructure, countries will need to set up tax-free/tax-abated enterprise zones around the country. It does not make sense to build all infrastructures around a handful of big cities, making them even more overcrowded. It must be a distributed and decentralized economic model, with the emphasis on enterprise zones, including affordable housing. 10-15 year tax abatement is a good incentive to attract an array of big and diverse group of companies from around the world, vertically integrated with the growing infrastructures. A decentralized model would help people live close to their roots – an ideal way to keep employee turnover and absenteeism low and morale always high. New payroll taxes along with the derivative revenue taxes would initially compensate for the lost corporate taxes. Upon expiration of the tax abatement period, the corporate tax revenue would start to kick in, enriching the exchequer by leaps and bounds.

  7. Invite For-profit to Build Institutes of Higher Technical Education – As those countries start to develop the service sector (atop the manufacturing sector), a steady flow of qualified employees with higher technical education would be needed. Again, instead of the local governments getting involved and controlling this layer of education, the private for-profit companies might be invited to build and run the institutes, with initial concentration in enterprise zones, as an added enticement. While the acceptance must always be merit-based, governments must significantly subsidize all economically disadvantaged students, to avoid having to implement a quota system down the road. Furthermore, the interested students must have equal access to all competing schools across the economic zone. Again, a steady flow of technically qualified local employees is critical in enticing companies to invest in the service sector.

   8. While governments should stay away from running all non-essential services, they must be involved in properly managing their natural resources along with all essential services like military, law and order, taxes, basic education, healthcare, clean water, etc. Countries that are built on moral (not religious) high grounds are more attractive to investors. For example, in many 3rd world countries in Africa, Asia and Latin America, young women do not have equal access to education (a crime against humanity!). “Equal access to education” must be a primary metric all foreign companies must use in evaluating the investment climate of a country, thus forcing those evil regimes to return to the basic decency and morality we must all follow and promote. While evaluating direct foreign aids, foreign governments must also use this as one of the primary “humane” metrics.

  9. Negotiating Trade Deals – When a rich country borders with poorer countries, it is prudent to consider the collective economic interests while negotiating trade deals. Case in point: Whether we build a wall on the southern border or not, while re-negotiating trade deals with Canada, Europe, Japan, China and the rest of BRICS, etc., the US must wrap around the economic interests of the Central American countries. Their growth and upliftment is in our best interest. For example, many successful companies from around the world would be interested in the US market but they might not be able to initially meet our wage levels. If a common trade deal is in place, those companies would set up their initial shops – manufacturing, processing, assembly, IT, research, etc. – in one of the Central American countries with lower wage levels, with unrestricted access to the US market. No doubt, given time, they would be setting up shops here, hiring locally and paying our prevailing wages. Meanwhile, we have to consider Central America as our enterprise zone, enticing and redirecting vast amounts of second tier economic activities (we are losing those businesses, anyway!) from around the world to them. Let Central America be our nurturing ground. It will be win-win. Once we have a level playing field, they will be our full world partners, not just our enterprise zone. In not too distant future, we will have fast-track lanes at the border for them. No human crisis is ever solved by building walls; they are solved by creating meaningful and cooperative economic opportunities. And, it’s never too late!      

- Sid Som, MBA, MIM
President, Homequant, Inc.

Wednesday, November 14, 2018

How to Pre-launch a B2B Start-up

How to Pre-launch a B2B Start-up

"I have been toying with a B2B concept for a while. I think it has great potential. How do I take it forward?"

As an entrepreneur, I often get this question from the budding entrepreneurs.

First off, B2B Service (where we operate) is one of the hardest segments to penetrate. Consider these steps (necessary but aren't sufficient) to pre-launch a B2B start-up:

1. If you have a good job, do not jump ship. Instead, take some time off and try out a pilot "live." If your concept/invention pertains to the same industry where you are currently employed, have an Attorney review your employment contract for “conflict of interest” and “no compete” clauses. Since start-ups do not qualify for SBA loans, hire a qualified consultant to review your financials (both business and household), type of business formation (S, LLC, C, etc.), liability insurance, etc., etc.   

2. Make sure you implement your own marketing plan (from the actual business plan) to promote the pilot (as if it were the real launch!). I would rather have an average concept backed by a super-duper marketing plan (recipe for success) than a super-duper concept backed by an average marketing plan.

3. If it is a local service, start networking. Run several live campaigns (with your real money) to get a good feel/reaction from the future clients.

4. If it is a national service, mobilize your marketing rolodex (LinkedIn, FB, etc.), with an announcement that you are open for business.

5. Simultaneously, implement your marketing campaigns on Twitter. Fine-tune campaigns based on Twitter Analytics. Re-implement the plan.

6. Seek advice from the like-minded B2B entrepreneurs - both successful and struggling - to avoid having to reinvent the wheel. It will save you many trips to the ER, so to say.

7. If you have written a book highlighting your concept/invention, join the Amazon Marketing Service to beef up its sale, bolstering “indirect” marketing. The Kindle version alone is not enough - the Paperback is equally important.

8. If it is a Business IT concept (like ours), copyright it, leading to patenting; otherwise, you will have zero protection (read my prior posts for details).

9. Analyze the results as they come in. If you think (preferably in collaboration with a marketing consultant) the results far exceed your (and your consultant's) expectations, initiate a much larger pilot with the updated service coupled with an upgraded marketing plan - i.e., adequately factoring in the inputs (+/-) from the initial pilot. If the follow-up growth curve is exponential (at this point, linear growth is not good enough!), you are "on to something."  

Good Luck!

-Sid Som, MBA, MIM
President, Homequant, Inc.

SkylineValue Shows how CBD Office Valuations Differ from CBD Periphery, Suburb & Airport's

CBD Location

CBD Periphery

(Click on the image to enlarge)

If you move around a very similar Class-A property (in terms of size, age, rehab, etc.) from  the Central Business District (CBD) to the CBD Periphery to the Suburb, it will fetch very different rental rates due to a number of of qualitative factors including but not limited to the quality of tenancy, type of ground floor retail and availability of parking. 

Considering the glitzy Miami CBD (in this example), the property would attract all triple-A tenants and very upscale retail paving the way for very high rental rates and translating to high market value, while the CBD Periphery would attract a combination of triple-A and highly creditworthy (but not triple-A per se) tenants along with specialty retail (but not necessarily the upscale retail that Miami CBD would easily attract). 

The Suburb location, on the other hand, would also attract a combination of a limited number of triple-A and mostly high credit tenants coupled with none to limited general storefronts (coffee shops, magazine/variety shops, men's wear, eye wear, etc.).

I used to produce this sample valuation as I own and operate the site, to avoid having to deal with any copyright issues. The site is mobile-friendly so no additional Apps are needed. It's also totally FREE and NO login/registration of any sort is required. 

In order to value an office property on this site, all one needs to know is the general location, rentable square feet and a few general property characteristics, all of which are easily obtainable online. Once these data elements are available, users can have the system process the valuation in 60 seconds or less. 

This system is designed for the Pros and Non-Pros, offering a "Quick Look" valuation and is intended to complement the traditional valuation, not replace it. 80 Major Office Markets in the US and Canada are currently covered. 

Just click on the market of your choice on our homepage and follow the prompt. If you need help, use 'TRY IT' from the homepage. Here is the link to

What the Experts are Saying:
“I checked out and I have to say that its awesome.  This is a classic case of good things come in small packages.  I was excited to see that the [XXXXXX] market is included.  I could see this being a very handy tool for investors, appraisers, portfolio managers or just average Joe’s who like to dabble in Commercial real estate.   For my own purposes, I selected different parts of Long Island and different sub groups of properties and I was astonished at how much flexibility and how quickly I was able to retrieve accurate values without the need for full blown work ups.  The fact that I can get a valuation right on my device in about 60 seconds is a breath of fresh air.  I will be using SkylineValue regularly!”     

Our AVM & Other Offerings
2. QA/Review AVM
3. Commercial AVM

Most Homeowners do not Understand the Clear and Present Impact of Assessment Inequity

(Click on the image to enlarge)

Sales Ratio (County Market Value to Adjusted Sale Price) is a common method to determine assessment equity, meaning whether the published property tax roll is fair and equitable. When presented spatially, the ratio chart aids visualization of the collective data, thus making the incidence of inequity, if any, stand out. 

The above sales ratio distribution graphic demonstrates some countywide assessment inequity. While West (blue) and East (green) are fairly assessed (between 25th and 75th Percentile), Southeast and North (red and yellow) show some significant under-and-over assessments (below 25th and above 75th Percentile). 

This anomaly often stems from the poorly-developed Automated Valuation Models (when AVMs are developed mutually exclusively at the sub-market level, without any roll-wise equalization at the back-end). 

FYI -- AVM Technicians 

In an event like this, a Benchmark AVM is in order, ironing out such inequity from the tax roll. Click on the link below to understand what our proprietary Benchmark AVM does...

I picked the above spatial graphic from as I own and operate it, to avoid having to deal with any copyright issues. My TownAnalyst site is totally free (no strings) and requires no login or registrations whatsoever. Please use the site/system that works best for you.

Disclaimer: This analysis is strictly illustrative. Any commercial or legal use of it is totally prohibited.  Always consult a Tax Attorney on statutory requirements.

Tuesday, November 13, 2018

When Confronted with Limited Number of Variables, Use Them Prudently in the Model

- Intended for Start-up Analysts and Researchers -

(Click on the image to enlarge)

Table-1 shows that the low predictive relationship between the Adjusted Sale Price (“ASP”) and Land_SF, as well as Bldg_Age have forced the model to a single stage multiplicative one, encompassing all of the continuous and descriptive variables. Both Land_SF and Bldg_Age coefficients would have been insignificant, thus pushing the linear regression step to be skipped altogether; for example, free land (improvement carries all value) is as absurd as the positive $19 depreciation annually.

Table-2 is the resulting correlation matrix of all of the available variables in the log form (for use in a non-linear multiplicative regression model). The high predictive relationship between ASP and Living_SF, as well as Town foretells that these independent variables would be the two most valuable contributors in the equation.

Table-3 is the output from the multiplicative regression model. As expected, the Living Area SF variable (Living_SF) is most important variable (highest t Stat) in this model, followed by the Town variable (Town). Land_SF remains non-contributing (low t stat and high P-value) as the vast majority of residential lots in this county tend to be predictably similar (violates the multiple regression assumption, hence being rejected by the model). The R-square of 0.8828 – without any residual analysis and outlier removal – points to the growing efficiency of the model.

Since one multiple regression equation has been resorted to, the three continuous variables – Land_SF, Living_SF and Bldg_Age – have not been converted into categorical variables; instead they remain in their original format, though log-transformed for the multiplicative use. Pool and Garage are the two binaries while Town is a categorical variable with categorical linear values.

- Sid Som, MBA, MIM
President, Homequant, Inc.