Tuesday, June 25, 2019

Ready to Buy the First Investment Property? Try a Single Family Residence

Now that you have been moving up the corporate ladder with more financial security and disposable incomes, your financial planner might suggest diversifying the asset allocation by adding an investment property to the mix.

Unlike your 401Ks, mutual funds and IRAs, owning an investment property generally requires hands-on management so it’s also a “lifestyle” investment. Many people later regret jumping into this area as it doesn’t suit their personality and/or lifestyle. It is therefore often suggested to test the water with a limited, one-off investment property, preferably a single family residence (SFR). 

My definition of the SFR comprises townhouses (HOA), condos and co-ops as well; for instance, the outer boroughs of NYC have more co-ops than condos so co-ops should also be part of the SFR complex, at least the investment SFR complex.

While a private SFR offers more flexibility in terms of ownership, it nonetheless requires more day-to-day management than condos or co-ops wherein the outside and common area maintenance (from cleaning to landscaping to maintenance of general amenities to routine repairs, building insurance, etc.) are taken care of by the Condo HOA/Co-op Board in exchange for a monthly Common Charge/Co-op Maintenance. Of course, the complex-wide cyclical renewals and improvements (like new roof, elevator, windows, etc.) are additionally assessed (atop the monthly fees), known as special assessments.

In this post, I will talk about some of the do’s and don’ts of buying and managing the first investment property for income (positive cash flow) and growth (in equity), not quick flipping or non-rental warehousing. Please seek advice from your financial planner regarding the financial/investment basics: change in asset allocation, credit, mortgage, PMI, etc. (again, this post does not attempt to offer financial or legal help/advice/counseling in any shape or form whatsoever).

   1. Cities/States Experiencing Population Growth are Better for Investment Properties than those Experiencing Negative Growth – Since we are talking about an investment property – not primary residence – one should take a longer-term view of the investment (i.e., consider the business cycle) before investing in towns/cities, even states, where the population growth has been negative in recent years. Although a small investor always prefers his/her own town/city for investment properties, the population growth variable should never be disregarded. For instance, the Sunbelt (where the real population growth has been for years) did much better than the major Midwest cities and states after the last recession. Case in point: While the Sunbelt cities like Las Vegas, Phoenix and Miami were the hardest-hit during the last recession, they came roaring back and made new highs in recent years because the smart money tends to chase those cities ahead of the others. 

   2. Primary Location is always the King, but Secondary Location factors are often as Valuable – While “location, location, location” is always the king in choosing a property, other geographic factors that positively impact values like enhancing water views, on-the-hill with majestic skyline/valley views, scenic tree-lined streets, across from major parks, proximity to houses of worship, etc. generally make properties significantly more valuable than those lacking such influencers. Likewise, the high-rise condos and co-ops with magnificent river or park-view (e.g., East/Hudson River or Central Park view in Manhattan) fetch significantly higher rents than their counterparts facing noisy arteries. No doubt, the properties with such enhancing views cost more to start with, but they tend to maintain much higher rental demands, thus lowering vacancy rates, improving cash flows, and returning above average capital appreciations.

   3. Understanding the local Demographic makeup/shift is the other key to Rental Success – If the local demographic is changing, with more and more small tech companies are moving in, it’s good to pay attention to that emerging trend and make the purchase accordingly. A smaller but efficient house or a 1BR condo in a complex with modern amenities located within an easy commute of the new tech hub will make more economic sense than a large house or a 3BR condo in a suburb away from the hub. Tech is generally 24/7 operation so the proximity is often more important than the size. Therefore, before deciding on the size and location of the property, one must thoroughly research and understand the demographic makeup and any on-going shift, including gentrification. For example, people who invested in Austin, TX about 20 years ago when the city started transforming into a major tech hub are reaping big benefits today. Property rental business, like any other business, requires vision and consistent strategy.    

   4. While Researching Rental Properties, Current Property Taxes require Serious Scrutiny – Since property assessment is prone to local laws and exemptions, the current taxes require reconstruction in line with the future owner’s status. For example, the current low taxes resulting from the available exemptions like low income, senior citizen’s etc. will certainly go up once a young owner with high income takes over and as the prior exemptions are withdrawn. Local laws like Prop. 13 in California could make a big difference in property taxes as well. Regardless of the exemptions or local statutes, most assessment rolls contain certain idiosyncrasies due to inefficiencies in automated valuation modeling, so it is imperative to hone in on the candidates with lower taxes that are un-impacted by the aforesaid factors. While the new home/condo owner can appeal any unreasonably higher taxes (relative to the comps), there is no guarantee that it would be reduced. Co-op owners cannot fight taxes at the individual level.  

   5. Lifestyle Upgrades are Impractical for Rental Properties – Lifestyle upgrades are fine for primary residences but are totally impractical for the generic rental market. Since the first investment property is more of a test case, it is advisable to stay as generic (in line with the local competition) as possible, attracting renters who comprise the body of the bell curve (the more homogeneous middle 68%), rather than the outer ends of the curve and the outliers. As such, adding fancy upgrades like smart appliances, plush carpeting and remote-controlled blinds to an average property may produce negative rental returns. Instead, it is better to price it right by shunning unproductive upgrades and frills. By the same token, if the appliances and systems (plumbing, central air conditioning, etc.) are out of the manufacturer’s warranty, buying service warranties from a national vendor is extremely prudent, to avoid having to deal with expensive outages, especially central air conditioning and plumbing.

   6. Range of Amenities in the Complex helps Attract and Retain Tenants – People who invest in rental condos and co-ops know how important amenities are in attracting and retaining quality tenants. The “retention” of quality tenants is one of the primary metrics of rental success. Renewal of leases not only makes the rent roll stronger and more predictable, but it also saves renovation costs as the tenant turnover eases. Of course, one must understand the local demographics to invest in a certain complex. Tech demographics usually require a different set of amenities than the more normally distributed demographics. Gym, pool, tennis/racquet ball courts and business services are generally more important to attract tech professionals while the family-oriented amenities are more conducive for distributed demographics.        

   7. Before Buying Investment Condos or Co-ops, it’s good to know the Rental and Pet Policies – Almost all established condos and co-ops have rental and pet policies in place. The vast majority of them will not allow any short-term (month to month, Airbnb, etc.) leasing; instead, they will require 7-month to annual leases. Many co-op boards have more stringent rental policies, requiring pre-qual followed by face-to-face interviews (could be time-consuming). Many established condo complexes institute a 20% rental threshold, meaning only up to 20% of the total units could be rented out at any given time, often forcing a long waiting list, depending on the attractiveness of the complex. A big percent of condo and co-op boards – outside of the major cities – maintains a 2-pet (cats and dogs) policy with size and weight restrictions. Like the pet-friendly motels and hotels, some complexes do charge a monthly pet fee, tagging on to the common charges. Increasingly more and more homeowners insurances are prohibiting certain aggressive breeds.

   8. Understanding the Financials of HOA/Co-op Corp., Monthly Charges and Renewal Cycles – Before investing in a condo or co-op future owners must thoroughly investigate the financial management, especially the general reserve of the HOA/Co-op corporation. A good reserve will help the board manage the next recession better than those walking on thin ice. If a wave of defaults hits, the rest would be on the hooks. Good tenants avoid poorly run facilities as well, causing above average vacancies. Special assessments coupled with higher vacancies make absent owners jitterier than the resident owners. All-inclusive monthly charge (including pass-through utilities/items like gas, electric, water, cable, internet, etc.) forces owners to bump up rents, often dampening rental attractions. Every 25-30 years, complexes (even houses) hit a renewal/replacement cycle, necessitating back-to-back expensive special assessments, so the future owners must study the existing (generally the responsibility of the seller) and the prior special assessments, thus understanding what could still be in store for them. It’s generally prudent to buy into a complex that has gone through a series of major renewals and replacements.

   9. Locating Qualified Tenants is not easy for the First-time Investors – Last but not least, locating the right tenant is not an easy job either. First-time investors would be better off using a qualified rental outfit that would vet and select the right tenant after checking for income, credit, references, past rental history, etc. Moreover, their ad copy is more professional and the placement of the vacancy ad on the MLS, Zillow and other rental sites helps promote and accentuate the entire process (including the online document signing, etc.).  In some major markets, eviction is a long-drawn judicial process, during which the tenants live free while the owner’s monthly expenses generally go up by way of added legal costs and court filing fees. Locating qualified tenants is therefore one area new investors must practice prudent risk management. Good rental agencies help reduce risks.

   Good Luck!

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

Saturday, June 22, 2019

Why Some Bosses Bully the Superstars

(Click on the image to enlarge)














Wednesday, June 19, 2019

How to Sell Cricket to the Baseball World

Though there are some similarities between Cricket and Baseball, the major playing nations are almost mutually exclusive. While cricket is limited to England and a handful of the former British colonies, Baseball has always been popular in Canada, Caribbean, Japan, Netherlands, South Korea and the United States. Thus far, the marketing efforts to expand cricket into the major baseball nations have been marginally successful, at best. Even when an exhibition cricket match is played in the US, the audience is mostly the immigrants from the cricketing nations, making it commercially unviable to attract any major TV channel to carry it live.

For cricket to be a viable alternative to baseball in major baseball nations, it has to be lot more entertaining to the viewers at large. While the cricket fans consider the shortened T-20 format very entertaining, it’s not so at all for their baseball counterparts. In fact, the baseball lovers will still find it quite “boring.”

The only way cricket can be sold to the major baseball world is by reinventing the format itself. From the entertainment point of view, the two-innings format is fundamentally backward-bending, offering little to virtually no incentives to the commercial media in the all-baseball world, because more often than not, this format makes an on-going match far too predictable, thus destroying the fun and thrill of it. For example, when the team batting first collapses or even performs sub-par, the outcome is more or less predictable. So, who would stick around for the second inning? Not the TV viewers, at least – which is the primary viewership.

Therefore, a more entertaining and thrilling T-20 format needs to be invented and tried in the baseball world. If it becomes successful there, it would be equally, if not more, successful at home as well.
    
Once this new T-20 format gains commercial momentum, the makers of virtual sports will quickly jump in, taking it to the next level where viewers can virtually play along “live.” The Virtual 2.0 will be AI-friendly, allowing the virtual batters to try out different “timing” and “striking” options which the actual on-field batter could only wish. Similarly, the virtual bowlers will be able to try out various “line” and “length” options which, again, the actual on-field bowler could only wish.

So, how to reinvent and sell cricket to the baseball world? Here it is…

1. The New Format will Comprise 8 Innings – In terms of the number of overs, the new format will continue to share the T-20 (i.e., 20-overs) format. But, instead of the existing 2-innings format, the new format will be split up into 4 batting innings per side (5 overs per inning) to a total of 8 innings, thus allowing each team to bat for four rotating innings, meaning the team that opens the batting will return again to bat out the 3rd, 5th and 7th innings, respectively. Needless to say, the same team will take the bowling/fielding for the alternate 2nd, 4th, 6th and 8th innings, respectively, when the opponent bats. The problem of the one-batting-inning per side is that the match often becomes far too predictable early into the second inning; for instance, if the side batting first does not put up enough runs on the board, the match becomes quite predictable within 5 to 7 overs into the second inning – to the utter dismay of the attending fans and the media audiences at large.

2. The New Format will Comprise One Set of Batting Wickets – Unlike in all formats of traditional cricket, one set of batting wickets will be used so only one batter can bat at a time. The advantage of having only one batter at a time is that the batting momentum will continue, keeping the entertainment ante significantly up, which is critical for the new format to garner audience. In the traditional format, since two batters bat together, the entertainment aspect of the game often gets compromised. Generally, when one batter goes on a scoring spree, the other slows down, playing a more supporting or defensive role (except in death overs), which could be technically fine, but generally at the expense of the entertainment value of the game. Having one batter at a time removes the potential of the second batter slowing down, altogether. 

3. Each Batter and Bowler Gets One Over per Inning – Under the new format, each batter gets to bat only one over per inning, with the mandatory introduction of all five new batters in consecutive innings. Of course, when the first five batters do not survive till the end of the fifth over, the inning ends, thus preventing the bowlers from sacrificing their wickets to pave the way for the specialist batters. To put in simple terms, the five batters from inning one can be repeated in inning three while the five batters from inning two can be repeated in inning four. Similarly, bowlers can bowl only one over per inning, with the mandatory introduction of all five new bowlers in consecutive innings. Therefore, the bowling side will reintroduce the five bowlers from inning one into inning three and the five bowlers from their second inning into inning four. This general one-over batting and bowling restrictions will force teams to recruit more all-round cricketers than specialists, lessening the usual predictability of the game. A team can use a dedicated wicket-keeper across all four innings, for now (this practice may also be dispensed with down the road, making way for more unpredictability).

4. Scoring Runs will require Returning to the Base – Scoring (non-boundary) runs in this format is going to be very different from all forms of traditional cricket. Batters must return to the base (batting crease) to be credited for any runs, making the traditional singles (1’s) and threes (3’s) totally off-limit. Of course, boundaries and over-boundaries, in line with the traditional forms, will remain in force. In other words, the batters can only hit 2’s and 4’s (maximum per bowl) by returning to the base. The elimination of singles and threes will therefore require more precise hits and placements, as well as enhanced judgment and athleticism. In order to minimize inaccurate bowling and imprecise throws, regular wide balls, no-balls, byes and leg byes will be allowed, adding runs to the batting side.

5. The Existing Batter Dismissal Rules will Continue, for now –  Until this new format gains some meaningful commercial momentum, any new and specialized technology will not be forthcoming. Therefore, the use of the existing DRS and related technology will force this format to continue with the current batter dismissal rules like, bowled, caught, stamped, hit wicket, leg before, run out, etc. Since singles and threes will be unavailable, the possibility of run outs will significantly rise.  Similarly, the proposed restriction of “one over per batter” will give rise to more aggressive style of batting, resulting in more stumping and caught/behind dismissals.    

6. Fielders and Bowlers will be allowed Protective Gear – In the traditional format, batters and wicket-keepers are amply protected with (protective) gear, but the fielders and bowlers aren’t. It makes no professional and economic sense to allow a good percentage of the players to sit out a good part of the season with finger injuries. This new format will therefore allow the bowler and all fielders to use baseball-type gloves on one hand to help prevent such unnecessary injuries. Of course, on the field, it will be their choice to use it or not. By the same token, they will lose their match fees (or prorated contract fees) if they are forced to sit out with such preventable finger injuries. The liability clause of the disability insurance must also contain similar stipulations, thus making it difficult for them to be rehired for future events as well. While they need a helping hand from the rules committee, they must also be willing participants. Irrespective of their prominence and celebrity, this format will never allow or encourage anyone to practice or demonstrate any narcissism whatsoever, so that the audience continues to exponentially grow, not drift away.

7. Names of Existing Field Positions will be Renamed – Granted, the game of cricket is a common religion in cricket-playing countries so the fans learn not to question its age-old shortcomings and idiosyncrasies; for example, the field position names like “Silly mid-on / Silly mid-off” “Point” “Third Man” “Forward short leg,” etc. will be a hard-sell in non-cricketing countries. The new format will therefore comprise a new set of non-technical, sensible and easy-to-remember field (position) names, e.g., Base, Short Base Left/Right, Long Base Left/Right, Deep Long Base Left/Right, Short Boundary Left/Right, Long Boundary Left/Right, Long Slip Left/Right, Deep Long Slip Left/Right, etc. Instead of confusing the new audience with unnecessary semantics – Long vs. Deep, etc. – the name Deep Long Base Left/Right will be self-differentiating, meaning this field position will be further deeper than the Long position, but along the same field corridor. In order to market a sport globally, it must be a marketable product, free of silly antiquities and age-old cultural nuances.

8. Tie-breaker will require One More Inning, not just one more over – In case of a tie, i.e., both teams tied at the same score, each team will bat one more inning, instead of the traditional one over each. When a match is finally decided by one over, it becomes somewhat unreasonable and irrational, at least from the audience viewpoint. In this new format, the one additional tie-breaker inning will bring more sanity and reliability to the game. For example, NBA Finals are played on ‘best-of-seven’ format, allowing the better team to prevail than ending the entire season with a one-off fluke. Likewise, the extra time in soccer is 30 minutes (1/3 of the regulation time) followed by shoot-out, etc. If the tie-breaker inning ends in a tie again, a one-over solution will be implemented until, of course, the tie is broken.

9. Batters will Not have the advantage to Play for the Record Book – In both short forms of Cricket – One Day International (ODI/50 overs) and T-20 (20 overs) – bowlers are restricted to 10 and 4 overs, respectively; batters however have no such restrictions. This encourages them to play for their own record book at the expense of the true spirit of the sport. For example, in ODI, as a batter approaches a personal century (100 runs), he tends to take much lesser risk by slowing down the run rate, often moving at a significantly slower rate. While the cricket fans are used to this practice, spectators and viewers in the baseball world will find it extremely annoying. The proposed one over per inning batting restriction would remove this selfish practice altogether.     

The combination of 4-innings per side, one set of wickets and one batter at a time coupled with one-batter/bowler per over will make the match more unpredictable, hence entertaining, till the end – a big win-win for both live and media audiences.

This new format must attempt to show the baseball world that an alternative and vastly different version of cricket could easily be developed and marketed, which is highly entertaining, thrilling, media-friendly and interactive fun sport. The 2D TV is way too outdated for sports and entertainment. By making this version 3D TV-friendly, viewers will have more fun watching it and perhaps participating alongside. A “Virtual” version will soon be developed, allowing viewers to play along “live.”

Initially, this format could be sold to the TV channels that broadcast traditional cricket and baseball in the cricketing and baseball worlds, respectively. As this format gets momentum, the bidding war for broadcast rights will intensify. The investment company owning its worldwide rights will hopefully go public so the sports fans around the world may own a piece of this futuristic sport-and-entertainment pie. If the value of the Indian Premier League (comprising only eight teams) can skyrocket to $6.3B in 11 short years, this new format of cricket could result in an astonishing value within a decade as well, considering the popularity of baseball in some of the richest countries (US, Canada, Japan, South Korea, Netherlands, etc.) and that of cricket in the UK, Australia, Asia and Africa and West Indies.

Thank you.

Sid Som MBA, MIM
President, Homequant, Inc.

COPYRIGHTED MATERIAL 

Wednesday, June 12, 2019

How to Replace the Property Tax System with Middle-Class friendly Progressive Consumption Taxes

The vast majority of homeowners believe that the current property tax system is inherently regressive, meaning middle class heavily subsidizes the rich. Others think it’s the biggest annual harassment they have to endure. Rich folks owning expensive homes are not too bothered as the system favors them. It is more or less the opposite of the income tax system where the top 1% pays 40% of all federal taxes. According to the Tax Policy Center 44% of Americans will not pay any income taxes this year – not so when it comes to property taxes. Property tax is one of the main reasons why seniors and minorities get uprooted from their neighborhoods. Unfortunately, home is the biggest investment for most Americans and it’s usually controlled by the local governments via their primary revenue tool called the property taxes.

It’s about time we phase out this mostly unfair and inequitable property tax system and replace it with a series of truly fair and transparent revenue tools, thus freeing the homeowners from the clutches of the government control. So, what are the replacement tools (revenue sources)?

1. Introduce Junk Food Surtax on Unhealthy Processed Foods and Beverages – Just the way the middle class must not subsidize the rich people’s property taxes, the health-conscious folks must not subsidize those who basically live off junk foods. This is a (preventive) health issue and, hopefully, this surtax will save citizens billions in health insurance premiums down the road. The counter case is equally compelling: Today smokers are paying a heavy price for their lifestyle (significantly higher taxes on their lifestyle products and higher premiums on life and health insurances, etc.). While we must not take smokers’ choice away, the rest of us must not finance their lifestyles either. The phase-out of the property tax system will take 5 to 7 years, during which as the property tax revenue starts to come down, the Junk Food Surtax should start at, say 10%, graduating up and perhaps leveling out at 20% (will require studies to make the system revenue-neutral). This tax could be implemented at the State level, where the States reimburse counties based on actual collections. If the State becomes an unwilling participant, it must be implemented at the county level. In a Utopian society, this collection will come down to null.

2. Implement Surtax on Basic and Luxury Durable Goods – In order to save $5K to $150K on property taxes at the front-end and capped deductions at the back-end, homeowners would be amenable to the proposed durable goods surtax. Unlike involuntary property taxes, consumption taxes are more humane – families can budget/plan for these expenditures. Since the basic durable goods impact the middle class, the rate must be lower, say 2 to 3% for the basic, followed by the luxury durable and ultra luxury durable goods, with progressively higher rates. For instance, all appliances under $10K could be basic, $10K to $20K being the luxury category and >$20K as the ultra luxury category, with progressively higher rates. Likewise, automobiles could have three categories as well. While counties would be allowed to charge different rates, there must be non-resident tariff provisions to negate any arbitrage; in other words, counties with lower rates must collect the differentials from the non-resident purchasers (from the reciprocating counties) with higher rates. Non-reciprocating counties would be notified of the non-resident purchases. 

3. Let the Investors Pay Higher Sales and Transfer Taxes on Income-producing SFRs – In terms of sales and transfer taxes, single family homes occupied as primary residences must be treated differently from investor purchases for conversion to rentals. At the point of purchase, those investors must pay higher sales taxes (add-on sales surtax). During the last recession, many institutions bought and converted millions of single family homes into rentals creating a whole new SFR Rental industry. Unlike people’s primary residences, these are income-producing properties and must be treated as such. Even during the years of property tax phase-out, they must be treated as a sub-class of the multi-family, paying higher sales, property and transfer taxes than the primary residences, in line with the competing multi-families. This should apply to large institutions as well as other parties and individuals with 5+ rental units including condos and co-ops.

4. Let the Gamers and Flippers Pay Higher Transfer Taxes – At the point of sale, shorter holding periods (say, up to 2 years) must carry much higher transfer taxes so the traders and flippers are separated from the homeowners. In fact, it’s a clear case of moral hazard when primary homeowners and gamers are treated alike by the local assessors. While the gamers are entitled to compete and buy, they must be treated as investors if they sell within the shorter window. They can however bypass the surtax by using the 1031 exchange (federal). Of course, exceptions (e.g., job-related relocation, medical emergency, etc.) must be factored in as long as the use of home as primary residence could be proven. During the tax phase-out period, none of these sales (institutional, traders and flippers) could be used in developing SFR AVMs or as SFR comps, to avoid having to artificially inflate the price/assessment levels.

5. Introduce/Re-introduce Million$-plus Home Sales Surtax – Since the upscale and expensive homes (owners) would be a big beneficiary of the phase-out (followed by no property taxes), the million$-plus home sales must be subjected to additional progressive surtaxes. It must not be a blanket one-size-fits-all rate; instead, it must be progressive in view of the savings – for example, sale price $1M to $2M @2.00%, $2M to $3M @2.25%, $3M to $5M @2.50%, $5M to $10M @2.75%, $10M+ @3.00% etc., etc. While the elimination of property taxes will make the high-end housing market more liquid, the introduction of sales surtax (coupled with higher short-holding transfer taxes) will gradually de-incentivize gamers, stabilizing this volatile segment. Should sales clusters start to balloon just under $1M, the threshold could be lowered to the jumbo mortgage (non-conforming) level. Of course, State’s participation will be important, absent which counties must implement the surtax on their own.

6. Let there be Luxury Hotel (4 and 5-Star) Surtax – These hotels are primarily for the corporate executives and rich folks so additional 5-6% surtax will not harm the hotel industry. In fact, these hotels might even use this surtax as a promo (“We Will Pay Your Surtax”) in order to boost traffic during the off-peak season. A vast majority of these hotels have medium-to-large convention centers – seasonal to round-the-year – so convention center surtax could be an ancillary surtax as well. The hotels that are run as resorts must be subjected to an additional resort surtax. Luxury car rentals must carry sizable luxury rental surtax. Similarly, all golf courses, private and public, must have additional surtaxes. None of these would adversely impact the middle class; even if they impact the middle class to some extent, it would be almost insignificant when compared to the tax savings they would be enjoying from the elimination of property taxes.

7. Counties should Start Selling Naming Rights to its Infrastructure – Let the rich people/private institutions pay to put up their names on local government buildings, county roads, town squares, bridges, marinas, municipal parking, toll booths, service plazas, ball parks, parks and recreational centers, public pools and rinks, etc. (that the local governments own and operate). Of course, public schools and colleges should be exempted. The selling process must be totally open and transparent (via open tenders), thus awarding the naming rights to the highest bidders (some restrictions could apply). Also, in order to attract the right market price, it must also be term-limited, say 3 to 5 years. Counties could also consider private-public joint ventures to build new toll roads and bridges (unable to get federal funding) wherein the private party incurs all costs to build the infrastructure in return for the toll incomes for 10-15 years.

8. Now that Airbnb is Mainstream, Counties must Claim its Share of Taxes – Like Uber, Airbnb has become mainstream competing with the commercial lodging industry, potentially lowering the latter’s occupancy rates and consequently government’s tax revenues. Under the circumstances, states must make sure that Airbnb collects and returns all taxes back to respective states and, in turn, to the originating counties. Given the skyrocketing popularity of Airbnb, this tax revenue will grow exponentially in coming years. In fact, this new-found tax revenue will not only far exceed the lost hotel tax revenue, but it will also generate new taxes in smaller markets where hotels/motels generally are in short supply. Because of the physical nature of Airbnb’s client-properties, it will be easier (than the internet sales) for the states to collect taxes. The emerging Airbnb competition must also follow suit, collecting and clearing taxes to the states.

9. Last but not least, massive Savings will be generated from the Closure of Assessment Offices – In large cities and counties, hundreds of employees work in those offices (Assessor’s office, Assessment Review, Data Collection, Mapping, Valuation and Valuation Modeling, Customer Service, Exemptions, Public Relations and Outreach, Attorneys, etc.). The elimination of those high-paying jobs will save local governments tens of millions in salaries and benefits. Additionally, the closure of those offices will save significant sums in rent, utilities, security, maintenance, IT, web, telecom services, etc. Since governments try to solve all problems by hiring more people (actual case: “The county has hired 60 staffers and plans to bring on 20 more. The [XX] Commission…has hired 16 staffers and plans to bring on another 10 in the coming months.”), the elimination of property taxes will save local governments a ton.

Since property tax is one of the most explosive issues for the local politicians (they win or lose elections based on the assessment issue alone), homeowners and their watch groups must fight tooth and nail to phase it out. Now that the SALT deduction has been capped, even the rich homeowners might be in favor of this phase-out. Of course, the local unions will not be silent spectators in this fight. No doubt, this fight will end up at State Supreme Courts. Of course, in order to win this fight, all homeowners need is one favorable decision, which will spearhead and strengthen the movement coast-to-coast.


COPYRIGHTED MATERIAL

Thank you.

Sid Som MBA, MIM
President, Homequant, Inc.

Monday, June 10, 2019

Introducing Reality Cricket on the Golf Course

    COPYRIGHTED MATERIAL
    US COPYRIGHT CASE # 1-7772044197


- Intended for International Sports Agencies -

The game of cricket is almost a religion in most cricketing nations, especially in South Asia. While Australia, England, Ireland, New Zealand, South Africa, West Indies and Zimbabwe are the other major cricketing nations, it enjoys some popularity in number of other countries like Bermuda, Canada, Kenya, Malaysia, Netherlands, Nigeria, Scotland, Singapore, Tanzania, UAE, etc.    

Though there are some similarities between Cricket and Baseball, the major playing nations are almost mutually exclusive. Baseball has always been popular in advanced nations like Canada, Japan, Netherlands, South Korea and the United States. Thus far, the marketing efforts to expand cricket into the major baseball nations have been marginally successful, at best. Even when an exhibition cricket match is played in the US, the audience is mostly the immigrants from the cricketing nations, making it commercially unviable to attract any major TV channel to carry it live.

For cricket to be a viable alternative to baseball in major baseball nations (and vice versa down the road), it has to be lot more entertaining to the viewers at large. While the cricket fans consider the shortened T-20 format very entertaining, it’s not so at all for their baseball counterparts. In fact, the baseball lovers will still find it quite “boring.”

The only way cricket can be sold to the major baseball world is by reinventing the format itself. From the entertainment point of view, the two-innings format is fundamentally backward-bending, offering little to virtually no incentives to the commercial media in the all-baseball world, because more often than not, this format makes an on-going match far too predictable, thus destroying the fun and thrill of it. For example, when the team batting first collapses or even performs sub-par, the outcome is more or less predictable. So, who would stick around for the second inning? Not the TV viewers, at least – which is the primary viewership.

While the traditional format cannot be changed overnight, a highly entertaining and thrilling “Reality” format could be invented and tried in the baseball world. If it becomes successful there, it would be equally, if not more, successful at home as well.
    
Reality cricket – by design – must be lot more entertaining and thrilling than the traditional variety. In addition to supporting the standard 2D smart TV, this form and format will also be 3D TV-friendly, thus attracting new generations of media audience who are otherwise unaware of or are indifferent to the world of cricket. Again, it’s not going to be the garden variety club cricket which will be commercially unappealing to the futuristic media.

Once the Reality version starts to gain commercial momentum, the makers of virtual sports will quickly jump in, taking it to the next level where viewers can virtually play along “live.” The Virtual 2.0 will be AI-friendly, allowing the virtual batters to try out different “timing” and “striking” options which the actual on-field batter could only wish. Similarly, the virtual bowlers will be able to try out a combination of various “line” and “length” options which, again, the actual on-field bowler could only wish.

So, what’s the new “Reality” cricket? Here it is…

1. Playing Field: Instead of the traditional flat cricket grounds, it will be shifted to the professional Golf Courses, preferably 18-hole Resort Golf Courses, with magnificent surroundings, for an added TV attraction. By switching the venue to a golf course, the so-called home field advantage will cease to exist. Since the makeup of each golf course is somewhat different, players will encounter new challenges each time they take the field. Also, the net practice and the practice matches will be arranged on smaller courses, keeping the thrill and unpredictability of playing on the big course alive. The same cricketing bat and ball will be used for now, with a usual cricketing pitch. Down the road the ball will be remanufactured with synthetic material to make it less susceptible to wetness. Pre-fab drop-in pitch will be ideal to maintain the portability from course to course locally, even regionally. Other than the pitch, the rest of the course remains unchanged which will help keep the costs under control. But, unlike in traditional cricket, only one batter will come in and bat at a time so only one set of wickets will be used. Should the course comprise actual water hazards like artificial ponds or lagoons, they must be netted using modern technology to get the ball out of the net promptly, without having to deal with the ball getting wet. Rain will stop play as is customary in the traditional format. Obviously, it is going to be played during the day only, differing from the short One Day International (ODI, usually day/night) or T-20 (mostly under floodlight) formats. Timeouts will be necessary to keep the ad dollars flowing.

2. Playing Format: In terms of the number of overs, the Reality format will initially share the T-20 (i.e., 20-overs) format. But, instead of the cricketing 2-innings format, the Reality format will be split up into 4 batting innings per side (5 overs per inning) to a total of 8 innings, thus allowing each team to bat for four rotating innings, meaning the team that opens the batting will return again to bat out the 3rd, 5th and 7th innings, respectively. Needless to say, the same team will take the bowling/fielding for the alternate 2nd, 4th, 6th and 8th innings, respectively, when the opposition bats. The problem of the one-batting-inning per side is that the match often becomes far too predictable early into the second inning; for instance, if the side batting first does not put up enough runs on the board, the match becomes quite predictable within 5 to 7 overs into the second inning – to the utter dismay of the attending fans and the media audiences at large. As the new Reality data points come in and get adequately mined, the format could be later expanded to 25 or 30 overs, adding innings proportionally.   

3. Player Format: While all cricket formats call for 11 players per side, the Reality version will comprise 7 players per side, reducing the use of specialists; for example, out of the 11 cricket players, 5 are generally specialist batters, 5 are specialist bowlers (1 is often considered an all-rounder) and the remaining 1 is a dedicated wicket-keeper with good batting skills. Again, the problem to this type of side selection is that the match becomes more predictable. When the top-order of batting (primarily specialist batters) collapses, the specialist bowlers (a.k.a., the tail-enders) can hardly come to the rescue and turn things around. Likewise, when the batters get their day, the bowling side starts to feel an insurmountable pressure. Again, the selection of specialists generally makes things more predictable, which is fine when the sole objective is to win a tournament. In the proposed Reality format, where entertainment is the primary objective, the team selection will be based on all-round skills, eventually paving the way for a whole new generation of skilled all-rounders. Of course, each team will need a 5-player bench considering it will be played under the Sun. This all-rounder approach will change the overall grooming and bidding (on player auctions) process.

4. Batting and Bowling: Under the Reality format, each batter gets to bat only one over per inning, with the mandatory introduction of two new batters in consecutive innings. Of course, when the first five batters do not survive till the end of the fifth over, sixth and seventh batters will bat. To put in simple terms, only three batters from inning one can be repeated while batting in inning two and so forth. Similarly, bowlers can bowl only one over per inning, with the mandatory introduction of two new bowlers in consecutive innings. Therefore, the bowling side can reintroduce only three bowlers when they open their second bowling inning. Of course, the exception to this rule will come into effect when more than five batters needs to bat in an inning. This general one-over batting and bowling restrictions will force teams to recruit more all-rounders than specialists, lessening the usual predictability of the game. The combination of 4-innings per side and 1-batter/bowler per over will make the match more unpredictable, hence entertaining, till the end – a big win-win for both live and media audiences. A team can use a dedicated wicket-keeper across all four innings, for now (this practice may also be dispensed with down the road, making way for more unpredictability).

5. Scoring Runs: This is going to be very different from the traditional cricket format. Batters must return to the base to be credited for any runs, making the traditional singles (1’s), threes (3’s), boundaries and over-boundaries off-limit. In other words, the batters can only hit 2’s and 4’s (maximum per bowl) by returning to the base. In order to minimize inaccurate bowling and imprecise throws, byes and leg byes will be allowed. A 2-run deduction will be taken when a batter’s strike hits the hazard (water or bunker) without bounce, beating any reasonable endeavor by the nearest fielder to catch the ball (reasonableness of the fielder’s attempt will be determined by the umpire). This deduction will stand irrespective of the batter’s score in the inning and will be counted as a cumulative negative (i.e., deduction).

The advantage of having only one batter at a time is that the batting momentum will continue, keeping the entertainment ante significantly up, which is critical for the Reality cricket to garner worldwide audience. In a traditional format, since two batters bat together, the entertainment aspect of the game often gets compromised. Generally, when one batter goes on a scoring spree, the other slows down, playing a more supporting or defensive role (except in death overs), which could be technically fine, but generally at the expense of the entertainment value of the game. Having one batter at a time removes altogether the potential of the second batter slowing down.  

6. Batter Dismissal: Until this format gains some meaningful commercial momentum, any new and specialized technology will not be forthcoming. Therefore, the use of the existing DRS and related technology will force this format to continue with the current batter dismissal options like, bowled, caught, stamped, hit wicket, leg before, run out, etc. Since singles will be unavailable, the possibility of run outs will rise.  Similarly, the aggressive nature of batting will give rise to more stumping opportunities. Down the road, when the specialized technology is available for the Reality version, the direct no-bounce hits to hazards could be treated as dismissals, rather than the proposed negative scores (2-run deduction). When the playing golf course comprises trees, a catch bounced off a tree will be disallowed. A batter however will be allowed full credit for the runs scored even when the ball bounces off a tree. Since scoring will be allowed, run-outs will also be allowed when the ball bounces off a tree.    

7. Protective Gear: In the traditional format, batters and wicket-keepers are amply protected with (protective) gear, but the fielders and bowlers aren’t. It makes no professional and economic sense to allow a good percentage of the players to sit out a good part of the season with finger injuries. The Reality version will therefore allow the bowler and all fielders to use baseball-type gloves on one hand to help prevent such unnecessary injuries. Of course, on the field, it will be their choice to use it or not. By the same token, they will lose their match fees (or prorated contract fees) if they are forced to sit out with such preventable finger injuries. The liability clause of the disability insurance must also contain similar stipulations, thus making it difficult for them to be rehired for future events as well. While they need a helping hand from the rules committee, they must also be willing participants. Irrespective of their prominence and celebrity, this format will never allow or encourage anyone to practice or demonstrate any narcissism whatsoever, so that the audience continues to exponentially grow, not drift away.

8. Field Positions: Granted, the game of cricket is a common religion in cricket-playing countries. So, the fans learn to not question its age-old shortcomings and idiosyncrasies; for example, the field position names like “Silly mid-on / Silly mid-off” and “Forward short leg” will be a hard-sell in non-cricketing countries. The Reality format will therefore comprise a new set of non-technical, sensible and easy-to-remember field (position) names, e.g., Base, Short Base Left/Right, Long Base Left/Right, Deep Long Base Left/Right, etc. Instead of confusing the new audience with unnecessary semantics – Long vs. Deep, etc. – the name Deep Long Base Left/Right will be self-differentiating, meaning this field position will be further deeper than the long position, but along the same field corridor. Considering it’s a seven-per-side event, only five more fielders – other than the bowler and the wicket-keeper who will hold dedicated field positions – will be present on the course. The idea is that the marketing team must be armed with a marketable product, free of silly antiquities.

9. Tie-breaker: In case of a tie, i.e., both teams tied at the same score, each will play one more inning, instead of the traditional one over each. When a match is finally decided by one over, it becomes somewhat unreasonable and irrational, at least from the audience viewpoint. In the Reality format, the one additional tie-breaker inning will bring more sanity and reliability to the game. For example, NBA Finals are played on ‘best-of-seven’ format, allowing the better team to prevail than ending the entire season with a one-off fluke. If the tie-breaker inning ends in a tie again, a one over solution will be implemented until, of course, the tie is broken. There will be one more twist to the tie-breaker inning: The team winning the tie-breaker toss will get to choose the opponent’s five batters, while the toss-losing team will get to designate the opponent’s five bowlers. Similarly, if the tie-breaker inning runs into tie-breaker over(s), the toss winner will get to designate the opponent’s batter while the toss loser will choose the opponent’s bowler. This new approach will force all competing teams to hire quality all-rounders rather than the traditional specialists who are good at only one aspect of the game.

This Reality format, by no means, attempts to reform the traditional format; rather it primarily attempts to show the cricketing and non-cricketing world that an alternative and vastly different version could easily be developed and marketed strictly as another highly entertaining, thrilling, media-friendly and interactive fun sport. Secondarily, it will provide an easy and rapid expansion into the commercially unharnessed non-cricketing world. The 2D TV is way too outdated for sports and entertainment. By making this version 3D TV-friendly, viewers will have more fun watching it and perhaps participating alongside. A “Virtual” version will soon be developed, allowing viewers to play along “live.”

Initially, this format could be sold to the TV channels that broadcast the traditional cricket tournaments in the cricketing world and to the Golf channels in the non-cricketing world. As the Reality version gets momentum, the bidding war to broadcast it will intensify. The investment company owning its worldwide rights will hopefully go public so the sports fans around the world can own a piece of this futuristic sport-and-entertainment pie.

Just imagine the unrestricted domain of opportunity this Reality version offers to the future investors. Later, a parallel Reality version can be ported to the game of Baseball as well.

Finally, Some Stats to be Excited about
        1. Major League Baseball (US/Canada) Revenue $10B
    2. Top 5 MLB Teams’ Combined Revenue $2.7B
    3. Nippon Professional Baseball Revenue $1.1B
    4. Indian Premier League (Cricket) valued at $6.3B
    5. The Economic Impact of Golf in the US: $84B (Forbes)

  Developed and presented by:
  Sid Som, MBA, MIM
  President, Homequant, Inc.
  homequant@gmail.com

  COPYRIGHTED MATERIAL
  US COPYRIGHT CASE # 1-7772044197