Palmer Property Associates, Inc.

Bringing Light to Real Estate

Dear Owners:

The real estate market here has grown to be very slow, both for the selling of existing homes (especially the larger ones), and for the renting of same. One of the problems has been the overall sluggish economy, with many people losing their jobs, and struggling to pay their bills. (We have had more delinquent rent payments lately than ever before!). This has resulted in many people moving back in with Mom and Dad for at least a while, in order to try to make ends meet.

Another challenge we are faced with, believe it or not, is the low interest rates for mortgages, now at a 38 year low!! This enables many builders to be able to sell their new homes on very good terms; and many tenants, who were unable to qualify to buy their own home in the past, now can. These things have resulted in a larger vacancy ratio that we have ever experienced in all of our company's history. (And please remember that we are now in our 30^th year!) We find ourselves with more vacancies, along with fewer good tenants to rent them.

These conditions are taking much more time to try to get places rented, including everything from writing and placing ads, answering the calls regarding them, showing the properties, and trying to keep them maintained so that they will show well. (Not to mention the ongoing need we have to maintain and care for the properties that are rented, so those Tenants don't want to vacate!)

In consequence of this challenging market, we have been working harder and longer, and have spent many late nights at the office trying to catch up on paper work. But we have finally gotten our Company's first attempt at a Web page on line, which should help. We have also been brainstorming and trying to come up with new and better ways to market your properties. So, if you think we have just been sitting on our hands, the reason for this letter is to correct that wrong impression, and to suggest some things that we might yet be able to do, along with your help and cooperation, to market your properties better.

But let me again express my regrets that, as a result of this time-demanding pace of work, we have not been able to better communicate with you and keep you informed of all that is going on. Many of you know that we have seemingly 'dropped the ball' on some of the things that we usually take pride in, like keeping you informed as to the details regarding your real estate investments' ongoing performance. It has been a case of either trying to keep up with all of the work needing done, or to stop keeping up and spend the time in following up with you, (which also should have been done).

Now, to deal with the current situation, since it does not seem to be reversing itself on its own, we seem to need to do one of two things, either lower the rents or upgrade the properties to make them more desirable (and, in some cases, both!). Many of you have done these things already, but the market is still VERY slow, and very competitive, with other landlords also facing the same dearth of good tenants. (There seem to be 'For Rent' signs on every block now!)

One thing that I fear some might be tempted to allow would be to accept into your rental properties 'the first warm body with some cash' to move in, without regard to their background or quality. In our opinion, good tenants are well worth working to attract and waiting for.

We are VERY confident that real estate is, BY FAR, still the very best investment for your money because it, unlike stocks or bonds or gold or collectibles, almost anything else, is one of the three necessities of life, namely: food, shelter, and clothing.

We encourage, as we always have, those we manage properties for to get your investment properties debt free as soon as you can. Then you can let the economy do what it may, and still be alright. For if inflation returns the rents will climb with it; but if there should come a total depression, or even an continuation or worsening of this 'recession,' the rents may likely have to drop, but so will, eventually, the other things we buy! (And some income is far better than no income!)

In addition, you retain control of your real estate investments as a substantial and very 'real' asset, which many whose savings and other investments were totally lost in the Great Depression of the 1930's wished they had been able to do with those investments, which disappeared I'm sure they would have loved to have something left!

Now, just for comparison for a minute, I recently heard an financial 'expert' tout the advantages of compound interest (which we agree everyone should definitely understand and appreciate). But he did so by comparing the current value of the approximately $24.00 in trinkets, which Peter Minuit, reportedly paid to the Indians to buy Manhattan Island compared with putting that same amount at savings, earning compound interest at 6% from 1626 (at which time 6% would be a ridiculous presumption, and continuing over that time; even today it would be very hard to find) through 2026. The point being made was that, without management or maintenance, the money would now total more than the value of all of Manhattan Island today.

This is a very interesting comparison, and we are certainly all in favor of compound interest. However, the one factor, that was totally left out of this analogy was the four hundred years of rental income that has been generated by the properties developed there! (And usually with borrowed money, which enabled the lenders to pay the compound interest, by the way.) Whereas the money in savings must remain untouched in order to keep compounding. Can you imagine how much rent has been collected on that Island over 400 years? That is a very significant difference! (And this does not take into consideration either, the many tax advantages which our Government allows real estate investors, which are an additional bonus!)

Well, anyway, enough preaching! But please understand that we at Palmer Property Association, Inc., are very much in favor of real estate as the very best investment that anyone can make! (And it might be a good time to perhaps even increase the amount of real estate in your investment portfolio here that we manage for you, if you agree and can do so.)

But, we want you to know that, in spite of our lack of communication to you, we are still 'keeping on keeping on' and trying to do our very best during this down economy to keep your properties rented and in good repair. We just don't have the time to always tell you about all of these things as we would like. (For example, I began to draft this letter on July 8, 2003, and it is now July 14^th!)

Please know that we are very grateful to you for your trust and confidence in real estate as a great investment, and for you entrusting your properties that you own here to us to manage and maintain for you! We have been and will continue to be in touch with you as to specific things that we might can do to keep your properties rented, and very much appreciate your patience during this time of 'more to do than we can seemingly get done.
--Bruce Palmer