Monday, November 24, 2008

On the Job. Monday, November 24, 2008

Seth Derderian, owner of Joseph’s Lock and Safe Co. in Worcester, with a selection of the products his company sells and services. (T&G Staff / PAUL KAPTEYN)
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What do you do?

“I’m the owner, but I’m the manager. I do estimating. And I oversee the company and I’m actively involved. As an owner, I wear many hats. I’m involved in accounting, human resources. I’m involved in purchasing. I’m involved in service. I’m fascinated with locks and safes and keyless entry systems. I was always extremely mechanically inclined. I always wanted to understand how things worked.”

How did you get started in the business?

“My father and uncle started the business after World War II. I started working there when I was 15 or 16 years old. I bought the business when I was maybe 30. I had passion; I was just intrigued by it. When I was a kid, I was, ‘Oh, how does this work?’ When I was a kid, I used to say, ‘Dad, can I go to work with you?’ ”

Is your safe business more residential or commercial?

“Most of our business is commercial. We do banks, we do credit unions, all sorts of convenience stores, restaurants, package stores, offices. The residential side is off. With the turn of the economy, people don’t have the extra money to build a safe into a room they might be remodeling or I don’t think people have as much cash or valuables. It’s a down cycle, on the residential side of it.”

I would have thought with the economy and stock market sliding that more people would want a safe in their home as an alternative to the bank, but that’s not the case?

“No, and if they’re buying it, they’re buying it from someone else. No one is coming into the store and saying, ‘I’ve had it, I’m afraid. I’m taking my money out of the bank.’ We saw this 15 years ago. There was a time when the market started to fluctuate and people were coming in and saying, ‘I don’t know where this economy is going, and I think I’m going to buy a safe because I don’t trust the banks anymore.’ ”

Do you think that could happen again?

“They may. The first time around, there was a lot of concern with a lot of the banks closing up and going bankrupt, but now, with what I have been reading, I think we’re going to be OK.”

Should more people have a safe in their home?

“Everyone should have a safe if they have anything of value, if they’re concerned about a fire or robbery. Whether it be jewelry, whether it be a passport, whether it be a birth certificate, they should be kept in a safe place. There’s no doubt.”

What is the best part of your job?

“I love it because it’s different every day. The job is different, the customer is different, the problem is different, the solution is different. I personally am satisfied that we help people resolve a problem.”

What is the worst part of the job? “The problems we run into are scheduling conflicts. The toughest part of the business is to be able to be there for the customer at the right time and the customer to be there so we can do it all. The most difficult part of the job is keeping the scheduling with our customer. We strive hard to do it. You call a customer about a 2 o’clock appointment and you get voice mail and no one there to pick up the phone and you got three guys ready to do something, so sometimes that can be discouraging.”

Have you installed a safe for someone who had an unusual amount of valuables to store away?

“We’ve had some very, very interesting cases. They are people who have acquired an incredible amount of jewelry, gold, coins, and like that.”

What have you learned from your 38 years on the job?

“I would have liked to have a master’s degree in business and a master’s degree in psychology. It’s understanding the dynamics of dealing with the people, the customer. How they act and react. They’ll say, ‘I need it right now.’ When our customers call sometimes it’s generally a crisis.”

What kind of emergencies do you come across in the safe business?

“It’s when (the safe) won’t open or they have to change the combination. Things like that. They’ll say, ‘We’ll be there at 4 o’clock.’ But the person has to be there. And then you call at 4 o’clock and you get voice mail. Then 40 minutes go by and they end up calling you at 5 o’clock. That’s the service side of the business. It’s not like we’re showing up at a building to paint a wall or wash a window. We have to meet somebody to get a combination and it’s not just anybody in the company. It’s usually the owner or one or two people.”

In movies, safecrackers can open safes by listening to the tumblers clicking. Is that for real or is it just a Hollywood thing?

“It can be done, but it’s not as simple as it is in the movies. Some safes have to be drilled to be opened. We have these modern computerized robotic dialers that we can put on a safe. And we can turn them on at the end of the day. They’ll run 100,000 possible combinations. And that’ll work on maybe 30 or 40 percent of the market.” Compiled by: Correspondent Richard Price

Monday, July 7, 2008

1031 exchanges yield income

1031 exchanges yield income, write-offs
Market for exchanges grew to $4 billion in 2007, from $200 million in 2001
By Richard Price February 11, 2008
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The strategy of swapping investment properties is similar to the dreaded Yankee gift swaps, in which everyone buys a holiday present for someone else and then, in a lottery style face off, swaps it for something more desirable.
In essence, participants hope to walk off with the cool iPod accessories and not get stuck with the hand-knitted tea cozy.
In the world of swapping properties, the idea is for advisers to send home clients with a Class A property with great cash flow, not the real estate version of the tea cozy.
When an investor trades an apartment house for a new and hopefully improved building, the transaction is classified as a Section 1031 tax-deferred exchange under Internal Revenue Service rules.
The market for exchanges has grown to more than $4 billion in 2007, from $200 million per year in 2001, said Jeff Hanson, chief investment officer at Triple Net Properties LLC, a Santa Ana, Calif.-based provider of tenant-in-common programs.
Tenancy in common is an interest in property between two or more people. But in a new twist to the old deal, clients can opt for a tenant- in-common fractional-ownership approach, which allows them to choose from among high-rise office buildings, apartment complexes and retail strip malls.
Under this arrangement, the client is a partial owner with other investors in the building and receives depreciation write-offs. In these deals, the IRS caps the number of investors at 35.
For instance, Don Ingram, an independent adviser at Ingram Financial Group Inc. in Winter Haven, Fla., is a 1031 specialist.
He helped a client sell his citrus grove business and reinvest in an apartment building complex in North Carolina. The deal generates cash flow of 6.5% but without the responsibilities of owning a grove.
Investors in 1031 exchanges are generally at least 60 years old, are seasoned investment property owners, and they plan to hold the deed on the property until it passes to their heirs, said Brent Barnes, who has many clients in tenant-in-common investment programs and runs a tax advisory business near Nashville, Tenn. "At that point, the surviving children get a step-up in the cost basis," he said.
Both Mr. Ingram and Mr. Barnes work at finding suitable prospects for 1031 exchanges. For instance, Mr. Ingram's partner and independent adviser, Nick Toadvine, is an active member of the Florida Citrus Association in Orlando. Mr. Barnes relies on his tax advisory business to identify clients who own investment property.
If you are considering helping clients exchange their properties, here are some pointers:
• Only investment properties, not personal residences, can qualify. "Look at the tax returns filed every year," said Randy Beckman, senior vice president at Triple Net Properties. "The returns should say they are marked as investment properties." But when in doubt, check with a certified public accountant.
• The swap must be for a similar type of investment, also referred to as a like-kind exchange.
• After the sale of a property, investors have 180 days to land a new one. The IRS rules are clear: Beginning the day after a sale closes on an existing property, a client has 45 days to choose a replacement property and then close on it within 180 days.
Neither weekends nor legal holidays stretch out the time period, Mr. Beckman said. He recommends earmarking up to three properties — even if they plan to roll into only one — to hedge their bets in case the first and second choices do not work out.
• Hire a middleman to help with the execution. In fact, you'll need to hire three of them. An exchange that doesn't raise the IRS' eyebrow will require the help of a certified public accountant, a real estate attorney and a qualified intermediary, a specialized escrow agent. The intermediary holds the funds from the property that was sold until a new property is bought.
Hiring an accountant or an attorney as an intermediary jeopardizes the integrity of the transaction. But as anyone who has closed on a house knows, there are many papers to file and sign, so the scrutiny of a CPA and an attorney will ensure that the exchange will go well.
• Choose proficient clients who have investment real estate experience and have enough investible assets to make the strategy viable. For instance, Mr. Ingram selects clients who have a minimum of $1 million of investible assets and at least $200,000 for the tenant-in-common program.
Richard Price is a senior research analyst for Investors Capital Corp. of Lynnfield, Mass. He can be reached at rprice@investorscapital .com.

Dividend Paying Stocks are a best bet

Dividend-paying stocks resilient to market mess
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By Richard Price Published July 1, 2008 From the 2008 Issue of Boomer Market Advisor Magazine
When I was in college, my girlfriend inherited a block of ExxonMobil stock from her grandfather. While he was alive, he preached the value of dividends and how they will take care of you in good times and bad. He told her never to sell the shares.
I never forgot what a lifesaver that check was for her. It wasn’t a big amount, about $300, but it always came at the right time, when schoolbooks were needed or the rent was due. Good old ExxonMobil — boring, predictable and always there to help.
It’s time to revisit the old and boring dividend stocks again.
I recently spent time with Tom Cameron and Greg Donaldson, two seasoned money managers who dedicate their professional lives to finding dividend paying dullards. They believe dividends are exactly what investors need in the aftermath of the subprime mortgage fiasco. And certain dividend-paying companies are proving to be downright weatherproof against recession.
Donaldson, director of portfolio strategy for Donaldson Capital Management, showed me a chart of companies that have raised their dividend every year over the past five years on an average of 10 percent or more. The resilience of some of these companies in the past months was profound: all of the large companies in his basket had raised their dividend; not one had lowered. The list included Coca-Cola, Abbot Labs and ITT.
Donaldson believes our chances of having found the market’s bottom is now at 70 percent, which he credits to the Fed rate cuts and the bailout of Bear Stearns. But he also believes it will be a choppy market for some time. That means that companies like Colgate Palmolive, which just raised its dividend another 11 percent (to 40 cents per share), will provide one of the few bright spots in a client portfolio.
He also likes Proctor and Gamble, not just because it doubles its dividends almost every seven years, but because it is a worldwide operation with more than 54 percent of sales occurring overseas.
Cameron, who manages the Dividend Growth Advisors mutual fund, blames hedge funds, especially offshore hedge funds, for a chunk of the financial mess. Cameron believes these mortgage debt packages are so complex they are nearly impossible to understand, which explains why many are no longer trading. Since he began his investment career in 1951, Cameron has seen it time and time again: the more complex the investment, the more trouble investors get into.
His core philosophy is simple — buy companies that have raised their dividend an average of 10 percent or more a year for ten consecutive years. This is why he likes McDonald’s, IBM and General Electric.
But what about the favorable tax treatment set at a maximum of 15 percent? Unless Congress acts, it’s set to expire at the end of 2010, possibly leading to a sharp sell-off. Cameron believes it’s important for stockholders to continue receiving dividend increases that are either at, or greater than, the rate of inflation.
Donaldson says many of these large companies are in pension plans, 401(k) plans and other tax shelters where tax law changes are irrelevant. Also, foreign countries own large positions so these laws have no effect on them. For those interested in researching dividend rising stocks, go to and Richard Price is an analyst with Investors Capital in Lynnfield, Mass. He can be reached at