Contact Us
Mental Health
Financial advice
Youth Matters
Techno Corner
Starting in January 2006, Khaas Baat will introduce an online directory of business services on our web site at Contact us to place your business listing for six months or one year.

For details and rate information, call (813) 758-1786 or e-mail

Finance | Financial advice | Business advice | Immigration | Money

Francis Vayalumkal
By Francis Vayalumkal

For the past several years, Florida has enjoyed a great residential real estate boom, largely because of a surge in investment and speculative activity. Buyers from around the world have decided that Florida real estate - primarily condominiums, but also single-family homes -- is an ideal investment, especially with prices rising 10 to 25 percent annually.

From downtown Miami to the Panhandle beaches, new condominium projects have been "selling out" almost as soon as they are announced as developers take reservation deposits on units they won't have to deliver for 18 to 36 months. But in some fast-selling multifamily projects, more than two-thirds of the people putting down reservation deposits have been investors and speculators, hoping to "flip" their units to a new buyer when the development nears completion.

Experts say that in 2006 we may not see the double-digit appreciation rates, but the housing market will be at a balance with a more normal rate of price growth.

David Lereah, chief economist for National Association of Realtors (NAR), said current trends in the housing sector are healthy. "We don't need to break a record every year for the housing market to be good -- in fact, cooling sales are necessary for the long-term health of this vital sector," Lereah said. "A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong. A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on nontraditional mortgages, there will be fewer investors in the market this year."

There are several reasons that investors will be less active in Florida real estate. Here are some of them:

* Overvalued properties. Speculation has dramatically driven up the cost of both new homes and resales. According to the PMI U.S. Market Risk Index, homes in Miami and Tampa are overvalued by at least 20 percent, and Fort Lauderdale and Orlando are not far behind. These higher prices have made homes unattainable for many who actually live and work in Florida.

* Higher development costs. Developers must pay more for everything involved in their product - land, materials and labor - a situation exacerbated by hurricanes Katrina and Wilma.

* Rising interest rates. All signs point to continuation of a slow but steady increase in interest rates by the Federal Reserve in 2006.

* Too many adjustable mortgages. Higher rates spell trouble for Florida homeowners who have "stretched" their monthly payments by using adjustable rate mortgages (ARMs). Statistics from the Mortgage Bankers Association show that ARMs accounted for 46 percent of all loans by dollar volume in the second half of 2004. Higher-risk interest-only mortgages constituted 17 percent of the total loan volume, and traditional fixed-rate loans were 37 percent of the total.

* Higher consumer debt. Across the country, household debt levels are rising. Many Floridians have been refinancing their homes, taking out second mortgages or opening home equity lines of credit to buy investment properties.

* Tighter credit standards. During the recent boom, lenders went out of their way to offer alternative and exotic mortgage products to buyers -- interest-only loans, negative amortization loans, 40- year loans, you name it. With higher interest rates already increasing the risk of defaults and foreclosures, lenders are expected to adopt tougher standards in 2006, closing off the flow of "easy money" to some extent.

* Increased home "operating" costs. After eight hurricanes in two years, Florida property insurance premiums will continue to rise together with higher utility bills and municipal taxes as the state recovers from the hurricane damages.

Today, buyers, sellers, investors and developers understand that the big boom is over -- even though Florida's overall economy remains strong. The state will continue to attract working-age families, retirees and second-home buyers and generate large numbers of jobs.

Certainly, the long-term outlook for Florida real estate remains promising. Developers are focusing on the needs of the end users in their market instead of investment buyers. The Florida residential real estate market is not crashing, it’s normalizing.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 971-7555 or via e-mail at

Finance | Financial advice | Business advice | Immigration | Money

Nitesh Patel
By Nitesh Patel

If you’ve ever been in the market for life insurance, you may have noticed everybody seems to have advice on the subject. One common recommendation from self-proclaimed financial “experts” is: Don’t buy life insurance on children. As with most blanket financial recommendations, this one too has its shortcomings.

On the surface, it is easy to see why many kids don’t have life insurance. After all, it is unlikely a child would have any dependents or be supporting anyone financially. Few things in life are more devastating to a family than the death of a child, and the mere thought of it can be more than many can handle. However, having the foresight to plan for the worst is key in making it through such an unimaginable event.

Assuming the child lives into adulthood, several other reasons become evident as to why insuring a minor makes sense.

Ensuring Insurability. One of the most important reasons to insure a child is to guarantee he or she will be able to have life insurance as an adult, regardless of their future health or genetic blueprint. This is especially important when there is a family history of disease or illness or, in the case of adoption, where the family history may not be known. This is not as “unthinkable” as you may first expect. Insuring your child while their general health is good is a sound idea. Should they develop a serious medical condition, it may affect their ability to purchase life insurance in the future.

If the policy on the child includes an additional insurance rider, it guarantees the child the ability to buy more insurance as an adult. It also guarantees the premiums of the future policy will be based on the child’s health classification at the time the original policy was issued, even if his or her health has worsened.

Covering Expenses. For many, the most obvious reason to insure a child is to cover the potential financial loss that would result at his or her death. While many think only of funeral and burial expenses, which can average between $5,000 and $10,000 or more depending on the type of arrangements, other payments such as outstanding medical bills or unexpected expenses can be significant. Many people don’t think twice about purchasing insurance riders on wedding rings or other items valuing a few thousand dollars. Insurance on children is one way to protect against the risk of an even greater financial loss. Another reason to insure young children is if they are sure to have significant wealth in the future. More and more of these families are planning ahead by making certain the next generation has insurance in place to help pay any estate tax liability.

Helping to Cope with the Loss. Many bereaved families find comfort in providing a lasting remembrance of their child by making a substantial gift to charitable, educational or other organizations. Proceeds from a life insurance policy can even help surviving family members establish an ongoing memorial or scholarship fund in honor of the child. Family members can even seek counseling or take additional time away from work using those proceeds.

Building a Nest Egg. Assuming the child makes it to adulthood in perfect health, as many do, the cash value that accumulates in a permanent policy can be pretty significant. For example, if a policy was issued by Northwestern Mutual on a healthy baby girl 18 years ago and the original face amount was $100,000, the annual premium was $519.

Today, that policy’s face amount would have grown to $172,778 with a cash value of $15,2741. At a stage of life when potential college costs may be looming, a wedding may be in the works, or a first-home purchase is pending, this potential financial resource could come in handy.

A Grandparent’s Lasting Legacy. While parents of young children should consider all the points I have cited, grandparents often see that purchasing a policy for a grandchild can be the most lasting gift they can give. For all the reasons above, a grandparent can provide the start of a personal financial plan that may outlive them.

While life insurance has always been a cost efficient way to provide the cash needed to pay estate taxes or other final expenses, buying a policy on a young child can save even more money since premiums are lowest at early ages. Insurance on children is an affordable way to protect against financial loss unmatched by any other financial vehicle. As with all permanent insurance, the proceeds are typically income tax free and any cash value in the policy grows tax-deferred and may be used later, possibly qualifying for favorable tax treatment (see your tax professional for details).

So, despite the opinion of some, life insurance on children is a viable solution for many families. When those children do survive all those bumps, bruises and growing pains on their way to adulthood, they’ll have a step-p financially because someone gave some forethought to their financial futures when they couldn’t even tie their own shoes.

1 Based on an actual NN 65 Life policy issued by Northwestern Mutual in 1986, female age 0, select, all premiums paid in cash, dividends used to purchase paid up additions, 2004 dividend scale interest rate. Dividends are not guaranteed.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

Finance | Financial advice | Business advice | Immigration | Money

Brian Stephens

As tax season comes upon us, we business owners face getting all our records in order.

Each year, many business owners consider not reporting some of their business income to avoid paying higher taxes. In addition to the moral and legal issues, one should add financial detriment to the business owner – especially if they ever intend to turn over the business at a later time.

Here is why. Smaller, main street businesses typically sell for between two and three times the Seller’s Discretionary Earnings or SDE. Larger businesses sell for between 2.5 and 5 times SDE. SDE is Earnings before Interest, Taxes, Depreciation and Amortization (expenses) plus owner salary and benefits. These figures are combined to reflect the owner’s benefit, and may even include adding back various expenses such as car allowances, meals and entertainment, some cell phone expenses, as so on. It is important to recognize expenses that are absolutely essential for running and growing the business, and what are optional expenses that business owners choose to apply to their businesses because they want to.

Buyers and banks like to see well documented cash flows – generally the larger the better. It helps secure buyers and get loans approved. Financing helps businesses sell for top dollar in shorter periods of time. Buyer’s like to leverage their investment dollars and take some extra comfort in a bank’s approval to finance a business.

Still, the greatest impact of reporting all earnings is on the value of the business itself. Consider a business owner who does not claim, and therefore does not pay tax on $25,000 of income he or she was able to hide. If tax rates run 40 percent, that owner would have saved $10,000 - assuming his or her accountant was not able to save him more money. Not bad until one considers the selling of the business.

Based on reported earnings, any buyer and even a bank would see $25,000 less earnings than we actually earned. The SDE also would show $25,000 less in value and the business would justify a price somewhere around $62,500 (2.5 times $25,000) less than its real market price. Note that under this scenario, it would take more than six years before the tax savings on unreported income would surpass the benefit of the price a business should get in the marketplace.

So besides risking government fines and possible prison, the owner runs an extraordinarily high risk of getting far less for the business than the business owner deserved. Most of us would give up $10,000 for $62,500 any day.

Brian Stephens of Empire Business Brokers in Tampa can be reached at 813 571-7700 or via e-mail at

Finance | Financial advice | Business advice | Immigration | Money

Rupa Mehta

In today’s job market, a good salary may no longer be enough to lure or retain key employees. In many cases, it comes down to what “extras” a company has to offer.

Some companies focus on helping their employees balance personal and professional responsibilities by offering such perks as flex time, on-site daycare, dress-down work attire, gym membership, personal concierge services and the like. Other companies focus on financial incentives, like stock options or pension plans. However, when it comes to the competitive market for high-level employees and executives, companies might have to go even further.

A non-qualified deferred compensation agreement may be the right incentive for joining a company or staying with a company in the face of another offer.

What is a non-qualified deferred compensation plan?

Simply put, a non-qualified deferred compensation plan is a written legal agreement between an employer and employee(s) in which an employee benefit is provided that generally supplements or substitutes for the retirement benefits available under qualified plans such as pensions or 401(k)s. Unlike qualified plans, there are limited government regulations involved with non-qualified deferred compensation plans, which means that such agreements can be extremely flexible –– with regards to money amounts, payment triggers, etc. –– and advantageous to both employer and employee.

Some non-qualified deferred compensation agreements allow for an employee or owner-employee to defer a portion of current compensation –– either as a reduction in current salary or a deferral of a raise or bonus, both of which could lower the employee’s tax bracket. In exchange, the employer provides an unsecured promise to pay compensation at some predetermined date or event, such as retirement. Other types of non-qualified deferred compensation agreements are called Supplemental Employee Retirement Plans (SERPs). In a SERP, the employer agrees to provide retirement, disability or death benefits to a key employee in addition to current compensation.

Who benefits from the plan?

Actually, both employer and employee can benefit from a non-qualified deferred compensation plan. For the employer, the greatest benefit is that it can help recruit, retain and retire key people. Next, unlike qualified plans, a non-qualified deferred compensation plan allows the employer to pick and choose participants, which means it may discriminate in favor of highly compensated executives (including the owner-employee). There also is minimal IRS, ERISA and other government regulatory requirements, and the employer receives a tax deduction when the benefits are eventually paid. Not only are non-qualified deferred compensation plans flexible, they are flexible with controllable costs. And they can help augment existing qualified retirement plans.

Similarly, there are many benefits to the employee. An offer of a non-qualified deferred compensation plan to an executive shows recognition and appreciation for his or her contributions to the success of the business. Furthermore, a non-qualified deferred compensation plan can help supplement existing retirement benefits or provide for family if death occurs before retirement. Perhaps the greatest benefit, though, is tax deferral. Employees offered non-qualified deferred compensation plans are usually highly compensated –– which means that they are near or at the top of their tax bracket. A properly constructed non-qualified deferred compensation plan may allow an employee to pay lower income taxes on current compensation, because the deferred compensation is not counted in current income. And when the deferred compensation is paid, the employee will probably be in a lower retirement tax bracket.

Using life Insurance to fund the plan

To achieve these intended tax results, a non-qualified deferred compensation plan must be “an unsecured and unfunded promise to pay benefits.” That means that no corporate assets can be tied directly to the plan or put beyond the reach of the employer’s creditors. There are several ways to fund non-qualified deferred compensation plans; many companies “informally” fund through the vehicle of company owned permanent life insurance. A policy is bought on the life of the employee, but the policy is paid for and owned by the company, and all benefits would be payable to the company. The company could access the policy’s cash values to provide some of the retirement benefits to the employee during his or her lifetime, or use proceeds from the policy to pay a death benefit to the employee’s family (if those were the terms of the non-qualified deferred compensation plan).

Consult your advisors

To receive the greatest tax benefits from a non-qualified deferred compensation plan and ensure its legality, it is crucial that such a plan is designed by an attorney. When used properly, a non-qualified deferred compensation plan could be a useful tool in a company’s hiring and retention strategy. Such plans are flexible, easy to understand and administer, and can be beneficial to both employer and employee.

Rupa H. Mehta, Agent, New York Life Insurance Company, can be reached at (813) 281-0100.

Contact Information
The Editor:
Send mail to with questions or comments about this web site. Copyright © 2004 Khaas Baat.

Anything that appears in Khaas Baat cannot be reproduced, whether wholly or in part, without permission. Opinions expressed by Khaas Baat contributors are their own and do not reflect the publisher's opinion.

Khaas Baat reserves the right to edit and/or reject any advertising. Khaas Baat is not responsible for errors in advertising or for the validity of any claims made by its advertisers. Khaas Baat is published by Khaas Baat Communications.