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Q & A with America’s real estate professor: Buying ski chalet in Switzerland

Published: Friday, Jan. 10, 2014 9:27 a.m. CDT

DOWNERS GROVE – The Downers Grove Village Council has approved restrictions for where medical marijuana cultivation centers and dispensaries would be allowed in town.

The zoning restrictions are in preparation for the new Illinois medical marijuana law.

The restrictions were passed by the council 4-3 on Tuesday, with commissioners Sean Durkin, Becky Rheintgen and Bob Barnett voting "no." They said the restrictions were not strict enough and wanted to see further limitations of where the facilities could be located in town.

The special use was recommended by the plan commission in October, and limits cultivation and dispensing centers to areas zoned for light manufacturing (M1).

M1 allows for a range of uses, including offices, banks, medical and dental clinics and daycare centers. M1 does not allow for schools, and is typically isolated from residential uses, according to village documents.

The state statute requires a marijuana dispensary to be at least 1,000 feet from a school, daycare or residentially-zoned area, and a cultivation site would have to be at least 2,500 feet away.

The village's special use also requires both to be the same distances from any parks, at the request of the park district.

Durkin and Rheintgen both wanted to additionally restrict marijuana dispensaries or cultivation centers from being within proximity of recreational facilities. Their recommendation was not added to the list of restrictions.

"I think we're being too lenient by supporting what staff's recommending," Durkin said.

In addition to applying for a special use permit with the village, any prospective marijuana clinic owner would have to comply with a lengthy list of state standards listed in the new statute, and owners would be subject to a criminal background check.

"The inclusion of a special use in this gives us the flexibility we need in order to apply, in a rational and thoughtful manner, the ordinance we have and take into account some of the other concerns that we have," Commissioner Greg Hose said.

Commissioner David Olsen also cited the fact that any prospective owner would have to come before the council to be approved for a special use as a further level of control for the village.

"I plan to support this, though I'm not happy about [the new state law]," he said. "This state law is not something I would have supported, but it's out of our control."

Village Planner Stan Popovich said this fall that like any request for a special use, the village looks at whether the business fits in the with the comprehensive plan for the proposed area, and whether it promotes and protects the "public health, safety, morals, comfort and general welfare."

"The state statute allows us to place reasonable zoning regulations on these [businesses]," Popovich said.

There are six areas zoned as light manufacturing in Downers Grove, but only two areas would fit the new requirements due to proximity to schools and parks: the area near Ogden Avenue and Warrenville Road and the Ellsworth Industrial Park.

Illinois is the 21st state to pass a medical marijuana law. It goes into effect Jan. 1.

The new law limits the total number of licensed dispensaries and cultivation sites at 60 and 22, respectively, state-wide. Patients with a prescription from a doctor to treat one of 35 eligible medical conditions will be able to buy up to 2.5 ounces of marijuana every two weeks.

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Buying Ski Chalet in Switzerland

Q. I have recently moved to Lausanne, Switzerland, and am interested in buying a ski chalet as a rental property and as an investment. Do you have any advice in this area? We are close to some of the best skiing and hiking in the world and feel there is some opportunity here. Thank you. Best regards, Deborah G., Switzerland

A. There are several issues I would caution you to consider.

1. First and foremost, will it be a good investment? This sounds like a prize property to me. And the problem with prize properties is that they generally have negative cash flows. Buying an investment property with negative cash flows is not a good idea in my opinion. Have you thought about whether or not you might do better with less hassle keeping your money in well-diversified financial assets?

To help determine if it will be a good investment, have you penciled out the rents and expenses on the property with conservatively estimated numbers? Will you be positive and earn a fair rate of return on the cash equity you invest?

This also sounds like it will be a short-term or vacation rental type of property. And unfortunately, those are some of the worst real estate investments. Management fees are very high because it is a ton of work. If you do manage it yourself, you’ll soon learn that it’s not much fun having to attend to guests once per week. Expenses you cover like utilities, insurance and furniture and fixtures are also very high and every issue is an emergency because your guests are only there a few days. The net effect is negative cash flows!

The better wealth-improving real estate assets are the nice, boring, moderately priced and cash-flow positive rental properties. And they’re almost never in fancy areas.

2. Will you own the chalet at least 5 years? In general, thanks to exorbitant transaction costs on the sale of real estate, the breakeven timeframe to make your first dime of profit is generally 5 years. If you are not 100 percent positive you will own it for that long – and 10 years is a better bet – you’re probably better off keeping your money out of real estate from a financial perspective.

3. Currency risk is the last issue. If you plan to move back to the United States (I’m assuming you are from the United States), you could lose all the money you make, if any, based on changes in currency. Of course you could double your money too, but don’t count on that! Speak to a financial advisor about this issue.

I hope this frank and hopefully straightforward guidance will be of assistance to you.

House With Cement Slab Foundation

Q. My wife and I are looking at a house that is 35 years old and built on a poured slab concrete foundation. Most of the slab is under carpets and laminate flooring. Some areas that are just concrete have small cracks in them. I’m concerned because of the potential for costly repairs due to this issue. What do buyers normally do regarding this issue? Albert O., Gardena, Calif.

A. Most people don’t do anything. But that isn’t a very prudent way to buy real estate! You should consult with a local concrete foundation repair company and have them do an inspection of the property. Soil conditions, lot slope, water run-off and other issues can impact the cracking of a floor slab.

Some cracking is normal and not a big issue. On a townhome I purchased years ago that had small cracks in the slab, I asked my home inspector how old he thought the cracks were. He joked that that cracks started to form 40 years ago when the concrete truck left the plant on its way to deliver the wet concrete poured into my slab! And he wasn’t joking.

All concrete forms cracks. The severity of the crack, the age of the crack (so how many years from when it was poured) and the likelihood of it expanding are what you need to know.

And a competent, local foundation slab consultant is the one to answer your questions. Good luck!

Leonard Baron, MBA, is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University lecturer, blogs at Zillow, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Email your questions to: Leonard@ProfessorBaron.com

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