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Category Archive: ‘Real Estate Investing’

New Limit Proposed on 1031 Exchanges

1031x

Hat tip to GM for pointing this out – did you know that the Obama Administration has been trying to modify the 1031 exchange rules?

Potential sellers of investment properties are already paralyzed by the thought of the excessive taxation by federal and state governments.  The 1031 exchange allows properties to be sold and the excessive taxation be deferred – any limiting of the 1031 rules will cause fewer transactions.

If this change is implemented, it will apply to 1031-exchanges that are completed after this year.  If you want to upgrade your investment portfolio, let’s move!

More here:

http://www.1031taxreform.com/legislation/treasury/

Excerpt:

The proposal would limit the amount of capital gain deferred under section 1031 to $1 million (indexed for inflation) per taxpayer per taxable year. The proposal limits the amount of capital gain that qualifies for deferral while preserving the ability of small businesses to generally continue current practices and maintain their investment in capital. In addition, art and collectibles would no longer be eligible for like-kind exchanges. Treasury would be granted regulatory authority necessary to implement the provision, including rules for aggregating multiple properties exchanged by related parties.

The provision would be effective for like-kind exchanges completed after December 31, 2016.

Other existing rules:

1031 rules

Posted by on Apr 29, 2016 in Jim's Take on the Market, Real Estate Investing, Shadow Inventory | 0 comments

Property Manager Embezzlement

2016-04-08 11.43.29

I know one of the victims, and she was told by the owner that she would be paid in full today.  We’ll see….

http://www.10news.com/news/team-10-homeowners-say-property-management-company-owes-them-thousands

Homeowners in the North County say a local property management company owes them thousands of dollars.

Carousel Properties is based in Carlsbad.

Martin Benowitz says he hired Carousel Properties to manage is Oceanside condo. He’s known the owner, Kelley Zaun, for about 15 years.

But the recent missing money has changed their friendship.

“I’m out $6,000. How much are we going to stay friends?” Benowitz said.

Benowitz said he recently received a lien on his property because the HOA fees were not being paid—something the property management company was supposed to take care of. He also says he’s missing the rent money owed to him from the last two months, even though his tenant has paid.

He is not alone.

“There’s no reason or excuse,” said Rinda White who lives in Texas.

She hired Carousel Properties to manage her Vista home. She is also missing thousands of dollars.

“We’re on a limited income. My husband and I are both retired,” White said.

Team 10 obtained emails, which the homeowners say are from Zaun. In the emails, she admitted she “made several errors.” She also claimed she was dealing with health issues.

When Team 10 approached her Carlsbad office, she told Team 10 to contact her lawyer and shut the door.

Some homeowners want to pursue criminal charges.

Team 10 called her attorney, but have not heard back.

Posted by on Apr 13, 2016 in Carlsbad, Jim's Take on the Market, Real Estate Investing | 3 comments

Vacant Home Occupied by Squatters

id

Hat tip to Susie for sending in this story from Potato Land!

The list price for the house was $134,900, and the photos on Zillow made it obvious that the house was vacant:

http://www.ktvb.com/news/local/couple-fights-to-evict-stranger-from-nampa-home/128686427

CALDWELL — A Canyon County couple is back to the drawing board after a judge ruled against allowing them to fast-track the eviction of a stranger who moved into their house without permission.

Brian and Renae Prindle discovered last month that someone was living inside the home at 37 South Westwood they had put up for sale.

The pair said they checked on the vacant property multiple times a month. Brian Prindle testified Monday that he stopped by the house March 25 after his wife noticed rocking chairs in front of the home had been moved.

Inside the home were several people, including a woman who told Prindle she lived there and had a lease.

Read More

Posted by on Apr 12, 2016 in Jim's Take on the Market, Real Estate Investing | 8 comments

Landlord Woes

prince

http://www.latimes.com/local/california/la-me-0323-saudi-party-animal-20160323-story.html

Over the years, neighbors accused Danny Fitzgerald of leasing his Hollywood Hills homes for loud parties. He said they had nothing better to do and suggested they “go to Palmdale where they belong.”

Then Fitzgerald had a brush with royalty.

This week he filed a lawsuit against a Saudi prince he accused of partying so hard — with drugs and strippers — that it caused more than $80,000 in property damage to one of his homes. Including other problems, such as not being able to lease the home out while it was being repaired, damages totaled more than $300,000, according to the complaint.

“It was horrible,” Fitzgerald said. “The guy just took full abuse of my home.”

Fitzgerald said his homes were only a source of trouble from 2012 to 2014, when he said a realtor had control over two of them and rented them out to everyone. He said there hadn’t been any problems since then — until the prince showed up.

“The only mistake I’ve made in the last two and a half years was this prince rental,” Fitzgerald said. “Here I am putting my reputation back together and then he just destroys it in one month.”

Fitzgerald said the trouble began after Saudi Prince Aziz al Saud leased one of his homes. He said the prince had one of his workers sign the lease agreement on Weidlake Drive in August. Fitzgerald said he and the prince had agreed that he would have only one party.

But throughout the one-month lease, according to the lawsuit filed in Los Angeles County Superior Court on Monday, the prince ransacked the home, threw all-night parties and caused near daily disturbances to the neighborhood.

Then there was the graduation party.

“It sounds innocent, a graduation party,” Fitzgerald said. “Doesn’t it?”

There were supposed to be no more than 150 guests at the Aug. 16 party, he said. They were there to celebrate the prince’s graduation from Pepperdine University, the complaint states.

Instead, according to the complaint, more than 800 people showed up, with guests doing drugs, including smoking marijuana, and strippers dancing on kitchen countertops.

Fitzgerald said there was damage to furniture and walls and that hardwood floors buckled because of spilled drinks. His invoice for the damage totaled $86,379. In the complaint, Fitzgerald alleges that the defendants — who include two of the prince’s employees — have not paid for any damages.

“Incredibly, after this August 16 party, Prince Aziz continued to have nightly parties until the early mornings and continued to leave piles of trash on the street,” the complaint read. “Guests of the Prince were seen urinating on Plaintiff’s neighbors’ properties.”

Posted by on Mar 23, 2016 in Jim's Take on the Market, Real Estate Investing | 2 comments

Reasons Why Parents Should Buy for Kids

house

Do you worry about your kids’ future, and this crazy world in which we live? What can you do?

REASONS WHY PARENTS SHOULD BUY A HOUSE FOR THEIR KIDS

A way to distribute the inheritance while you are alive to see it.

Senior care – You might need them to take care of you some day!

Affordability – If prices stay strong, buying a house could get out of reach for most. A salary of $100,000 can barely buy a $600,000 house with 20% down today – and you have to go to an outlying area to find a decent house for that money.

Appreciation – Even if price didn’t go up much, paying down the mortgage builds equity.

Rental income – Pay cash or low-leverage a house purchase and hand over to a property manager.  The resulting positive cash flow will help pay their expenses while searching for a high-paying job.

Help to establish an investment portfolio, and to diversify their holdings.

Create a cap on kids’ housing expense.

Safety Net for emergencies – Ill-liquid, but that ensures it’s only used for catastrophic events.

Help the kids grow up. Owning real estate is for adults, and it inflicts responsibility.

Relieve pressure on kids from having to marry rich.

Help determine where the grandkids grow up.

Ensures they live in a quality area with good schools.

Taking care of the kids and grandkids makes grandma happy.

If Grandma ain’t happy, then nobody’s happy!

Posted by on Feb 29, 2016 in Jim's Take on the Market, Market Conditions, Real Estate Investing, Thinking of Buying? | 9 comments

Communal House Flipping

flippers

The building of the next bubble won’t look the same as the last one, but a common thread will be lenders who are hands-off. Hat tip to daytrip for sending in this story about crowdfunding for flippers:

http://www.latimes.com/business/la-fi-crowdfunding-house-flippers-20160214-story.html

An excerpt:

Although data providers don’t track the number or dollar-volume of loans going to house flippers as opposed to developers of larger projects, more than a dozen real-estate-focused platforms offer loans to them. And a handful of Southern California start-ups specialize in the market.

Patch of Land in West Los Angeles made about $61 million in loans last year, mostly to house flippers, and PeerStreet in Manhattan Beach made $40 million, almost entirely to them.

“There’s a crowdfunder popping up once a month now, and the low-hanging fruit is the fix and flips,” said Jonathan Lee, a principal at George Smith Partners, a Century City real-estate-financing firm.

Like hard-money lenders, crowdfunding platforms guard against risk by securing the loans to the property and lending for less than its full value.

If a borrower goes bust, the lender takes title to the property, which, in theory, can be sold for more than the loan principal. PeerStreet, for instance, typically will lend only about 75% of a home’s value.

“They don’t look at income or tax returns. They’re looking at the property and the project. Is there profit to be made?” said Christian Fuentes, a Pomona real estate agent and house flipper.

Patch of Land can issue a check in just a couple of weeks, assuming that a loan meets its underwriting standards. The loan is then offered up to the 17,000 investors signed up on its site.

Golden Bee in November bought a two-bedroom house on Greenfield Avenue in West L.A., not far from the Westside Pavilion. The company paid about $1.2 million, with $1 million coming from Patch of Land at an annual interest rate of 12%.

Berneman is planning a $750,000 renovation that will add more than 1,500 square feet of space, along with new plumbing and wiring. He estimates that the house, built in the 1930s, hasn’t been renovated in 50 years.

“We’ll be knocking some of it down to the studs,” he said.

Berneman hopes to sell the house for as much as $2.5 million once it’s back on the market this fall. Golden Bee would stand to make $575,000, not including the cost of financing.

Posted by on Feb 13, 2016 in Jim's Take on the Market, Mortgage News, Real Estate Investing, Remodel Projects | 1 comment

Golf Courses in Transition

golf

A story with great examples of golf courses being closed across the country, and many being turned into real estate developments.

From the nytimes.com:

BOCA RATON, Fla. — Weeds, crabgrass and fallen palm fronds cover the wildly overgrown greens of what was once the Mizner Trail Golf Club, its decrepit state emblematic of the fate of hundreds of golf courses around the country, many of them derisively known as “rabbit patches” or “goat farms.”

A short drive away, however, perspiring construction workers in yellow vests swarmed on a recent afternoon over the emerging structure of a 150,000-square-foot activities center, part of a $50 million renovation of the 44-year-old Boca West Country Club, home to some 6,000 residents, where fairways are newly planted and houses sell for as much as $5 million.

With the winter golf season beginning in Florida — the nation’s leader in golf courses with more than 1,000 — the extremes of failure and success point to a nationwide upheaval in the sport. It was booming when players like Tiger Woods reigned, but has since been roiled by changing tastes and economics, an aging population of players, and the vagaries of the millennial generation’s evolving pastimes.

There are about four million fewer players in the United States than there were a decade ago, according to the National Golf Foundation. Almost 650 18-hole golf courses have closed since 2006, the group says. In 2013 alone, 158 golf courses closed and just 14 opened, the eighth consecutive year that closures outpaced openings. Between 130 and 160 courses are closing every 12 months, a trend that the foundation predicts will continue “for the next few years.”

Dozens of private and public golf courses here in South Florida, and hundreds around the country, are in transition. Some courses have sought bankruptcy protection, while others have slipped into foreclosure. Many are under construction, with single-family homes and condominiums going up on land once dotted only with pin flags, sand traps and water hazards. Others have gone to seed as they await resolution of legal and zoning disputes.

Read full article here:

http://www.nytimes.com/2015/11/25/realestate/commercial/fewer-golfers-but-some-lush-courses-are-booming.html

Posted by on Dec 16, 2015 in Builders, Jim's Take on the Market, Real Estate Investing, REOs | 1 comment

Perils of Seller Occupancy After Closing

market insanity

A family member in a hot market is trying to move up.

They have lost out a couple of deals, so the right kind of frustration is starting to set in, but they keep coming across the same tactic – sellers who want to occupy after closing.

It’s not enough for these sellers and listing agents to get a premium price. On top of that, they make more outrageous demands that gives you the feeling that you’re being toyed with – just to see how high you will jump.

In this case, the sellers are wanting to rent the house after the close of escrow for 90 days at $2,000 per month UNDER the current market rate.  There are multiple offers, so they’re figuring one of them will bite.

What are the pitfalls?

  1. The loan documents require owner occupancy within 30 days.  Most lenders do random checking by having a fraud detector knock on your door to see if you live there yet.  If not, the bank could call your loan due.
  2. Buyers are now landlords, and bill collectors.  Try to collect the total rent due at the close of escrow, and a deposit if possible.  Most sellers reject the thought of a deposit, so make sure all of the rental terms are clear before signing the purchase deal.
  3. The insurance policy should be for a rental property.  If the sellers/tenants fall down and break a leg, you could be sued, and you need the proper coverage.
  4. Sellers asking for 90 days must not have found their next home yet – how do you know that they will move out?  Make a provision that any holdover rent will be double the current rate – sellers usually object, but it doesn’t cost them a penny extra as long as they move out as agreed.
  5. Damages? Hopefully a deposit was tendered, but either way, make sure to conduct a Pre-Move-Out inspection so any damages caused by the sellers are acknowledged and remedied.

I told the family member that if they have any major objections to seller rentbacks, then they aren’t desperate enough yet – because it’s likely that one of the bidders will comply with the demands, and you’ll lose another one.

As long as you have a solid agreement in the beginning, you’ll forget all about it six months from now.

If these types of demands are too uncomfortable, there is an alternative.  Buy an inferior house – they don’t have nearly as much competition.

Posted by on Dec 13, 2015 in Bidding Wars, Jim's Take on the Market, Listing Agent Practices, Market Conditions, Real Estate Investing | 0 comments

Rents Pushing Higher

higher rents

Speaking of newcomers, it won’t just be outsiders who fuel the future demand.

Mortgage rates dipping into the threes make buyers giddy, but today’s low rates are just the sweetener.  Demand is being driven by the soaring rents.

Rich people can choose in or out – I heard the story yesterday about the doctor couple who have been renting a house in Santaluz for 13 years.  But for those with static incomes, the reality is grim.

More on rents here:

http://www.rent.com/blog/2015-rental-market-report/

Posted by on Oct 15, 2015 in Jim's Take on the Market, Real Estate Investing, Thinking of Buying?, Thinking of Selling? | 5 comments

99 Homes

The foreclosure movie ’99 Homes’ is out – here is the review from Variety:

http://variety.com/2014/film/festivals/venice-film-review-99-homes-1201293206/

Here is what the sfgate.com had to say:

“99 Homes,” a gripping, intelligent thriller set amid the bursting of the nation’s housing bubble, zeroes in on the ruination of the American dream and the morally bankrupt characters who profited from the carnage. Like “The Grapes of Wrath,” it’s a classic example of how to take a social issue and turn it into riveting cinema.

The story opens in an Orlando, Fla., bathroom, where a family man has just killed himself to avoid the specter of being thrown out of his foreclosed home. Not long after the yellow police tape has been set up, real estate broker Rick Carver (the incomparable Michael Shannon) is prowling the premises, with an e-cigarette in his mouth, a cell phone in his ear and a gun attached to his ankle. Carver needs to make sure that the dead man’s grieving wife and kids are shooed off the grounds, so he can keep his banker clients happy.

Then it’s off to another residence, where Carver’s next victim awaits: down-on-his-luck construction worker Dennis Nash (Andrew Garfield, back in top form after his “Spider-Man” foray), his mother (the always reliable Laura Dern) and his son. It’s the first of many evictions in this movie, and director Ramin Bahraini imbues all of them with a palpable sense of terror, anguish and heartbreak.

As it turns out, Carver sees a lot of leadership potential in the handyman Nash, who ends up striking a Faustian deal in which he helps the ruthless broker with evictions in exchange for financial help. Because of Garfield’s skill, and the strength of the script, we sympathize with the desperate Nash and his love for his home, even as he forecloses on his moral values.

Likewise, Shannon provides interesting shadings to Carver. On the surface, he’s Gordon Gekko with a “Miami Vice” outfit, but it’s clear that Carver doesn’t enjoy what he’s doing or view it simply as a way to get rich. Instead, he sees himself as a player trying to survive in a game that’s been rigged against 99 percent of the population. Shannon manages to convey an inner loneliness, a quiet desperation that he’s gone too far but can’t turn back.

The movie trailer:

Posted by on Sep 30, 2015 in Foreclosures, Jim's Take on the Market, Local Flavor, Real Estate Investing | 1 comment