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Category Archive: ‘Real Estate Investing’

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

Latest 1031 Attack

trump

From Bloomberg – hat tip GM:

LINK

Billionaire Donald Trump, who built his fortune in real estate, told Bloomberg Politics this week that he wants to raise his own taxes. One way to do it is a bipartisan proposal that would blow up one of the real estate industry’s favorite tax breaks.

The break, known as the like-kind exchange or “1031” for the tax code section it comes from, lets real estate owners sell one piece of property and buy a new one soon afterward without paying any capital gains taxes on the profits from the sale. The result is an ever-increasing pile of deferred capital gains, taxed only whenever there is a final sale or, better yet, never taxed as income at all upon death.

Read full article here:

LINK

Posted by on Sep 4, 2015 in Jim's Take on the Market, Real Estate Investing | 0 comments

Chinese Buying to Accelerate?

chinese

Excerpted from an article in BI:

Chang’s client is one of the group of wealthy Chinese caught in between a rock and a hard place: Leave their assets in China to potentially weather additional market volatility and yuan devaluations — or put it in real estate that is now more expensive than just a few weeks earlier.

“Lots of my clients have been hit heavily by the equity market,” Chang, who was once a vice president at HSBC’s private bank, told Business Insider through a series of interviews. “But that only makes them more determined to diversify out of China.”

The chaos of the past few weeks is likely to lead to an acceleration in the rate of real-estate purchases by wealthy Chinese buyers in the US and elsewhere.

Chinese individuals are also being actively encouraged to buy abroad by the government.

Thus far, Chinese individuals have been allowed to convert $50,000 into other currencies annually — though there are ways to skirt the regulation.

That is about to change, with the Chinese government readying the launch of the Qualified Domestic Individual Investor program.

The QDII2 is an overseas-investment scheme that would allow Chinese citizens to invest overseas directly. Those with at least $160,000 in financial assets qualify.

The program is likely to launch this year and will bolster overseas real-estate purchases on the part of the Chinese.

“With QDII2 in mind, within five years we might look back and think of the current levels of Chinese cross-border investment as quaint,” Andrew Taylor, co-CEO of Juwai.com, a website that helps Chinese to buy properties abroad.

Read full article here:

LINK

Posted by on Aug 30, 2015 in Jim's Take on the Market, Market Buzz, Market Conditions, Real Estate Investing | 0 comments

1031 Exchange

Image result for 1031 exchange

I appreciate the analytical, business-like aspect of the 1031 exchange, and try to do a couple every year just to keep my chops up.  I’d love to do more exchanges because sellers of investment properties have to re-invest to avoid capital-gain taxes.  But it’s rare that you can find new properties locally that are a good enough buy to make it worth the trade.

But for those who can – here is a good article on the basics of the 1031 tax-deferred exchange, plus three extra points worth noting:

LINK to 1031 exchange article

The excerpt:

While you will always want professional guidance when doing this kind of swap, there are three things to have in mind from the start:

  • Be aware of “passive liability.” In other words, if you have a $1 million mortgage, do a swap and acquire a property with a mortgage of $900,000, you have “gained” $100,000 in the eyes of the taxman. If you are buying and selling large investment properties, these gains can add up quickly.
  • To “exchange” a vacation or second home, that home must be an investment property. If you are planning to swap a vacation home, you need to make the case that it is an active investment. Usually that means being able to show paying tenants for at least a year. To ensure that you do not swap an investment property for a primary residence, a 2008 IRS ruling created a “safe harbor” for dwellings in a 1031 exchange. To meet the safe harbor rule, in each of two years immediately following the exchange, the home must be rented to another person for 14 days or more, and you may not use the home for more than 14 days (or 10 percent of the total number of days the home is rented in a 12-month period).
  • An exchanged vacation home cannot become a primary residence for purposes of taking advantage of the principle residence exclusion. Property acquired in a 1031 exchange is subject to a five-year-period of exclusion from the principal residence capital gains tax benefit.

Link to full article

Posted by on Jul 30, 2015 in Jim's Take on the Market, Real Estate Investing, Realtor Training | 0 comments

Seniors Renting

old guy renting

From Bloomberg:

http://www.bloomberg.com/news/articles/2015-07-21/boomers-competing-with-millennials-for-u-s-urban-rental-housing

Mike Abelson calls it his “man cave.”

After his wife passed away, the 65-year-old sold his house and began renting a 1,400-square foot apartment eight miles away in Bethesda, Maryland. The trial attorney now uses his downtime to enjoy warm summer evenings on his terrace.

“I pay a pretty steep rent, but it’s worth it,” Abelson said. “I don’t pay property taxes, I don’t pay for maintenance, plumbing or electrical. I don’t have to pay for the grass cutting. It’s just easier than being a homeowner.”

The number of renters who are 65 or older will reach 12.2 million by 2030, more than double the level in 2010, according to research by the Urban Institute in Washington. While the millennial generation born after 1980 has driven demand for apartments in recent years, baby boomers — those born from 1946 to 1964 — will be the next wave, pushing up rents and spurring construction of more multifamily housing.

Real estate developers such as Bozzuto Group, Abelson’s management company, and Alliance Residential Company are building projects where multiple generations can coexist. Should the supply of rental properties fail to keep up, however, younger people will be competing for housing with the burgeoning population of older Americans.

“It’s a combination of their sheer size and that they’re entering the age range where they increasingly downsize,” Jordan Rappaport, a senior economist at the Federal Reserve Bank of Kansas City, who has also studied the subject, said in a telephone interview. As a result, “it will put upward pressure on rents for all types” of multifamily homes, he said.

Read full article here:

http://www.bloomberg.com/news/articles/2015-07-21/boomers-competing-with-millennials-for-u-s-urban-rental-housing

Posted by on Jul 24, 2015 in Jim's Take on the Market, Real Estate Investing, The Future | 3 comments