- This topic has 9 replies, 5 voices, and was last updated 15 years, 6 months ago by
TemekuT.
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September 29, 2007 at 5:08 PM #10450
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September 29, 2007 at 8:30 PM #86390
temeculaguy
ParticipantI don’t understand the rent back for 1 year thing, does lennar want to be the landlord? A managment company want’s you to be the landlord? What are the specifics.
As far as them being a good buy, if you wanted to live there and you worked in town I guess they would be. The biggest problem is the location, I’m not sure if it is in the City of Murrieta, they annexed some land but check the school district too, it may be in the Menifee district because these are way out there, that hits the value if it isn’t in Murrieta’s school district. Yahoo maps doesn’t show the streets they list in the directions yet but it’s right on the border, everything North of Los Alamos is not in Murrieta but may still have a Murrieta zip code, you lose 5-10% value for being unincorporated and another 10% if you are out of the school district. As a rental I don’t think it would pencil out, the 390k one won’t command 2k in rent (they might tell you it will but it won’t), I’m sure the larger ones get a worse ratio so just analyze the cheapest. French Valley is the newest part of the Temecula Valley and has the most foreclosures (usually in the top 25 of the country). The biggest drawback with those is the location. They require the use of the 215 or winchester road for many miles, which is a nightmare because of all the houses out there. I can literally get to Escondido from South Temecula faster than I can get to French Valley during commuting hours. For people who work South of here, that is the least desirable place and can double their drive time from the North County. I have a friend who works in Vista who moved out there from temecula and complains that he doubled his commute time, the roads just haven’t caught up and with the slowdown in R/E they may be delayed further, if it’s unicorporated, forget about it. I wish all of the negatives weren’t true because when I was looking for a rental there were great deals and tons for rent out there and lots of repos, I just don’t want to live there and will pay more to live further South, I imagine other renters and buyers feel the same way. I would also be very wary of investing in Murrieta with any company that wants to handle your investment property and shows you how you can make money (I hope you didn’t hear about this in church), there are few hundred investors still licking their wounds from a similar investment scanario.
Lastly I think the whole valley is a bad investment for a landlord if you need to count on 2k or more in rent. At that price, renters can just buy their own and I see the rental stock in the 1500 range as being tight with hundreds of choices at the 2k price. Rents decrease as you move North and East and inventory rises, these houses are in the North East.
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September 29, 2007 at 10:24 PM #86397
HLS
ParticipantTemec,
I think what he is asking about is when the builders sell their models up front, and rent them back from the owner until complex is sold. Helps their cash flow if they can find a victim.In an up market, they don’t want to do this! They keep raising prices in new phases etc…so they can get more at the end..
In this market, you buy the model now, and they rent back from you until they sell out.
That is why they want 6 month options.A friend of mine has a rental like this in Las Vegas.
The original lease was 1 year, I think that he is on year 3 now, but I don’t think the house is worth what he paid anymore. They haven’t sold out yet.Sometimes you can get a great lot and the upgrades etc, but there is wear and tear of people walking through, possibly for several years.
I’m sure that they repair or clean up any mess, and the landscaping is in too.
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September 29, 2007 at 11:44 PM #86401Participant
My Bad, I should have figured it out based on three models per tract, I thought those were the starting prices per plan. In my defense that concept is so silly I couldn’t have figured that out on my own, that’s like buying futures. Quick, strike the price now before it goes up. Let’s see, verge of the worst market collapse in history and in the worst place of the hardest hit region, ooh sign me up. I hope they buy you dinner and flowers before they &^%$ you.
You know what I think, they are preparing to fold the tract. In the early nineties a bunch of developers shut down their tracts half built, packed up and left. They had obligations to build improvements like parks and common areas that they hadn’t done. In Temecula, the city seized the models, auctioned off the furniture and then auctioned off the houses, then with the proceeds they built the things that were promised in the development plan so as to not burden the taxpayers or leave the vacant lot the builder was supposed to make into a park or whatever the deal was. They also did this to keep HOA’s from eating it on 1/3 built defunct tracts and banked the proceeds so the HOA could survive and pay for the pool untl the market turned and a fill in development could finish it out. Seems to me the builders are setting up a possible exit, like someone preparing for bankruptcy or has a big IRS lein leases their car so it won’t be seized as an asset. If there is one place where will see the first tent folding by the builders it is in French Valley. Something stinks in Denmark.
Who remembers the Temeku hills golf course, they built a brand new gold course and had about a thousand unbuilt lots, then just let the grass die and fenced the whole thing for about 4 years, boy was that a peach to look at. On the plus side, the kids on their BMX bikes think they died and went to heaven.
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September 30, 2007 at 12:21 AM #86404
Bugs
ParticipantThe sale-leaseback does ease their cash flow, but probably a more significant reason for a builder to do this is it immediately provides a closed sale that will be used in at least the first few appraisals. Appraisers usually use at least one outside sale when appraising new homes, but they would normally weight the inside sale a lot more.
Lennar’s project in Carlsbad (Bressi Ranch) sold the model homes from all 6 of their “neighbohoods” to a group of investors. Some of you may remember that these buyers subsequently tried to sell the model homes off and then when they had trouble getting their price they tried an auction – kind of like DR Horton’s auction this weekend. Lennar’s auction fizzled – no sales. So they went back and marketed them through the MLS again. The last time I looked there were still a couple of these available for sale. Had the market continued to go up these investors might have made a lot of money. Now it looks like they’re going to end up losing a lot of money.
But for Lennar everything worked out great – they got their closed sales and those closed sales were indeed used in most of the appraisals in the initial phases of these neighborhoods.
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September 30, 2007 at 12:28 AM #86405
TemekuT
ParticipantThe DRE requires the developers to post bonds for all the uncompleted common areas. Even if the developer abandons a project, the bonds are in place to complete the common area amenities. I can’t address what you are saying about the city of Temecula seizing the model homes and auctioning the contents but I do feel confident that the DRE (as well as any city I’ve worked with), required bonds for completion of the improvements. How in the world would the city be able to seize private property except through an eminent domain action? Perhaps there was a clause in the City’s agreement with the developer that in the event of default of the building process the City was entitled to the proceeds from tangible assets of the developer?
In Temeku Hills the reason for the boarded up land was a bankruptcy by the original builder. McMillin bought the property out of bankruptcy for pennies on the dollar. Corky McMillin was a shrewd businessman. He partnered with UDC Homes for one of the two initial tracts, brought the place back to life, and put his company at the top of local builders. FYI – there were 2 complexes completed before the original developer went BK – an attached home (patio home) complex consisting of very few units, and a manufactured housing for seniors complex, also very small. I think those complexes have separate HOA’s and had had acrimonious relationships with the Temeku Hills Master HOA in the past.
It is common practice for the developers to sell and then lease back the models. There may be some tax advantages, hence this widespread practice.
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September 30, 2007 at 1:41 AM #86406Participant
It’s likely what I saw was an anomaly, the tract that had the auction that I attended (and the reason was stated on the paperwork and checks were made out to the city) may very well have been because the project was started when it wasn’t incorporated as a city but folded after it was. Perhaps the county didn’t require a bond or returned the bond when the city incorporated or as a young city it hadn’t learned yet, who knows. The timing was pretty close, the tract started somewhere between 1989 and 1991 and the city incorporated in 1989. But thanks for the explanation TemekuT, my fears have been assuaged. Still, buying the model in that tract doesn’t look like a good call, even if it is above board. French Valley is a far cry from Carlsbad and buying the models there went sideways, how would this possibly make sense. You are right about Mcmillan, they cleaned up at Temeku Hills, Morgan Hill, not so much.
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September 30, 2007 at 1:11 PM #86454Participant
O.K., I’m crying “uncle”! You’re right about the Morgan Hill situation. I now can’t believe all the $#%&*@^ flippers that are walking away from their zero down, non-recourse loans. I didn’t want to buy here but couldn’t convince hubby the appreciation train was derailing. He’s now a convert, thanks to Pigginton and other blogsites, but we’re stuck here indefinitely, unless we want to give up >$100k of upgrades paid in cash. I sure wouldn’t touch anything out in French Valley. When a recovery occurs (in the distant future) Temecula will rally quicker than the outlying areas. Hey, you missed the opportunity to buy a single level Pegase Court cul-de-sac flipper REO in the Cristal tract, approx 2400 sq. ft. for $387k. (No worries though, it will be cheaper in 6 months when the next REO of that model comes to market). That Pegase house really burned us, as well as several neighbors, as we all paid between 445k and 475k for the identical non-upgraded house, depending on the phase. But we’re mostly empty nesters on this street and can afford to wait it out. But should we? Or should we just laugh off the $100K and get out of Dodge now?
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September 30, 2007 at 4:14 PM #86467Participant
Sorry Temeku, I forgot who you were, now I remember from a past thread you are the hot mom of Morgan Hill. The way you spell Temeku, I thought you were in Temeku Hills and I only made that comment because Morgan is McMillan’s other master planned community in town. You can and should ride it out but do get a re-assesment of your property taxes at some point, HLS can do it for you for a percentage of the savings if you don’t want the hassle. Morgan is a great place, just got built at the wrong time. When they hit 300 I will probably be shopping it, I just wish they would get annexed into the city and didn’t have such wicked taxes. When the market does recover, Morgan will be among the first areas to recover and since you don’t have an ARM (please say you don’t) then you will be fine sitting tight since that may be you only option since nothing is selling anyway even if you did want out of dodge. If you like it and can afford it, ride it out and avoid the transaction costs, since it is too late to sell high and buy back later, that ship sailed. What’s a 100 grand between friends?
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September 30, 2007 at 10:28 PM #86521Participant
Well, we do own in Temeku Hills…my husband is bullish on Temecula. We unfortunately bought high here in Morgan Hill. No ARM, I’m much too conservative for that. I remember when Redhawk wasn’t annexed; I believe they are annexed now and the taxes have dropped. Hubby doesn’t want to sell here, he believes because of the hospital and all the medical coming along HWY 79, this will be a prime location. I just feel compelled at times to get out of Dodge because I hate wasting money and this place is stalled out for now, so I try to calculate whether it’s better to lose the $ if I can reinvest it somewhere else when the market hits bottom. We actually have a smallish loan here, so there’s lots of equity in the house, just like all the empty nesters around here.
Hot mom, that’s funny, although my 30 year old tells me that. Her latest comment is that I’m better preserved than anyone else…still no Subaru, but the blond hair has been 86’d.
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