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ParticipantNet loss after considering the holding costs.
ParticipantThis is a whole different animal than residential real estate. If you’re talking about land the thing to remember is that land isn’t worth anything to anyone until somebody is ready to build.
Here are some questions to ask about retail land:
Zoning on the site – and how those zoning controls affect development for that site.
The availability of utilities
Public improvements (streets, sidewalks, traffic signals)
Applicable bonds or assessments to pay for those improvements
Traffic exposure and traffic patterns
Competition (how many other vacant sites nearby)
Pattern/Rate of growth in this area
Type of businesses nearby
Is Wal-Mart coming to town any time soon
Local residential growth patternsReally, trying to figure out vacant land – especially commercial land – involves so many considerations that the average residential investor-type is going to be completely in over their head. It’s still possible to make a buck but it involves a lot more luck and trust in the broker’s opinion. Personally, I wouldn’t recommend it to the average rookie investor-type. Fortunes are won and lost on land deals.
Not to come across as self-serving, but this kind of investment is where it starts to make some economic sense to get an appraisal with a detailed market analysis and highest/best use analysis from a knowledgable commercial appraiser.
ParticipantIt should go without saying that “empowering yourself” does not have to involve abusing your realtor. There’s a big difference between seeking a fair and equitable relationship with the other parties in a transaction and being an ass.
ParticipantTo address your points:
The local governments have building codes to enforce that are intended to develop and maintain health and safety issues as well as other aspects of construction that have an impact on the community. If you think building codes are too restrictive you might go take a look at unregulated areas, like some of the neighborhoods in Tijuana, and see what happens when the comunities don’t enforce standards.
There’s a distinct difference between looking up a sale of a neighboring property to use that information to make a decision or perform an analysis, and looking over our neighbor’s fence to watch them sunbathing in the nude for our personal gratification. Although our society apparently revels in invading the privacy of celebrities and seeing photos of their cellulite and bulging bellies in the tabloids, most civil people will draw the line at openly scrutinizing the contents of the shopper’s basket while standing in line with them at the supermarket. A Japanese family of 4 can live in a 400 SqFt apartment by scrupulously observing personal boundaries. Obviously, we all have our boundaries.
Here’s a rhetorical question: would you approach your neighbor and ask the same question that you’re trying to answer off this database? In the case of sales prices or property attributes, maybe so – I do it all the time when I’m working. In the case of paying their taxes, probably not. If you wouldn’t feel comfortable doing it to their face then how much more socially acceptable should it be when you’re doing it behind their back?
All of this ties back to the purpose of gathering and using the information. If you’re using the information constructively then that’s one thing, if you’re using the information for entertainment purposes then that’s something else.
Just my opinion. Other people can and do disagree.
ParticipantThe appraisers in Phoenix and Tuscon depict a market that’s declining faster than San Diego. Foreclosures going through the roof. If your friend is doing well in that market their powerful wealth building system would probably be even more effective here.
ParticipantIn 1996, before this upswing started, if I had allowed my imagination to run totally wild I would never have guessed that pricing would have gone as high as it has or the extent to which it has influenced our society. Based on the information available at the time it was literally beyond my imagination.
If a person allows their imagination to run just a little wild now about how low it can go and what the consequences would be as a result of that decline, they could come up with some truly scary scenarios.
If I am as wrong about the results of this decline as I was about the results of the increase, I’d almost be compelled to ask the question if it’s possible to be too bearish on RE at this time.
ParticipantI wish I could say their loss is a foregone conclusion, but all bets are off when there’s a court and a plaintiff who claims to have been victimized by the government.
Presumably they were informed up front that the property rights they were buying were restricted – and they obviously agreed to those restrictions in exchange for getting the reduced price. This government subsidy was intended to provide for their shelter and stability, not to enable them to profit from the flipping lotto.
ParticipantThe operative phrase in your post relating to condos is that they are “the lower priced alternative”. I agree that condos will get hurt first and hardest, but that doesn’t mean it’s a completely separate market of it’s own and the houses won’t follow suit in order to compete with this alternative.
Water seeks its own level. I think the downtown condos are a fantastic bargain – just not at these prices or anything close to them. If they are actually priced to be the reasonable alternative more people will buy.
Letsee. Market rents for a 2bd condo downtown are in the $2,000 range. Add in a 25% ownership premium to pay for the right to enjoy the tax break and the possibility of eventual profit on resale and we can justify paying up to $2,500/month to cover the mortgage, taxes, HOA dues and other expenses. As a housing expense this is a reasonable payment for a $100,000 household income or a lower household income who is bringing some equity to the table to reduce the mortgage.
Okay, working backward through iteration and assuming a cheap $300/month HOA fee, $100 in average maintenance/reserves expenses; $300/month for property taxes, that leaves about $1,800/month for the mortgage payment. At a 6% fixed rate mortgage that would service a $300,000 loan on a $330,000 purchase, because unlike many recent buyers, our prudent buyer actually has a 10% down payment and can pay their own closing costs. Obviously, the $330,000 purchase price is about 45% less than our current average listing price of $595,000 for 2bd condos of 1200 SqFt or less.
At this price range, every time the interest rate on the loan increases by 1/2% the amount of the mortgage financed by the $1800 mortgage payment gets reduced by $15,000. Presumably that reduction will be translated directly to the sales price.
So yeah, at $325k or so, a lot of our downtown condo renters probably would consider buying their rental unit to be a no-brainer – assuming they weren’t concerned about the prices continuing downward. AND assuming that rents don’t decline.
ParticipantI don’t know for sure but my impression is that it happens a lot more often in the higher price ranges and is positively rampant in the new home subdivisions. Depending on what other sales are occurring in the area it could possibly be enough to skew the average a little.
ParticipantThere’s almost nothing more frustrating to an appraiser than to painstakingly develop a reasonable appraisal only to see it funded at the higher price – obviously with a different appraisal – by another lender. Even if we have a good relationship with our client, it’s hard for them to see their competition fund the loan and make the commission without asking us why we couldn’t value it the same way.
ParticipantI regret that I’ll not be able to attend because I am teaching an appraisal class that day until 5:30. Sorry.
You’re not missing much anyway. I have no social skills whatsoever. My normal routine is to sit in the corner and drool into my beer.
ParticipantActually, I think wealth is better defined by what you keep than by what you make.
ParticipantIt ain’t just “statistical noise”.
A countywide stablization or slight decline in average prices is more than just “statistical noise” if it’s being compared to the former trend of increases. The number isn’t what’s important here, it is the pace at which the trend has changed from a slowing increase to decrease that the economists should be commenting on. Statistical noise aside, you’ll notice it didn’t even flatten out for any length of tme. It went straight from + to -. Every month, more and more market segments are going negative. As this trend continues the countywide averages will decline at a faster pace until the market psychology takes on its own life and perpetuates itself.
As I’ve said before, the passing of July 1st marks the end of the use of yr2005 sales data comparables in SFR appraisals. Since those sales are now all 6+ months old they can no longer considered recent enough to be relevant except possibly as secondary indicators in markets where no recent sales have occurred. That means that appraisers will be forced to use yr2006 sales even though they’re lower, and the resulting appraised values will decline along with the market’s sale prices.
ParticipantI know that several deals I rejected on behalf of one of my clients for being overappraised ended up being funded at Countrywide at the (over)appraised value.
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