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Thursday, April 24, 2008

Foreclosures in the Neighborhood

Bear Creek Meadows, Katy, Texas

A story by Paul Knight in this week’s Houston Press adds a little color to the Houston foreclosure map:

Houston’s 77449 ZIP code, on the northwest side, made the top 100 in the nation for 2007. The area saw rapid growth in the early part of the decade, with retail strip centers and a sea of new homes popping up almost overnight.

“They started developing that area really aggressively,” says Erion Shehaj, a Houston realtor who specializes in foreclosed homes. “Like clockwork…[foreclosures] have been popping up one after another, because they were pushing them to people that couldn’t really afford them in the first place.”

Large signs are now planted along the roadside, advertising housing deals such as “Inventory Clearance!” and “Closeout Specials.”

One subdivision in the area that was hit particularly hard is Bear Creek Meadows. The neighborhood was developed about five years ago, with houses priced in the $120,000 range and marketed to first-time buyers.

Below the fold: More on Bear Creek Meadows, plus a few photos to illustrate Knight’s reporting on foreclosure cleanups.

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Thursday, April 10, 2008

More Repair Work for Vo

Courtyard Apartments, 950 Villa de Matel, Houston

Chronicle reporter Matt Stiles has found two more properties owned by State Rep. Hubert Vo: The Northpoint Apartments, at 74 Lyerly St., just north of the Northpoint Mall; and the Capewood Apartments, at 4335 Aldine Mail Rd., outside city limits.

And, uh, they’re not in great shape:

Tomasa Compean, 58, has lived for 18 years in her one-bedroom unit, where she pays $450 a month and has never received new carpet or paint. White powder bug poison outlines her baseboards, and a leaky faucet has left a large patch of rust and mildew in her tub, which apartment officials have covered only with paint.

“There are a lot of defects in the apartment,” said Compean, speaking in Spanish. She also complained about a lack of security at the complex. “The worst things are the roaches and mice. That’s just too much.”

Carmen Aguilar, whose two-bedroom apartment faces a dusty courtyard next to a swimming pool filled with opaque green water, pointed to a buckled wall and a large, moldy hole above her bathtub.

The Chronicle also found other potential violations at the complex, including an entry gate bent to a 45-degree angle, discarded furniture, masonry damage and busted breezeway lights. Workers could be seen Wednesday making some repairs, a day after the Chronicle asked the city about the property. . . .

Among other potential city violations at three complexes were overflowing Dumpsters, damaged parking lots and an algae-filled swimming pool — all conditions that could prompt criminal fines.

Vo, who has owned the properties for years, took blame for the problems Wednesday, saying he had not done enough to ensure the complexes were maintained. He said he would improve the conditions, pledging personal inspections of individual units, cooperation with city officials and outreach to residents to encourage them to report concerns.

One thing that will help: Vo is apparently a quick study with repair estimates. A year ago, Houston Press reporter Ruth Samuelson spoke to him at Thai Xuan Village near Glenwood Valley, just north of Hobby Airport, after it was threatened with demolition. Mayor White had asked Vo to serve as a liaison between residents of the complex and the mayor’s office:

. . . Vo thinks the community can’t tackle this project; it’s far too big. Vo, who owns several apartment complexes, says he walked the perimeter of Thai Xuan Village when he was there mid-March.

“I believe the structure could be okay, maybe some railings need to be fixed,” he says. “But the face-lift of the property needs to be done.” After a quick examination, he said the project would cost well over $100,000.

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Thursday, April 3, 2008

Hubert Vo’s East End Complex: For Sale!

Courtyard Apartments, 950 Villa de Matel, Houston

A resident of nearby Simms Woods sends us photos of an apartment complex off Wayside Dr. that’s received a number of citations recently . . . but not the good kind:

The citations to the Courtyard Apartments on Villa de Matel allege eight structural and electrical problems, including rotting wood, missing balcony railings, loose boards and broken windows, city officials said. . . .

Tenant Victoria Vargas said that when she moved in a year ago, the management refused to replace the tattered mini-blinds, outdated appliances and worn carpet.

Now, she said in Spanish, she also must contend with leaky ceilings, rats and high energy bills for her $400-a-month unit.

State Rep. Hubert Vo has owned the 241-unit complex at 950 Villa de Matel through a company called Newlink Investment since July of 2002, according to HCAD records.

The mess — and the neglect apparently visited on his tenants, who are clearly not in his district — doesn’t look healthy for Mr. Vo, a Democrat who’s running for re-election this year. But maybe someone can help him out!

A commenter on the Chronicle’s Houston Politics blog passes on a report that Vo bought the Courtyard Apartments for $2.8 million, and notes that they are now available for sale . . . for just $20,332 a unit! That’s only $4.9 million for 7.6 acres of juicy East End Inner Loop property! From the listing brochure:

This property affords a buyer good upside potential thru a moderate/heavy rehab. This community is constructed in a classic garden style design and was built in 1972.

After the jump: more pix of this prime real estate, just steps away from the Gus Wortham Golf Course and ripe for that moderate/heavy rehab! Plus: more Vo East End apartment holdings!

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Thursday, March 20, 2008

Farb Gone: Will the Signs Go Down on Broadway?

Sign at Broadway Square Apartments, north of Hobby Airport, for Harold Farb Apartment Homes

The last of the Harold Farb apartment complexes has been sold. Cypress Real Estate Advisors, an Austin firm, bought the Nob Hill Apartments on North Braeswood and the West Point Apartments on Woodway last December. And Post Investment Group, an LLC out of LA with some NYC backing, just closed on Farb’s Broadway Square Apartments just north of Hobby Airport.

David Beebe, who’s just posted his own account of the southeast-side walking tour he took with John Lomax last month, has a few comments about his stroll along Broadway:

The [trees] throughout this neighborhood are mature and beautiful. They are, for the most part, oaks. This is a big difference between the Harold Farb pioneered Hobby Airport area and the Frank Sharp designed Sharpstown. If [Sharp] had been as pro-active about tree planting his nighborhood would look more like this. The architecture and age is about the same.

. . . and on the Broadway Square Apartments, which Farb built in 1975:

His apartments here on Broadway are still the best looking of the entire area’s- French Victorian style, but without falling off shutters and with better built and ornate wrought iron railings and kempt landscaping.

There’s been no announcement about it, but the iconic signs along Broadway showing a silhouetted Farb wielding what appears to be a roll of blueprints are likely to be replaced. Globe St.’s Amy Wolff Sorter reports that Post Investments is planning a $2.5-million renovation:

Work will begin in two months on the 182-building complex and take 1.5 years to complete, according to Jack R. Ehrman, Post’s acquisitions director. The lion’s share of the tab will be used to replace 90% of the roofs.

Photo of sign at Broadway Square Apartments: David Beebe

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Friday, March 14, 2008

More Surface Deals Surface

From Abc13’s Wayne Dolcefino:

To get the winning hand, it helps to have the luck of the draw. Maybe that’s what Michael Surface has.

In January of 2005, one of his corporations buys an old H-E-B store on Antoine. The appraised value — $1. 2 million.

Two months later, Harris County announces it’s looking for a big building to replace Commissioner Lee’s Annex A in the same neighborhood that Michael Surface now owned his old H-E-B.

Maybe it was just a lucky hand for Mr. Surface. But years earlier, he was the guy in charge of Harris County’s building department.

(Hey, isn’t this the same guy who brought in the proposal to redevelop the Astrodome into a hotel? Good thing he’s outta there, so that deal can go forward!)

. . . tax records show [Surface] sold the [H-E-B] building and land to a corporation called HC5815 for $2.2 million. That corporation, in turn, got the winning hand months later. The head of that corporation was David Blumhardt from Dallas, who we’ve learned got the winning hand in at least nine Harris County real estate deals. His local representative on the Antoine project was the guy whose name we found on a worn out real estate sign — Jason G. Hall, Weston Partners, Ltd.

Where have I heard that name before?

Jason Hall used to work for Michael Surface at Harris County. Now, his real estate operation is located in Michael Surface’s offices.

When Jason Hall worked for the county, one of the projects he evaluated was 2525 Murworth. It’s now the home of Children’s Protective Services, part of a $35 million county real estate deal developed by Michael Surface just months after he left county government.

After the jump: a longer view!

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Tuesday, January 8, 2008

Joel Osteen Townhome Sales Technique: Give and Ye Shall Receive Full Asking Price

Your Best Life Now: 7 Steps to Living at Your Full Potential, by Joel OsteenThere’s more to the story of the Lakewood Church pastor’s amazing house flip: How were Joel and Victoria Osteen able to unload their townhouse in order to buy that house they made so much money on?

Readers of Joel Osteen’s previous book — Your Best Life Now: 7 Steps to Living at Your Full Potential — already know the answer. From page 265:

Victoria and I had been married a few years when we decided that we wanted to sell our townhome and buy a house. We put the townhome on the market for six or eight months, but we never had a serious offer. Hardly anybody looked at it, even though we were praying regularly, asking God to help us sell it.

We really wanted the other house, but we couldn’t afford it until we sold our townhome. Finally, we decided to do more than pray. We needed to sow a special seed in faith, believing for that townhome to sell.

There’s more!

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Thursday, January 3, 2008

Joel Osteen, Deed Restrictions, and the House Flip from Heaven

Joel Osteen’s Become a Better You: 7 Keys to Improving Your Life Every DayLakewood Church’s Joel Osteen, in Become a Better You: 7 Keys to Improving Your Life Everyday, p. 289:

I remember as a young couple, Victoria and I found a home that we really liked. It was a run-down house but on a nice piece of property. And we knew it was for us. In the natural, it didn’t make a lot of sense. We were leaving a beautiful townhome. Yet we knew that’s what God wanted us to do. So we took a step of faith and we bought the run-down house. The day we closed on it, we were standing in the front yard and a Realtor stopped by and offered us much more than we had paid. We thought, “What’s going on?” We didn’t understand it. Come to find out, they were in the process of changing the deed restrictions in the neighborhood. And several years later, we sold that property for twice as much as we paid for it. That was God causing us to be at the right place at the right time.

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Wednesday, November 21, 2007

The Clearest Sign of Trouble in the Houston Housing Market

Map Graphic from HoustonFacts.orgSure, there’s the latest numbers out from the Houston Association of Realtors, showing a continuing decline in home sales in October, an 8 percent upswing in the average number of days homes have sat on the market, and a slight drop in the median home price compared to this time last year.

But the most blatant sign that serious problems in Houston housing have already arrived is the new promotional blitz just unleashed by the Greater Houston Builders Association — telling us all not to panic: Everything’s just rosy in the wonderful world of Houston residential real estate. Hey, everybody back in the water!

The PR push, which includes a blanketing of radio and TV spots in local markets, is designed to reassure nervous would-be buyers that now’s the perfect time to buy a home way out on the latest subdivision frontier, even though lots of scary signs have been suggesting otherwise for quite a few months now. The heart of the homebuilders’ campaign is the ominous-sounding HoustonFacts.org website, which fills Houston homebuyers’ ears with fact-filled, sage advice like this:

If you try to wait and time the market until it hits rock bottom, you are likely to lose out. Just as no one can accurately predict the peaks and valleys of the stock market (name one person who sold their tech portfolio in April of 2000), the same holds true for housing. If you sit on the fence and wait for the absolute best deal, you could end up literally waiting for years. And most likely, your guess on market timing would be wrong. But if you choose to buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation once you become a home owner. Remember, those who purchased homes in the early 1990s during the last big economic and housing downturn came out as big winners.

There’s lots more of this kind of wisdom available on the site, but here’s a special challenge to eagle-eyed Swamplot readers: See if you can find the comparison of a home investment to a stock-market investment on the site that simplifies all those messy calculations by leaving out the cost of monthly mortgage payments and expenses!

Keep reading for a HoustonFacts.org tip on home foundations for the Houston climate!

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Monday, November 19, 2007

Metro Chief Very Excited About Sprawl

Aerial View of Wolff Companies Projects Along I-10

Sure, Metro talks a lot about transportation in this city’s central districts. But a Houston Business Journal profile shows us Harris County Metropolitan Transit Authority Chairman David Wolff is also enthusiastic about Houston’s westward spread:

Many developers are building various types of commercial properties west of Houston and beyond.

The city of Katy, with an estimated population of 205,000, sits square in the path of Houston’s westward growth pattern.

“The whole city is going that way,” Wolff says. “I think Katy is going to be the next Sugar Land.”

He recalls the creation of Park 10, and how much the area has grown over the last three decades.

Says Wolff: “It was just rice fields. That was really the edge of the world then.”

After the jump, the METRO Board Chairman’s exciting projects way out west, plus how to get folks in the “next Sugar Land” to build freeway on- and off-ramps for your developments!

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Monday, October 29, 2007

Demolition Watch: Greenbriar Chateau Apartments

Greenbriar Chateau Apartments, 4100 Greenbriar St., HoustonFirst, they came for Maryland Manor. And then: the Greenbriar Chateau apartments? Just what is happening to the great Mansard apartments of Houston? And what will be next on the chopping block: that birthing place of Bushitude, Chateau Dijon?

No 23-story tower has been proposed for the Greenbriar Chateau site—yet. But think of the stylistic possibilities: a Tuscan shopping center . . . or taller, vaguely turn-of-the-century New York-ish apartments. Sure, it’s more than three-and-a-half acres at the northern edge of Boulevard Oaks, but really, it’s those mansards that have to go.

A local investment group has obtained a $10-million loan to buy the 145-unit Greenbriar Chateau in the near southwest submarket. Given the location, it could end up as a conversion into a higher-density project.

Bammelbelt LP bought the complex, built nearly 40 years ago at 4100 Greenbriar St., a prime infill location within minutes of Rice University, Hermann Park and the Texas Medical Center. Sources familiar with the area say rising land costs for infill sites could prompt similar deals by investors buying aging properties as land plays.

Swamplot readers: is this your home? When you get that little slip in your mailbox, let us know.

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Tuesday, October 23, 2007

How To Get Even More People To Invest in Houston Real Estate

While we’re on the topic of low-minimum real-estate investments, here’s a doozy of an idea for the Houston residential market:

[financial] derivatives that would let people continue to live in their houses, and keep legal ownership to them, without being exposed to fluctuations in the home’s value.

Wanna get out of the real-estate market but don’t want to sell your home? An investor will pay you a monthly fee in return for the profit that may result if your home increases in value. Or pay an investor a monthly fee to ensure that you won’t get hurt if your home drops in value. Or find an investor in each category to offset each other. You keep the title to your home, but you don’t have to worry what the market does.

Neat, huh? The concept is called SwapRent, and it’s the brainchild of Ralph Y. Liu, a financial-derivatives expert and entrepreneur who lives in California.

Sorry, you can’t do it yet:

Liu has tirelessly sought support from lawmakers, regulators, and investment bankers for his concept. He says several bankers have told him they’re interested but don’t want to be the first to move. Says Liu: “Nobody wants to stick their necks out.”

Where would all these new investors come from, to buy up the appreciation potential of Houston homeowners who are willing to swap their upside for a monthly income—or to get cash in return for protecting homes from drops in property values?

A lot of them would probably come from somewhere else: New Houston real-estate investors. Playing our market—from a safe distance.

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Monday, October 22, 2007

Big! Lots for Small! Fry

Firewheel Village Shopping Center, Garland, Texas

Worried that all those big-money real-estate investors have turned the Texas landscape into an unending sprawl of soulless shopping centers populated by the same boring chain stores?

Well, worry no longer! That’s right: Now even small investors can get in on the act!

As of this month, a new company called Nexregen will let even grumpy, middle-income sprawl curmudgeons put their money where their mouth is—by investing in shopping centers, strip malls, and other commercial real estate with as little as $2500.

For now, the options are limited: Nexregen is for Texas investors only, and there’s only one property available so far: the 14.5-acre, 148,870-square-foot Firewheel Village Shopping Center in the sprawling Dallas satellite of Garland, Texas, pictured above.

Yes, it’s a REIT, but you’re investing in a single property at a time. And that’s a pretty small minimum investment. If you think Houstonians aren’t proud enough of their commercial strips—or that there aren’t enough of them—just wait until Nexregen sells property here!

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Friday, September 28, 2007

The 1031 Exchange Buyer Advantage

Parkview II, 333 Cypress Run, Houston

Everyone knows having money gives you a big advantage when you try to make money. But think about the advantage already owning real estate gives you when you’re trying to buy real estate.

Imagine a buyer bidding against a crowd of competitors on a pair of fully-leased West Houston office buildings—say, Parkview I and II:

“They’re not active buyers and they had a specific need with 1031 exchange money,” says Marty Hogan, associate director in Houston for Holliday Fenoglio Fowler LP. Texas is a non-disclosure state so he won’t discuss the sale price of the 333 Cypress Run properties, but local experts confirm that similar class B buildings are trading for $110 per sf to $120 per sf.

Hogan says the assets attracted 10 offers, with a partnership from Greenwich, CT ending up with the deal because it offered a short due diligence and certainty of close. “The buyers also had a large amount of equity and the purchase wasn’t contingent on financing.” Hogan tells GlobeSt.com. “Given the market at this time, they weren’t high-leveraged buyers looking to get 80% to 90% of the purchase price financed so that was appealing.”

Sure, a lot of cash in the transaction is going to be pretty attractive to a seller. But other aspects of 1031 exchange requirements—if the buyer knows that’s what you’re doing—give like-kind-exchange buyers a decided advantage in any market: The seller knows you’ve got time constraints to complete the deal. And that you’ll likely have to pay a lot of taxes if you can’t pull it off. You look like a sure thing.

Of course, if the seller knows that you have no other 1031-exchange options available and the terms of your deal aren’t fully worked out yet, that’s another story.

Photo: Parkview II

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Wednesday, September 12, 2007

IRA Mortgage Investors: Hoping for Foreclosures?

Some individual investors who’ve been using IRA money to invest in mortgages have been cheering as foreclosures have become more common, reports the Wall Street Journal:

No one tracks IRA loan defaults, but experienced individual lenders say it has happened rarely — though they are bracing for an uptick, given the shaky state of the housing market in many areas.

“You don’t want them to pay you,” says Charlie Adams, a Houston investor who has made about 20 mortgage loans through his and his mother’s IRAs in the past 10 years, typically charging 15% interest for one-year loans. “What’s the worst thing that can happen — you wind up owning a house at 70% of its cost?” He lends no more than 70% of a property’s value and charges interest-only payments. More conservative lenders will go no higher than 50%.

With the one foreclosure he’s done, his mother had lent $40,000 to a renovator to refurbish a house worth $85,000. The borrower made 12 months of interest payments, then stopped, and did not make the balloon payment due. Mr. Adams foreclosed on the house, his mother’s IRA spent $14,000 to finish fixing it up, and they sold it in three months for $85,000, he says, adding that he helped his mother’s IRA increase in value to $140,000 from $50,000 in five years.

Great, but you’ll need to make sure you have enough IRA money in reserve to handle this kind of “good fortune”:

For investors, one risk in foreclosing on a house is racking up so many expenses — from legal fees to repair bills — that the IRA runs out of money. If that happens, the IRA owner faces a difficult choice: Get a loan, or close out your IRA and pay any taxes or penalties.

Using a self-directed IRA to fund mortgage or real estate investments can make sense: for a lot of people, an IRA is the largest pool of money available. Self-directed individual-retirement-account companies Entrust, Pensco Trust, and Guidant Financial have seen a dramatic increase in real-estate lending activity within their IRAs, the article reports.

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Tuesday, June 19, 2007

Avoiding Capital Gains Taxes with 1031 Exchanges: How To Check Up on Your Qualified Intermediary

The 1031 Exchange industry grew enormously during the recent nationwide real-estate boom, as unwitting owners of suddenly high-priced real estate discovered that selling their properties would trigger substantial capital-gains tax bills. Real-estate owners hoping to defer capital-gains taxes when they sell their investment properties have regularly turned to firms touting their services as qualified intermediaries to help them get the benefits of the tax-free 1031 exchange.

1031 Exchange accommodators can help investors navigate the somewhat tricky process more flexibly, but the industry is largely unregulated. And now two of them have gone bankrupt or been accused of absconding with funds investors have placed with them between transactions:

Mr. McGhan and his companies allegedly misappropriated more than $95 million of customers’ proceeds to fund other business and personal activities, according to a lawsuit brought earlier this year by several aggrieved investors and now in federal court in Los Angeles.

The lawsuit alleges that Southwest was a Ponzi scheme in which Mr. McGhan allegedly took QI funds belonging to more than 130 clients, in part to finance investments in a company that manufactures silicone-breast implants.

Well, there’s another growth industry. But, says the Wall Street Journal,

a QI can do virtually anything with the funds in its possession, subject to its agreement with the taxpayer. “There isn’t any kind of prohibition in the tax code that says where those dollars can be placed,” says John King, senior vice president at a subsidiary of Fidelity National Financial Inc. in Jacksonville, Fla. that serves as a qualified intermediary.

Misappropriated investments are one thing; presumably the double whammy for investors whose funds have gone missing is that their exchanges will likely fail too, and they’ll end up having to pay a tax bill on gains they no longer have.

Some advice, then:

you must make sure your 1031 intermediary places your money in a segregated account (and “segregated” means only your money is in that account). You should also insist on a method to check on the account yourself to see that your funds stay put.

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