Tag: Real Estate Investing

Homebuying
11/21/07 10:27am

The Clearest Sign of Trouble in the Houston Housing Market

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Housing Data, Houston Data, Price Trends, Real Estate Investing, Real Estate Marketing
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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!

CONTINUE READING THIS STORY

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Buying and Selling
11/19/07 11:52am

Metro Chief Very Excited About Sprawl

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Commercial Real Estate, Development Strategy, Freeways and Toll Roads, Katy, Land Development, Proposed Developments, Real Estate Investing, Sprawl, Transportation
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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!

CONTINUE READING THIS STORY

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Apartments
10/29/07 12:30pm

Demolition Watch: Greenbriar Chateau Apartments

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Boulevard Oaks, Buying and Selling, Commercial Real Estate, Financing, Real Estate Investing
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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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Financing
10/23/07 8:07am

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

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Real Estate Investing
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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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Commercial Real Estate
10/22/07 8:02am

Big! Lots for Small! Fry

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For Sale by Owner, Real Estate Investing, Shopping Centers, Sprawl, Strip Centers
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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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Buying and Selling
09/28/07 8:41am

The 1031 Exchange Buyer Advantage

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Commercial Real Estate, Financing, Office Buildings, Real Estate Investing
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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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Financing
09/12/07 11:14am

IRA Mortgage Investors: Hoping for Foreclosures?

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Foreclosures, Mortgages, Real Estate Investing
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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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Financing
06/19/07 11:24am

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

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Fraud
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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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