Real Estate Down Turn - Have You Been Hit?

[AroundTheWorld]

Have you been hurt by the downturn?

I haven't seen much impact from the downturn - until recently.

We've got a SFR with 283,000 in equity. We wanted to sell that and put our equity to work in something that will generate cashflow.

NO BUYERS. Market here is dead.

We will be okay - finally decided to just rent it out.... found a tennant over the weekend and rent *almost* covers debt service.

I'm also noticing - generally - that credit is just drying up. We are shopping loans for another self-storage facility. Its a great project... about 50% LTV. Plenty of income to cover debt (1.3) ... some banks have told us... "great project, but we have no money to lend"

 

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[JesseO]

I have noticed many many more homes for sale the last week. The "New Price!" or "Price Reduced!" sign add-ons are very common too. Looks like it might be a good time to buy in a couple more months once people get desperate. There's probably going to be a lot of good deals.

 

[Yankees338]

I guess this is why the foreclosure and pre-foreclosure markets have become popular recently...

And fortunately I haven't been hit. Unfortunately it's because I don't own any real estate (yet...)!

 

[biophase]

Just off the top of my head I'd say I've been hit to the tune of around $220K. Most of it from the Phoenix area and some from Chicago.

 

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[kidgas]

Actually hit very little. Of course in Indiana there was negligible appreciation during the boom so we don't have much busting to do either.

 

[MJ DeMarco]

Luxury homes are somewhat immune to depreciation declines. My house has appreciated $1mm since I bought it 2 yrs ago. Unfortunately, the luxury market isn't immune to foreclosures ... my neighborhood has a few.

 

[ErikV10]

Parents have been holding on the properties we own. Its good that we have renters on all of them so we don't have to worry about paying the bills per month.

Still looking to buy properties being sold really cheap. It will go up again in the future so its good to have a lot of properties to sell when that happens.

 

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[biophase]

Just wanted to state the obvious...

This is why having positive cashflow or at least breakeven cashflow is SO important.

 

[Peter2]

Luxury homes are somewhat immune to depreciation declines. My house has appreciated $1mm since I bought it 2 yrs ago. Unfortunately, the luxury market isn't immune to foreclosures ... my neighborhood has a few.

Here in Florida, the luxury home market has declined a lot in the last couple of years. It is very tough to sell a $5 million+ home. Out of about 20 new construction homes that I looked at in 2001, more than half of them are still empty. That's six years of never having anyone living in the homes.

 

[AroundTheWorld]

Just wanted to state the obvious...

This is why having positive cashflow or at least breakeven cashflow is SO important.

Which leads to the next question.... It's actually the answer!

What can be done to protect yourself before a downturn hits?

What biophase is saying is so true... when you are making an investment, make sure it is something that will still be a good investment in a downturn.

 

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[venom]

Hi


The mood is different. We had an eviction on one of the easier homes to rent. Debated about selling and I am still not sure why we didnt do the lease option. If we had sold we probaly would have had some time on the market and not gotten what we "want" for that house.
Even lots of the people on the rd forum have "no wanters" or they cant afford to carry the properties they have. As with most business it seems they dont have enough funds to pay the bills.
Then of course I keep getting mail from builders that are offereing huge incentives. If something sells I keep wondering what angle to play with that money.
Rob

 

[tbsells]

I've actually been hit pretty hard. My j-o-b is a realtor. Two of my deals that were supposed to close this Friday are not going to due to the lender going out of business. This was not the company and the loan officers I was dealing with but the big lender they were selling the loan to. The money supply has tightened up dramatically in the last 30 days. It's going to get worse because the subprimes are gone, and the ALT A's are close to gone, and the conforming conventional guidelines are really tightening. Everything is being very heavily scrutinized by the underwriters. The standards were way to loose, now they are getting pretty tight. I had two homes of my own on the market for sale and just decided to take them off the market and rent them. My cash position going into winter is going to be weaker than I had hoped. The two sales would have put about $90K in my pocket. I'm thankful they are good positive cash flow, but I was looking forward to having the cash.

 

[klh6686]

I live in houston county, ga which is one of the fastest growing counties in ga. Of the top 2 framing companies in the county, the first has 1 house this month (they usually complete 15+ a month) and the other is looking for jobs. very bad downturn in my area.

 

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[NoMoneyDown]

Yes, to a degree. But one can still make lemonade from the lemons even in this downturn. Inventory is high and demand is low, which any intro economic text book will tell you means prices will fall. Ample time to buy for those with (access to) cash. And, perhaps moreso, an ample opportunity for those who can provide owner financing in the form of a wrap/aitd, cfd, l/o, junior lien, etc. The one thing I've noticed in my market - in just the last year - is rental demand is high. I posted this elsewhere, but I put ONE ad on craigslist last week and have been flooded with calls and emails. I couldn't beg someone to rent the same place for the same amount just a year ago. Makes me wish I hadn't sold one of my properties earlier this summer.

 

[phlgirl]

We have been affected; however, for the most part, in a postive way. We have been in 'buy' mode for the past year+ and intend to stay that way for the next 2-3 years. This foreclosure market has certainly made the dealflow more plentiful. You are able to pick up homes for 50-70 cents on the dollar and due to the increase in the rental pools (as previously stated), able to rent them fairly easily, in oder to obtain a postive cash flow position.

The part that is getting tricky is the financing. With the banks experiencing large numbers of defaults, they are severely tightening the lending strings. So there are deals galore but you have to find someone willing to give you a 70-80% LTV loan on an investment property, with no seasoning requirements. Regardless of your credit score, as a non-employee, this becomes difficult to do. Difficult, but not impossible... and I love a good challenge : )

 

[FT1]

Here in Michigan, we have the worst economy and real estate market in the country. Reportedly we're the only state that has experienced no growth for 3 consecutive years.

 

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[tbsells]

Here in Florida, the luxury home market has declined a lot in the last couple of years. It is very tough to sell a $5 million+ home. Out of about 20 new construction homes that I looked at in 2001, more than half of them are still empty. That's six years of never having anyone living in the homes.

Wow! Obviously, thats catastrophic for somebody. Are they REO's now or did the builder just have extremely deep pockets? Whats the status now? Can you buy a $5M house for $3M? But, if it hasn't sold in 6 years it never was a $5M house anyway. I guess what I'm asking is what is the status of these homes now? Are they scattered about or several in one subdivision? Whats happening in that marketplace? Are the builders or owners trying to dump them or just trying to wait it out?

 

[SteveO]

The real estate downturn is not really an accurate statement. I know that you are aware of the current state of the apartment and commercial markets.

It is the individually bought and sold homes that are struggling. The exception being the ones that are purchased as rentals and have positive cashflow.

The apartment market has had a recent small speedbump. Lots of homes became available as rentals during the past year which pulled some tenants out of the market. The result was higher vacancy in some markets. This is a very temporary issue though as the prognosis for rentals is rosy for many locations.

I have not seen any real significant drop in values. Buyers are not purchasing based on market proformas as much as they were for a while but that is likely a result of the recent softening.

 

[Peter2]

Wow! Obviously, thats catastrophic for somebody. Are they REO's now or did the builder just have extremely deep pockets? Whats the status now? Can you buy a $5M house for $3M? But, if it hasn't sold in 6 years it never was a $5M house anyway. I guess what I'm asking is what is the status of these homes now? Are they scattered about or several in one subdivision? Whats happening in that marketplace? Are the builders or owners trying to dump them or just trying to wait it out?

Most of the homes are still owned by the builders. The homes are spread out in several different south Florida locations. Most of the owners are just waiting it out it looks like. Many of them have raised the asking price over the years, and only a few have lowered the price.

 

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[tbsells]

Raising the price when something doesn't sell baffles me. I have seen it done and I'm always like "yeah right." Of all the reasons I've seen for a property not to sell, too cheap is not on the list.

 

[Atufal]

Hi all,

New here and a full-time wholesaler, short sale negotiator in Chicago.

I specialize in middle-class properties and I've seen a big change in my ability to find buyers. It used to be that most of the short sales that I did were on homes that needed a lot of work and I was forced to sell them to rehabbers at a big discount.

Now,of the 10 or so deals on my board, I would say that 8-9 of them are retail-ready. and I've been ecstatic because retail buyers expect little to no discount. But the buyers are drying up fast because the financing is disappearing.

Frustrating.

The good news though is that since I am basically negotiating my price with banks I can always simply offer less. And less. And, if need be, less.

This means that there is always the possibilty of a deal.

 

[Adam]

I think that everyone has been hit, directly and indirectly. Look how much income potential has been lost in the residential market. And of course, this has affected consumer confidence, which spills over to retail, etc.

 

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[Diane Kennedy]

We've personally experienced it in our Phoenix properties in two ways:

(1) We're sitting on way too much equity in our Paradise Valley home. Normally, we'd refinance and pull cash out. But the luxury home market financing is dried up right now. I think it'll be a short-term issue, though, and it'll come back.

(2) Our properties are all rented up for the first time in 6 months!!

We were ready for the downturn and went to cash early. Now we're just waiting to see when the next move in real estate will be.