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Tuesday, June 12, 2007

Tax relief may work against real estate vultures

Tax relief may work against real estate vultures

mhaggman@MiamiHerald.com

For two years Magdiel Guillemi watched the condominium towers go up across South Florida and waited for his chance to buy in. Now the 25-year-old aluminum company executive thinks his time has arrived.

With the housing market stuck in slow motion, more and more condos nearing completion, and many jittery preconstruction buyers wanting out as closing day approaches, Guillemi's betting he'll be able to buy at steep discounts. Then he hopes to sell for a profit, just as flippers did when the market was on the way up a few years ago.

Call it the contrarian view of real estate investing. While the market appears stone-cold to many individual buyers and sellers, others -- the so-called vulture investors -- see opportunity.

Guillemi says he's already finding bargains but he wants to act fast: The Florida Legislature starts a special session this week to consider lowering property taxes -- a move he thinks could spur renewed buying activity and endanger the low-cost deals he's scouting.

''If they cut taxes that will motivate individual buyers,'' said Guillemi, who plans to start buying in the next few weeks. ``And I want to get in before they do. I don't want to be left with the crumbs.''

Large investor groups and hedge funds are also scouring the region for bulk deals at bargain prices.

At the height of the 2001-2005 housing boom, it seemed everyone was getting into real estate, hoping for fat profits. But a separate class of speculators sat out during those frenetic days, betting the market would be bid to unsustainable heights yet still hold long-term value.

Their gambit: Buy on the dip and ride the market up.

The question for these investors is when to buy. Many observers say the market hasn't yet hit bottom, others say the time is right.

But for the vulture investors, who have pooled cash and waited for their big chance to score from a market correction, this week's special session brings a twist. It's spurring some like Guillemi to accelerate their plans and others are hoping legislators don't accomplish much.

Peter Zalewski, a former journalist who a year ago started condovultures.com -- a company that helps buyers find bargains in a downturn, said he fears decisive action in Tallahassee will provide a jolt that could potentially undermine his plans.

''There is an urgency that is being created by the legislative issue,'' Zalewski said. ``If they resolve the property tax issue, the market will get some medical attention. We don't want that, we want to bleed out the market some more.''

Of course, few will feel badly if vulture investors' prospects evaporate. Home builders, brokers and many homeowners hope Zalewski's thinking that a cut in property taxes will give the region's anemic housing market a shot in the arm is right. The Latin Builders Association and Builders Association of South Florida are both pressuring leaders in Tallahassee for sharp cuts.

But not everyone is convinced a property tax cut in Tallahassee will cure the housing markets ills. Among the other issues the market must work through are:

• A giant oversupply of homes: more than 76,000 were listed for sale in April in Broward and Miami-Dade counties compared to some 50,000 a year ago. Over the next 18 months about 20,000 new condo units are expected to come onto the market in Miami-Dade County alone, possibly spiking unsold inventory as those units are put back on the market for resale.

• Insurance rates have not come down. Condo associations and individual homeowners are still grappling with hefty premiums.

BIG BUYERS

Analyst Jack McCabe, who is advising large vulture investors on bulk deals, said big investment groups aren't as worried about tax rates as individuals -- saying such costs can be spread out across big buyers' portfolios.

Last week McCabe announced the completion of the first market-corrected deal he's worked on since the slowdown began. While short on specifics, McCabe said a multibillion-dollar private investment fund bought a substantial block of newly built condominiums from a publicly-held home builder in Florida. His investor client, he said, was chosen because of its ``ability to close quickly in an all-cash transaction, noncontingent on financing.''

Currently, he said the market is too sick to recover from a tax reduction alone. A big property tax cut may reignite buying now, he said, but would effectively create a false bottom.

''Meaningful reduction will slow down the correction cycle but the correction is still inevitable,'' said the Deerfield Beach analyst, who has warned for some time about too much construction going up too fast. ''The market is so sick it will take a while to cure this,'' he said. ``This is not a head cold, it is more like pneumonia.''

But such doomsayers also believe the market is poised for brighter days ahead. McCabe says that barring calamitous hurricanes, the market will have righted itself by 2010 -- just as the first baby boomers turn 65.

''No one is more bullish on Florida long-term than me,'' McCabe said.

It's such thinking that prompted corporate raider Carl Icahn to announce last week that he would continue efforts to buy Bonita Springs-based WCI Communities. And Zalewski spent last week showing property in South Florida and Central Florida to two investor groups, one from Michigan and another from Colorado.

DEEP DISCOUNT

Guillemi, meanwhile, is focusing on a unit at the Brickell on the River condo in Miami. He said the owner bought it for $341,000 and is trying to sell for $280,000.

''The seller has two other properties under foreclosure and is having trouble making mortgage payments,'' said Guillemi, operations director of FDS Aluminum in Pompano Beach. ``I'm trying to pick it up for $260,000.''

So with an eye on the special session in Tallahassee, he's ready to move now. ''With tax reform you will have two things pushing people into the market: lower prices and lower taxes,'' Guillemi said. ``I'm not going to wait. Of course, you have to be smart about it. There is a lot out there and you can't get married to the first girl you see.''

 
Posted at 2:41:31 PM
 
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Real Estate News
Updated: Tuesday, January 15, 2019


What You Dont Know About Real Estate Could Cost You

Itrsquo;s what you donrsquo;t know about real estate that could cost younbsp;when buying or selling.

bull; First-time buyers usually havenrsquo;t seen enough houses or condominium units to fully understand where real estate value lies.

They may not have been caretaker of a house and, therefore, donrsquo;t notice subtle signs of damage, sloppy construction, poor maintenance, or worn-out elements. Those who have visited friendsrsquo; houses will ra>

bull; First-time-in-a-longtime buyers may not realize that they are out of touch with advances in materials, modern design approaches, or evolving life>

This can lead them to under- or over-value new houses or condominium units.nbsp;For example, quartz kitchen countersnbsp;have gained popularity over marble and granite for several reasons. Open-concept design is preferred by those with small children or those who live to entertain, but not by those who are untidy, >

bull; First-time sellers who base resale value on their total costnbsp;of acquiring and maintaining real estate ownership, plus expectednbsp;profit, have missed the point.

Emotions, including pride of ownership, can get in the way and prove expensive. Sellers may believe that their cost of buying and transforming the property into their home, plus money spent on maintenance and upgrades, plus profit and the cost of selling, including commission, add up to their actual ldquo;bottom linerdquo; for resale value. Problems arise for sellers when this must-have sale price is not in line with market value, which is value determined by the real estate market - current buyers and previous sales. When the seller expects more than market value, this ldquo;over-priced listingrdquo; may take longer to sell, may eventually sell for less, or may fail to find a buyer. First-time sellers may lack experience evaluating how their property compares with local property values and appraising their property from the perspective of current active buyers.

Value determination and marketing - or communicating action-enticing value to potential buyers - represent two different professional real estate selling-skill sets, neither of which are usually possessed by sellers.

bull; Empty-nester and downsizing sellers may decide, in theory, that smaller and cheaper are the characteristics they desire in their next property, but some discover itrsquo;s a different story in practice.

When faced with the actual move to a smaller house in a cheaper location, they may find the mental leap too great. Downsizing is often wrongly considered me>

Many faced with wanting a change find they lack the real estate knowledge and planning expertise to make the shift gracefully acceptable and financially successfully.

bull; Newbie real estate investors may believe that crunching numbers to determine how much profit they want and what it will cost to achieve this profit is all it takes.

Creating an offer to purchase, which entices a property owner to sell for the buyerrsquo;s desired price, requires special professional expertise. Then, offering the property for profit-generating rent that will attract qualified prospective renters involves a different set of professional skills. Many new investors possess neither skill set, which are both common in real estate professionals.

The emotional element regarding what sellers will sell for and what renters will pay to live in the resulting investment property can influence financial gain and bottom-line projections. Skill and experience is essential to investors taking all this into account to create profit.

What you donrsquo;t know about property ownership and real estate transactions can cost you when buying or selling, wherever you fit in on the list of buyers and sellers above. Do you have experience with contracts, financing, interior design, renovation, conflict resolutionhellip;? Then, therersquo;s marketing - both using it to persuade others and personally fending off its effects when yoursquo;re making decisions.

What you donrsquo;t know about real estate, real estate professionals do. They are committed to studying and keeping up to date on what matters. Most have spent years on the job perfecting their expertise and learning local markets.

Would you surgically operate on yourself or drill your own teeth? Itrsquo;s that extreme an issue when you donrsquo;t engage available professional skill and knowledge to work for and with you.

Concentrate on learning what the right real estate professional cannbsp;help you achieve.

Not the least of which is discovering what you donrsquo;t know about buying and selling. When you think, my goal is ldquo;buy my dream homerdquo; or ldquo;sell at my dream price,rdquo; understand what will have to happen and what you must do to achieve the desired outcome.

If you donrsquo;t know where to start, no problem.

Real estate professionals are trained to know what needs to be done for prospects and clients every day, every offer, every transactionhellip;. Do you know what yoursquo;ll gain with professional help? How determined are you to achieve real estate goals and exceed your expectations, as quickly and hassle-free as possible?

To continue learning about buying and selling real estate, checkout more Realty Times articles by PJ Wadenbsp;The Catalyst:

bull; 4 "Big Regrets" to Avoid When Buying a Homenbsp;
bull; Trends Cost Sellers Money
bull; Ready to Talk About Real Estate?


> Full Story

5 Reasons to Buy a Fixer-Upper Instead of a Perfect Place

.It costs less

ldquo;Fixer-uppers list for an average of 8 below market value,rdquo; said LearnVest. If yoursquo;re on a budget or are being priced out in your market, this is a way to get a literal foot in the door. How much depends greatly on the location. ldquo;Fixer-uppers in Phoenix have the smallest cash discount, saving buyers just 1,000 off list price. But you can save a lot of money in expensive markets like San Francisco, where fixer-uppers are discounted an average of 10mdash;giving homebuyers 54,000 in upfront savings for renovations on the median home.rdquo;

You may be able to finance your renovation

One of the major drawbacks of buying a home that needs to be fixed up is having to come up with the cashmdash;especially after yoursquo;ve just put so much money into your down payment and closing costs. There are a few different types of loans that package the mortgage with funds for renovations, and they often come as a surprise to buyers who have only focused on FHA and 30-year conventional loans.

ldquo;Whether you need a new roof or your kitchen is outdated, there is a mortgage thatrsquo;s right for your fixer-upper,rdquo; said Bankrate. Fannie Maersquo;s Home>

It gives you the opportunity to build value

With an already-updated home, ldquo;If a seller has redecorated or improved the whole place, that seller is reaping the benefit,rdquo; said Forbes. ldquo;If the homes value has been raised, the buyer is paying for it. Also, consider this reality: A seller who re-does a whole house in order to sell is not likely putting in the highest-quality materials. Theyre cutting costs to maximize profit. But if you buy a fixer-upper, you might be able to secure an undervalued property, improve it and get the benefit of the extra equity. Its a core real estate concept. If you can find the right property, this could mean thousands of dollars almost immediately.rdquo;

You can do renovations over time

There may be a few things you canrsquo;t live with in a fixer-upper, like the grungy carpet and cruddy plumbing fixtures, but no one other than design shows says your place has to be perfect the day you move in. Taking your time to make updates as yoursquo;re able gives you the opportunity to save money and recover from all the expenses of buying the home and moving in.

It allows you to put your stamp on it

When you buy a home that was lived in and fixed up by someone else, it reflects their taste and >

ldquo;One of the primary reasons people buy fixer-upper properties is for the opportunity to make the space their own,rdquo; said Green Residential. ldquo;Instead of purchasing a home in which someone else designed the layout, chose the materials, and dictated where different elements were placed, you can buy a basic structure and then take charge. Itrsquo;s like building your own home without having to go through the lengthy process of drawing plans and constructing it from the ground up.rdquo;


> Full Story

Whats the Real Impact of the Government Shutdown on Real Estate?

ldquo;An NAR survey of 2,211 members found 75 percent had no impact to their contract signings or closings. However, 11 percent did report an impact on current clients and 11 percent on potential clients,rdquo; said the National Association of Realtors. Among those impacted by the shutdown, 17 percent had a closing delay because of a USDA loan.rdquo;

The most impacted areas of the market surround:

Buyer uncertainty

Consumer confidence is always a topic of conversation when it comes to real estate, and with rising interest rates and a roller coaster stock market, a government shutdown only makes the issues that much stickier. According to the NAR study, ldquo;The most common impact, at 25 percent, was the buyer decided not to buy due to general economic uncertainty, though they were not a federal government employee.rdquo;

Loan approvals/Closing delays

Whether or not your loan and/or closing is impacted by the government shutdown largely depends on the type of loan you are getting. ldquo;If youre getting a Federal Housing Administration or Department of Veterans Affairs loan, its likely you can expect delays in the underwriting process, and its possible your closing date will be pushed back as well,rdquo; said the Dallas Morning News.

HUD has said that while new FHA loans will be endorsed during the shutdown, ldquo;Some delays with FHA processing may occur due to short staffing.rdquo; In addition, new Home Equity Conversion Mortgages HECM, more commonly referred to as reverse mortgages, are on hold for now.

While the White House has insisted that the Internal Revenue Service IRS process tax refunds during the shutdown, itrsquo;s made no such mandate in regards to helping consumers who need info because theyrsquo;re buying a home. That means that buyers wonrsquo;t be able to requests tax return transcripts, which may be required by lenders, thereby delaying the purchasing process.


> Full Story



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