Jul 06
A member writes on ApartmentAssoc@YahooGroups:

I’m curious how many of our members are aggresively buying right now.  I just did a quick check of Milwaukee neighborhoods I already own in and there are lots of decent looking properties out there cheap.

You are correct, there are a lot of very cheap properties on the market.  The lowest prices I’ve seen in my career (1977 to date)  Money is also the cheapest I’ve ever seen. Vacancies are very low as well.  The best time ever to buy… perhaps not.
So why aren’t these things flying off the market into the hands of new owners as soon as they are listed?
There are a few reasons.
  1. If you buy a foreclosure DNS (building inspection) will make you get an occupancy permit.  Somehow this always  turns into a painfully expensive experience, with you having to do a bunch of things that result in really limited benefit to anyone.  We had one occupancy permit that the plumbing inspector made us replace the 1 1/2 drains with 2″.  These were clearly original or near original pipes as they were steel with cast iron fittings.  So $2200 later the tenant can drain their bathtub 10 seconds faster?
  2. Another issue for most owners is that it is a cash market today.  Many banks will not even accept an offer that includes any financing contingency.  If you can’t show you have all the funds in the bank the day you make the offer, oh well take a walk.This is all over the nation.We bought a commercial property in Florida last month.  Original asking was 450,000, which was lowered after six months to $395,000. In the month prior to us purchasing the bank had an offer of $375,000 with the bank financing 70%, another offer of $350,000 with a 14 day third party finance contingency also based on a 70% loan.  Both offers were rejected.  We paid $210,000.  So the bank could have gotten $165,000 more if they financed or $140,000 more had they waited 14 days for someone to get a loan commitment.
  3. Rental housing is harder than its ever been. This, despite some of the best occupancy rates in the last 25 years and as a result, rents that are finally rising a bit. Why?
    Cost just keep spiraling out of control.  I was talking to a good friend today who has been in the business for twenty years.  Neither he nor I could figure out how any owners that have much of a mortgage could survive today.Look at a water bill on a duplex with NO USAGE.  Today, it is 131.75 for three months.  Add some sewer and water and your quickly up to $300 or $400.

    Let’s say you pay $40,000 for the house.  You’ll be taxed as though the house was worth $100,000-$140,000 or more.  I bought one in 2009 for $20,000.  The place was listed with a broker .  I never met the seller prior to closing and have never seen him since.    I appealed the $112,000 assessment.  They lowered it to $104,000, claiming it was not an arm’s length transaction.

    Maintenance costs have gone up as well.  For example a couple of years ago you replaced one or two smoke detectors at $5 a piece.  Today they have to be the more expensive hush units and you have to add a CO detector or two or three.  But these are one time costs… right.  On an average unit prep we have to replace far more than half the detectors.

  4. “Smart” economist are say the bottom in our market still is six months to a year away.

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