May 26

The Mayor and head of DNS discuss the “zombie” housing problem in  this Milwaukee Journal article.  The article is interesting, the comments even more so.

“City officials define [zombie housing] a bit more precisely: when title to a property remains with someone who believes he or she has lost the property as a result of foreclosure. “

“Both Dahlberg and Barrett say they don’t understand why banks allow the problem to proliferate. “

While zombie housing seems to be a new phenomena to the city officials, we discussed it since at least July 12, 2009.

https://groups.yahoo.com/neo/groups/ApartmentAssoc/conversations/messages/11702

https://groups.yahoo.com/neo/groups/ApartmentAssoc/conversations/messages/11828

http://justalandlord.com/?s=zombie

At that time I predicted the ordinances that had just been passed to make lenders more accountable would actually result in many more properties abandoned by both the owner and the lender.

The city also makes matters worse through reinspection fees.  I’m sure they think this is a cash cow, but it is a further cause of the abandonment problem.  On the front end these fees force marginal owners into failure and on the back end they make it less likely the lender or owner can sell the property.  Banks that control foreclosures in Milwaukee have adopted a policy of not paying taxes until the property sells.  When they receive offers they run title prior to accepting offers. Too many fees and they let the property revert to the city.

This was the case with two singles on one lot that I made an offer on a couple of years ago.  Bank ran title and rejected the offer due to reinspection fees (the front house was owner occupied, there was a sewer back up that they could not afford to fix and suddenly they were being billed $375 a month)   The city then foreclosed on taxes, the property was stripped of metal, druggies used it as a dry place to get high and finally they started the one house on fire, that in turned burned down a neighboring house, taking it off the tax roll too.  All along the city has had to mow the yard, shovel the walks, reboard it as it kept getting broken in.

Here is a post on how the city’s ordinances, no matter how well intended or logical on the surface, are actually contributing to the problem.

May 11

Wolf Richter writes:

 

Steps in the Fed, and trillions of dollars get printed and handed to Wall Street, and asset prices become airborne, and Wall Street jumps into the housing market and buys up hundreds of thousands of vacant single-family homes, drives up prices, and armed with free money, shoves aside first-time buyers and others who would actually live in these homes, and turned them instead into rental units. Now in over 1,000 cities, prices are, or soon will be, as high as they were at the peak of the last housing bubble.

The difference? Last time, all that craziness was called a “bubble” with hindsight. This time, it’s called a “housing recovery.”

If you are planning to buy now and catch the rising market you should read this and think 2006…

Apr 30

 

Bloomberg reports on a case in CA where  Deutsche Bank is being sued for evicting the tenant of a foreclosure in violation of the federal Protecting Tenants at Foreclosure Act of 2009

Rothschild, legal director at the Western Center on Law and Poverty, said the January ruling established that tenants can take owners who acquire properties through foreclosure to state court for violating protections Congress afforded renters under the 2009 Protecting Tenants Against Foreclosure Act. The law doesn’t give renters the right to sue in federal court.

An attorney for the United Trustees Association states:

The overly broad decision may lead to a proliferation in lawsuits for breach of the lease imposed upon purchasers at a foreclosure sale. With no prior knowledge, a purchaser at a foreclosure sale now may be burdened with a lease with unlimited combinations of potential contractual obligations ranging from unilateral renewal rights to mandatory substantial improvements to the property.

All of this could make buying an occupied or recently vacated unit a dicey situation.

Jun 17

Two articles caught my attention today.  The first from the Calculated Risk blog:

As more inventory comes on the market, buyer urgency will wane and price increases will slow and even decline seasonally in many areas this winter. IMO this will be another step towards a more normal housing market.

The second from the Wall Street Journal:

Although rates are rising, fears that this will derail the housing recovery are overblown. There is still plenty of demand for the housing market’s limited offerings before the word “bubble” should enter the discussion

 

 

 

Jan 05

 Real Estate Ideas for 2013

What can be done collectively to improve our businesses, save costs or generate additional revenue?

On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on.  I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.

This post is the forth of my more in depth notes on the ideas.  I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com


Part Four: 

Group purchase of a distressed block or two

There has been this wild idea floating around in my head for years. Long time AASEW member Carl Baryl and I spoke of this many times during the early 90’s. Acquiring a distressed block with a group of active owners and turn it around for fun and profit.

So how would this work?

Choose a very small geo area of Milwaukee. Think something on the terms of both sides of the street for a block or two maybe three at the max. It should be depressed, as in make Detroit look like a nice place to live, depressed. Apologizes to Detroit, but many people know of Detroit’s challenges and fewer of similar challenges of Milwaukee.

Yes, unfortunately, there are many areas like this in Milwaukee and the numbers are increasing as foreclosures work their way through the system.

Oh, you read in the Journal that the foreclosure mess is just about behind us?  They may be correct in a overview of SE Wisconsin, but a walk though the neighborhoods will tell a different story in the City of Milwaukee There are actually more, not less properties sitting vacant and obviously abandoned in these areas than when I first wrote about walking the neighborhoods.

A highly visible face block would be best – something that faces the freeway, a school, a major road, shopping area etc.

Then assemble a group of investors to buy the available, preferably vacant & abandoned, properties in the identified area.

This could be done either as a partnership with all owners having an interest in all properties or as an alternative owners would each have individual ownership of their properties, with a homeowner association type mechanism in place as governing bylaws of the project. I am thinking of one standard screening criteria, perhaps a lawn service and other such bundled services.

Partner with a neighborhood group to provide services to the owner occupants. All aspects – crime, trash, maintenance, throw in some owner occupant foreclosure prevention and even some social help.

Then we work our butts off to turn that or those blocks around. Use this as a best practices testbed, putting private, neighborhood and public efforts and resources into a turn around.

Personally, for me to participate the project would have to be on the Southside (8th and 12th Aldermanic Districts) as that is where my interest lay.  Others may see areas of the Northside that would offer the biggest bang for the buck.

Choosing the correct first block is very important. There are five potential areas I have in mind today. It would take a bit of work to make a final selection. Considerations would be how many bank and city owned properties ( more the better ) how many rental owners we know and their potential level of cooperation. (again more the better ). My preference would be a neighborhood I currently have a presence in, of course, because there would be an advantage for me. However three of the five target areas I’ve selected are not on blocks that we own houses.

Pretty simple eigh? Of course not.

Doable? Absolutely. Worth the effort? Either yes, or don’t bother doing it. This should result in increase rents, occupancy percentages and resale values.

The outline

Organize the existing property owners; everyone – owner occupants, rentals and commercial properties.  Then go at it and buy everything else that is available; vacant land, city owned and banks that are holding etc.

We pitch the idea based on benefit rather than strong arm people to participate. If our initial selection doesn’t result in willing participants we move on to block selection two.

We have our neighborhood group partner find and apply every grant, resource available for both rental owners and the owner occupants in the target area.

The realities of the project

This project would require a lot of work and certainly a bunch of cash as you are not going to typically finance something like this. The City of Milwaukee, despite gaining a benefit from the efforts, will not make it easy.  Having bought a bunch of foreclosures over the past couple of years and putting a bunch of effort into making them solid rentals I can attest to some of the pettiness that goes on.

There are success stories in a similar vien.

Bill Doyle of Milwaukee Lead fame did it with northern Bayview.  On a larger scale, Tony Goldman in SOHO NY, South Beach and Wynwood, Miami, FL.

 


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