Need-to-know No. 1: The fine print associated with the type of auction you're attending. If you plan to score your bargain-basement unit at the foreclosure auction on the steps of the county courthouse, consult with a local real estate attorney and make sure you conduct an exhaustive title search before you make your bid. It's possible to purchase one of these properties and still have to contend with other liens still on the property, like second (or third) mortgages, back property taxes and Homeowners Association (HOA) dues unpaid by the former owner.
Under the law in nearly half of the states, when you buy a place at the foreclosure auction, the former owner has anywhere from six months to a year after the auction to "redeem" their rights to the property, meaning they have the legal right to buy it back from you.
If you're buying the property at an auction of REO properties (Real Estate Owned by the bank), make sure you read 100% of the terms and conditions of the auction. Many auctions will allow you to get a property inspection -- go figure -- so you should. They will also often allow you to use a mortgage to finance your purchase, which the courthouse foreclosure auctions do not.
However, most of these REO auctions do take a non-refundable cash deposit from the auction winner, and do add some sort of "buyer's premium" on top of the winning bid -- some as high as 5%. That extra cash can make it tougher to get positive cash flow out of the place.
Get clear on the fine print before you buy at any property auction.
Need-to-know No. 2: Your numbers. Many a wanna-be investor thinks, "Hey -- it's a $50,000 condo. If I get $1,000 in rent -- I'll be making cash hand-over-fist." And there ends their cash flow analysis. Seasoned investors know, though, that there are always more line items to the story. If you're thinking about investing in even the cheapest of cheap condos, you still need to create a written cash flow projection, or pro forma, to see how feasible it is that the investment will actually pay off.
If you plan to finance your investment with a mortgage, you must factor in the mortgage payment, mortgage insurance (if you put less than 20% down), and closing costs. And, even if you are able to buy a cheap condo with cash, you still need to take into account the costs of HOA dues, property taxes, landlord's insurance, any utilities landlords pay in your neck of the woods (like water and gas), a property manager and repairs.
You should also include an allowance for long-term maintenance, possible special assessments by the HOA and vacancies -- every landlord deals with occasional months where no rental payments come in. And you should definitely have a chat with your tax adviser about the deductions you should factor in, and the income tax you may incur on the rental income.
Then, offset that -- on paper -- by the average rents being received by other landlords in the complex or the area. If you're only making $3.75 per month in the projections, you might decide that other investments are more sensible.
Need-to-know No. 3: Whether the HOA and the complex are healthy. Sacramento, Calif., real estate agent Stacey Wilson thought she'd scored, big-time, when she invested in a two-bedroom, two-and-a-half bath condo for $40,000 in September of 2009, especially since the place had gone for $175,000 in 2007. After closing, though, it quickly dawned on Wilson that the complex and the HOA were both broke.
"Take a look around and see whether things are in working order," Wilson advises prospective condo investors. "When things are broken, find out how long they've been broken." Wilson's complex has two pools and a sauna, but "none of them works -- and they haven't worked in years."
Also, Wilson's unit is in an HOA riddled with a sky-high rate of delinquent dues, so it can't afford to repair the pools and sauna, nor does it have the cash to replace the wood shake roofs on all the buildings. "We only have a couple of years of roof life left, and now the hazard insurance company is threatening to drop our coverage, because they see the wood roof as a fire hazard," Wilson explains. "It's really important to read every page of the HOA disclosures you get during escrow, and make sure they're solvent. If the HOA is broke, it can create a domino effect of problems."
Need-to-know No. 4: The landlord-tenant laws and restrictions of your city or HOA. Many urban areas, in particular, have rent-control and eviction-control laws that limit your ability to raise the rent, or to evict a tenant without having a particularly strong reason for doing so -- sometimes even requiring landlords to pay tenants to move out.
And because the percentage of owner-occupied units impacts the ability of an HOA's members to resell and refinance their homes (many banks won't offer mortgages in complexes with fewer than 75% of the units being owner-occupied), many HOAs put a cap on how many units can be rented out. If you're planning to buy the condo as a rental property, it behooves you to know how feasible and how desirable it is to be a landlord in that complex and town before you buy.
Need-to-know No. 5: Where goes the neighborhood. Wilson's foray into dirt-cheap condo investing turned into a true adventure when circumstances led to her moving into the property she thought she'd never live in. Turned out, the nighttime goings-on in her new neighborhood were unlike anything she ever expected from her exclusively daytime experiences in the area. Before investing in a discount condo, Wilson advises, act like someone house hunting for their personal residence, and "go by the place at night and on the weekends. You'd be surprised at how different a place can be at night."
The fact that a condo is so inexpensive might actually be a signal that the neighborhood may not be one you want to spend much time in, even as a landlord. Wilson says, with 20/20 hindsight, "If it's really cheap, it's probably not in the best place."
Recently I went to visit an acquaintance who was trashing out his own condo. There were hinges to be pried out of doorways and appliances to take for eBay. The house had become inert, a non-house: trapped somewhere between the building's association who wanted the fees owed to pay for the building's roof and walls and the like, the people who wanted the property taxes to pay for things like schools and street lights and roads and the people who were in charge of collecting (or more likely not collecting) the mortgage for whomever actually owned the mortgage debt (at the end of that chain, quite possibly you and me). These various claimants made the house largely worthless—more worthless than the latest assessment, which was… well, a comparable apartment nearby had recently sold for $120,000. It had been listed at $325,000 in May, 2009. That $120,000 sale price was not much higher than that apartment's last sale—twenty years ago.
Anyway, it was somewhat likely that, after the investment of some work on this apartment that was being trashed out, such as providing it with new door hinges and appliances, the association would find a renter unafraid of a possibly surprising ending to his rental agreement term in exchange for a below-market rent. That would be a best outcome.
The others would most likely find no purchase for their attempts to collect (the owner was protected by bankruptcy), and certainly the bank had little incentive to collect the mortgage, although their claims on the title would likely make finding a purchaser difficult.
One of the few chairs remaining in the near-vacant condo was occupied by someone on the other side, as it were. Someone not in bankruptcy, for one thing. This person had recently made a $200,000 offer on two-bedroom apartment in a nice part of town. (Needless to say, this town was not New York City.)
But when he had gone to get a mortgage, the bank had balked, because that apartment now assessed at half that value, and so now his current offer for the two-bedroom was at something like $78,000, having come up from something like $65,000 or $72,000. That offer number was jiggling and that title too was somewhat not entirely not cloudy, because that condo association was trying to get a bit of the sale money for past unpaid maintenance under the old owner, which seems, if logical, a bit short-sighted of the association's best interests. They ran the risk of receiving zero dollars instead of some dollars, by dragging the potential new owner into someone else's debt.
But then, we're pretty much all subject to someone else's debt these days, even those of us who rent. Renters are shielded from what is happening with a property, except when they receive a stray envelope addressed to their landlords, or the records pop up online—and the record-keeping systems, when I look up mortgages and sales online, seem to me to be bogged down and very tardy. I imagine the one or two municipal employees in each town in America with the responsibility of making these things public crouched in some little cave, with a stack of depressing white and red and yellow paper towering over their little desks. (Really, it's probably all done by computers. With near- or off-shored labor—somewhere in Utah or Israel.)
In any event, there it was: the magical $78,000 two-bedroom apartment. The steal of a lifetime. The great American get-ahead.
I bring this up in part because this Sunday, at the Brooklyn Book Festival, there is a panel at noon which includes Naomi Klein and Kurt Andersen and Jordan Flaherty and also Paul Reyes. His new book, Exiles in Eden—some of which is in the August issue of Harper's—is an account of going to work for his father, who has for some time now been a trasher-outer of abandoned and foreclosed homes. In the book, Reyes follows the trail of breadcrumbs of the people who've abandoned or been evicted from their houses to the foreclosure auctions, and along the way meets people like the housing advocates who've installed squatters in vacant properties.
(The panel is slotted against "Me… In The World," which stars Sam Lipsyte, and a panel called "Pop Life: Music, Memory, and America’s Coming of Age," with Ta-Nehisi Coates, which may be more appealing and relaxing and better-attended, but then we all have to make difficult choices in these times.)
Reyes did the first reading from his book the other week and something odd happened. He did not get author-friendly questions about the precious process of writing his book. Instead, a long discussion ensued among the audience members about the financial system and the housing market. In the audience were brokers and bankers and homeowners and renters. A mass of anecdotage and experience and theory was shared. It was something like an impromptu consciousness-raising session, very thorough, and when the audience left, everyone had had time to sift through his and her experiences with the state of our financial system and to incorporate some fresh input.
"The audience reaction was exactly what I'd hoped for," Reyes wrote to me the other day. "I'm certainly happy to stand up there and blather for twenty minutes, but I'd much rather have an intense discussion about this issue and hear what people have been through and what their ideas are."
Although he'll be taking this conversation to the Times' Opinionator blog's Living Rooms section soon, he does not have at this time many in-person readings scheduled; author reading tours are not booked by publishers much these days.
"I'm trying to work the promotion of the book into a split personality tour of sorts–between the narrative journalist and housing wonk," Reyes wrote. "If all goes well, I'll drop in on university classes in the daytime, then hit the bookstores at night. I'll wear a different pair of glasses for each role, of course."
Next week, on the 14th, Reyes will be reading as well at the Enoch Pratt Library in Baltimore. Perhaps you'd like him to visit your fine local bookstore, classroom or community center. His email address is on his website.
Meg Whitman's Housekeeper -- 'Explosive' Allegations | TMZ.com
The housekeeper and Allred will hold a news conference today in Gloria's office at 11 AM PT, "to tell how she suffered as a long-time, Latina household employee in Meg Whitman's home." We're told the housekeeper will be filing a legal ...
Small Business <b>News</b>: Social Media Survival Guide
Blogs, Facebook, Twitter, LinkedIn. These are only a few of the more common tools we think of when we hear the term social media. To grapple with this brand new.
Social <b>News</b> Startup Ongo Raises $12 Million From Gannett, NYTCo <b>...</b>
Ongo, a news sharing site currently in stealth mode, has raised $12 million from a trio of major newspaper publishers, USA Today reported. It wasn't known if there were other investors besides USAT parent Gannett (NYSE: GCI), ...
bench craft company rip off
benchcraft company scam
Meg Whitman's Housekeeper -- 'Explosive' Allegations | TMZ.com
The housekeeper and Allred will hold a news conference today in Gloria's office at 11 AM PT, "to tell how she suffered as a long-time, Latina household employee in Meg Whitman's home." We're told the housekeeper will be filing a legal ...
Small Business <b>News</b>: Social Media Survival Guide
Blogs, Facebook, Twitter, LinkedIn. These are only a few of the more common tools we think of when we hear the term social media. To grapple with this brand new.
Social <b>News</b> Startup Ongo Raises $12 Million From Gannett, NYTCo <b>...</b>
Ongo, a news sharing site currently in stealth mode, has raised $12 million from a trio of major newspaper publishers, USA Today reported. It wasn't known if there were other investors besides USAT parent Gannett (NYSE: GCI), ...
benchcraft company scam bench craft company rip off
Need-to-know No. 1: The fine print associated with the type of auction you're attending. If you plan to score your bargain-basement unit at the foreclosure auction on the steps of the county courthouse, consult with a local real estate attorney and make sure you conduct an exhaustive title search before you make your bid. It's possible to purchase one of these properties and still have to contend with other liens still on the property, like second (or third) mortgages, back property taxes and Homeowners Association (HOA) dues unpaid by the former owner.
Under the law in nearly half of the states, when you buy a place at the foreclosure auction, the former owner has anywhere from six months to a year after the auction to "redeem" their rights to the property, meaning they have the legal right to buy it back from you.
If you're buying the property at an auction of REO properties (Real Estate Owned by the bank), make sure you read 100% of the terms and conditions of the auction. Many auctions will allow you to get a property inspection -- go figure -- so you should. They will also often allow you to use a mortgage to finance your purchase, which the courthouse foreclosure auctions do not.
However, most of these REO auctions do take a non-refundable cash deposit from the auction winner, and do add some sort of "buyer's premium" on top of the winning bid -- some as high as 5%. That extra cash can make it tougher to get positive cash flow out of the place.
Get clear on the fine print before you buy at any property auction.
Need-to-know No. 2: Your numbers. Many a wanna-be investor thinks, "Hey -- it's a $50,000 condo. If I get $1,000 in rent -- I'll be making cash hand-over-fist." And there ends their cash flow analysis. Seasoned investors know, though, that there are always more line items to the story. If you're thinking about investing in even the cheapest of cheap condos, you still need to create a written cash flow projection, or pro forma, to see how feasible it is that the investment will actually pay off.
If you plan to finance your investment with a mortgage, you must factor in the mortgage payment, mortgage insurance (if you put less than 20% down), and closing costs. And, even if you are able to buy a cheap condo with cash, you still need to take into account the costs of HOA dues, property taxes, landlord's insurance, any utilities landlords pay in your neck of the woods (like water and gas), a property manager and repairs.
You should also include an allowance for long-term maintenance, possible special assessments by the HOA and vacancies -- every landlord deals with occasional months where no rental payments come in. And you should definitely have a chat with your tax adviser about the deductions you should factor in, and the income tax you may incur on the rental income.
Then, offset that -- on paper -- by the average rents being received by other landlords in the complex or the area. If you're only making $3.75 per month in the projections, you might decide that other investments are more sensible.
Need-to-know No. 3: Whether the HOA and the complex are healthy. Sacramento, Calif., real estate agent Stacey Wilson thought she'd scored, big-time, when she invested in a two-bedroom, two-and-a-half bath condo for $40,000 in September of 2009, especially since the place had gone for $175,000 in 2007. After closing, though, it quickly dawned on Wilson that the complex and the HOA were both broke.
"Take a look around and see whether things are in working order," Wilson advises prospective condo investors. "When things are broken, find out how long they've been broken." Wilson's complex has two pools and a sauna, but "none of them works -- and they haven't worked in years."
Also, Wilson's unit is in an HOA riddled with a sky-high rate of delinquent dues, so it can't afford to repair the pools and sauna, nor does it have the cash to replace the wood shake roofs on all the buildings. "We only have a couple of years of roof life left, and now the hazard insurance company is threatening to drop our coverage, because they see the wood roof as a fire hazard," Wilson explains. "It's really important to read every page of the HOA disclosures you get during escrow, and make sure they're solvent. If the HOA is broke, it can create a domino effect of problems."
Need-to-know No. 4: The landlord-tenant laws and restrictions of your city or HOA. Many urban areas, in particular, have rent-control and eviction-control laws that limit your ability to raise the rent, or to evict a tenant without having a particularly strong reason for doing so -- sometimes even requiring landlords to pay tenants to move out.
And because the percentage of owner-occupied units impacts the ability of an HOA's members to resell and refinance their homes (many banks won't offer mortgages in complexes with fewer than 75% of the units being owner-occupied), many HOAs put a cap on how many units can be rented out. If you're planning to buy the condo as a rental property, it behooves you to know how feasible and how desirable it is to be a landlord in that complex and town before you buy.
Need-to-know No. 5: Where goes the neighborhood. Wilson's foray into dirt-cheap condo investing turned into a true adventure when circumstances led to her moving into the property she thought she'd never live in. Turned out, the nighttime goings-on in her new neighborhood were unlike anything she ever expected from her exclusively daytime experiences in the area. Before investing in a discount condo, Wilson advises, act like someone house hunting for their personal residence, and "go by the place at night and on the weekends. You'd be surprised at how different a place can be at night."
The fact that a condo is so inexpensive might actually be a signal that the neighborhood may not be one you want to spend much time in, even as a landlord. Wilson says, with 20/20 hindsight, "If it's really cheap, it's probably not in the best place."
Recently I went to visit an acquaintance who was trashing out his own condo. There were hinges to be pried out of doorways and appliances to take for eBay. The house had become inert, a non-house: trapped somewhere between the building's association who wanted the fees owed to pay for the building's roof and walls and the like, the people who wanted the property taxes to pay for things like schools and street lights and roads and the people who were in charge of collecting (or more likely not collecting) the mortgage for whomever actually owned the mortgage debt (at the end of that chain, quite possibly you and me). These various claimants made the house largely worthless—more worthless than the latest assessment, which was… well, a comparable apartment nearby had recently sold for $120,000. It had been listed at $325,000 in May, 2009. That $120,000 sale price was not much higher than that apartment's last sale—twenty years ago.
Anyway, it was somewhat likely that, after the investment of some work on this apartment that was being trashed out, such as providing it with new door hinges and appliances, the association would find a renter unafraid of a possibly surprising ending to his rental agreement term in exchange for a below-market rent. That would be a best outcome.
The others would most likely find no purchase for their attempts to collect (the owner was protected by bankruptcy), and certainly the bank had little incentive to collect the mortgage, although their claims on the title would likely make finding a purchaser difficult.
One of the few chairs remaining in the near-vacant condo was occupied by someone on the other side, as it were. Someone not in bankruptcy, for one thing. This person had recently made a $200,000 offer on two-bedroom apartment in a nice part of town. (Needless to say, this town was not New York City.)
But when he had gone to get a mortgage, the bank had balked, because that apartment now assessed at half that value, and so now his current offer for the two-bedroom was at something like $78,000, having come up from something like $65,000 or $72,000. That offer number was jiggling and that title too was somewhat not entirely not cloudy, because that condo association was trying to get a bit of the sale money for past unpaid maintenance under the old owner, which seems, if logical, a bit short-sighted of the association's best interests. They ran the risk of receiving zero dollars instead of some dollars, by dragging the potential new owner into someone else's debt.
But then, we're pretty much all subject to someone else's debt these days, even those of us who rent. Renters are shielded from what is happening with a property, except when they receive a stray envelope addressed to their landlords, or the records pop up online—and the record-keeping systems, when I look up mortgages and sales online, seem to me to be bogged down and very tardy. I imagine the one or two municipal employees in each town in America with the responsibility of making these things public crouched in some little cave, with a stack of depressing white and red and yellow paper towering over their little desks. (Really, it's probably all done by computers. With near- or off-shored labor—somewhere in Utah or Israel.)
In any event, there it was: the magical $78,000 two-bedroom apartment. The steal of a lifetime. The great American get-ahead.
I bring this up in part because this Sunday, at the Brooklyn Book Festival, there is a panel at noon which includes Naomi Klein and Kurt Andersen and Jordan Flaherty and also Paul Reyes. His new book, Exiles in Eden—some of which is in the August issue of Harper's—is an account of going to work for his father, who has for some time now been a trasher-outer of abandoned and foreclosed homes. In the book, Reyes follows the trail of breadcrumbs of the people who've abandoned or been evicted from their houses to the foreclosure auctions, and along the way meets people like the housing advocates who've installed squatters in vacant properties.
(The panel is slotted against "Me… In The World," which stars Sam Lipsyte, and a panel called "Pop Life: Music, Memory, and America’s Coming of Age," with Ta-Nehisi Coates, which may be more appealing and relaxing and better-attended, but then we all have to make difficult choices in these times.)
Reyes did the first reading from his book the other week and something odd happened. He did not get author-friendly questions about the precious process of writing his book. Instead, a long discussion ensued among the audience members about the financial system and the housing market. In the audience were brokers and bankers and homeowners and renters. A mass of anecdotage and experience and theory was shared. It was something like an impromptu consciousness-raising session, very thorough, and when the audience left, everyone had had time to sift through his and her experiences with the state of our financial system and to incorporate some fresh input.
"The audience reaction was exactly what I'd hoped for," Reyes wrote to me the other day. "I'm certainly happy to stand up there and blather for twenty minutes, but I'd much rather have an intense discussion about this issue and hear what people have been through and what their ideas are."
Although he'll be taking this conversation to the Times' Opinionator blog's Living Rooms section soon, he does not have at this time many in-person readings scheduled; author reading tours are not booked by publishers much these days.
"I'm trying to work the promotion of the book into a split personality tour of sorts–between the narrative journalist and housing wonk," Reyes wrote. "If all goes well, I'll drop in on university classes in the daytime, then hit the bookstores at night. I'll wear a different pair of glasses for each role, of course."
Next week, on the 14th, Reyes will be reading as well at the Enoch Pratt Library in Baltimore. Perhaps you'd like him to visit your fine local bookstore, classroom or community center. His email address is on his website.
bench craft company rip off
Meg Whitman's Housekeeper -- 'Explosive' Allegations | TMZ.com
The housekeeper and Allred will hold a news conference today in Gloria's office at 11 AM PT, "to tell how she suffered as a long-time, Latina household employee in Meg Whitman's home." We're told the housekeeper will be filing a legal ...
Small Business <b>News</b>: Social Media Survival Guide
Blogs, Facebook, Twitter, LinkedIn. These are only a few of the more common tools we think of when we hear the term social media. To grapple with this brand new.
Social <b>News</b> Startup Ongo Raises $12 Million From Gannett, NYTCo <b>...</b>
Ongo, a news sharing site currently in stealth mode, has raised $12 million from a trio of major newspaper publishers, USA Today reported. It wasn't known if there were other investors besides USAT parent Gannett (NYSE: GCI), ...
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Meg Whitman's Housekeeper -- 'Explosive' Allegations | TMZ.com
The housekeeper and Allred will hold a news conference today in Gloria's office at 11 AM PT, "to tell how she suffered as a long-time, Latina household employee in Meg Whitman's home." We're told the housekeeper will be filing a legal ...
Small Business <b>News</b>: Social Media Survival Guide
Blogs, Facebook, Twitter, LinkedIn. These are only a few of the more common tools we think of when we hear the term social media. To grapple with this brand new.
Social <b>News</b> Startup Ongo Raises $12 Million From Gannett, NYTCo <b>...</b>
Ongo, a news sharing site currently in stealth mode, has raised $12 million from a trio of major newspaper publishers, USA Today reported. It wasn't known if there were other investors besides USAT parent Gannett (NYSE: GCI), ...
benchcraft company scam bench craft company rip off
Meg Whitman's Housekeeper -- 'Explosive' Allegations | TMZ.com
The housekeeper and Allred will hold a news conference today in Gloria's office at 11 AM PT, "to tell how she suffered as a long-time, Latina household employee in Meg Whitman's home." We're told the housekeeper will be filing a legal ...
Small Business <b>News</b>: Social Media Survival Guide
Blogs, Facebook, Twitter, LinkedIn. These are only a few of the more common tools we think of when we hear the term social media. To grapple with this brand new.
Social <b>News</b> Startup Ongo Raises $12 Million From Gannett, NYTCo <b>...</b>
Ongo, a news sharing site currently in stealth mode, has raised $12 million from a trio of major newspaper publishers, USA Today reported. It wasn't known if there were other investors besides USAT parent Gannett (NYSE: GCI), ...
bench craft company rip off
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