I got to bed before 10pm last night which was good. I had been unable to sleep the last few nights and had been up until 1pm or later. A couple of the things that were stressing me out are drawing out to their conclusions. I'm not happy with the conclusions, but I'm happy to wrap up the onerous situations. The only way to deal with bad news is head on.
Speaking of 'bad news' there were articles on record foreclosures and the problems in the commercial real estate market in the last week. I was talking with a broker about the coming wave of REO's that would hit the market in CA.
In the article on foreclosures, it talks about people walking away from homes that are upside-down on the equity. It also mentions that banks are not finishing the foreclosure procedures in down markets. I can attest to that.
I was in the sauna at the gym the other day and talk turned to the economy and, of course, real estate, when one of the guys admitted to not having made a payment in about a year and a half. We're in the Inland Empire, a market that has lost as much as 75% of it's equity since the housing market collapse. It's probably better for the banks to leave defaulted "homeowners" in the houses as vacant units often get heavily vandalized.
With all that talk, it seems bleak. But on the upside, if you have the money or can get it(are "well capitalized" in industry jargon) you have the opportunity to buy some bargains out there. Furthermore (I love that word), there is talk of extending the $8000 tax credit AND giving it to any buyer (not just first time home buyers).
Don't think this is just generosity on the part of government. If people are willing to buy property at higher prices (and a tax credit makes this possible) than local governments have higher property tax bases to collect from. This allows the county and state governments to finance more of their own expenses without asking for federal money (they will anyway--what governmental agency ever says it can make do with less money). So we may see more opportunities for investors to get a tax break from buying in a down market.
If you're thinking of transitioning from the residential to the commercial rental market, opportunities are just around the corner. As net income is the best indicator of value of a rental, remember to look for hidden costs. The include local taxes and regulation that take their toll on businesses (your new renters) and high utility costs that you may be responsible for (or upcoming rate changes). As commercial tenants are generally responsible for their own maintenance, you can invest across the country.
6 months ago