Real Estate Journal Online

In Arizona, small business owners and homeowners alike are “buying time” on their property taxes by simply opting out of paying, reports Coconino County Treasurer Bonny Lynn[1]. In this Arizona county, the number of tax liens for sale this January is fully double the number just three years ago in 2007 before the worst of the bust hit the state. Lynn believes that this is just another product of the state’s struggling economy, but Dharmesh Vora, president of the Vora Financial Group in Coconino, believes that many businesses and homeowners may view a failure to pay property taxes on time “essentially as a small loan with a low interest rate that they don’t need to apply for.” Since tax liens have much more lenient guidelines when it comes to redemption than do federal income taxes, for example, they may be viewed as a lesser of two evils.

Arizona is a tax lien state, which means that when tax lien investors bid on the debts, they are bidding on the debt itself rather than on a property that has already been foreclosed[2]. The state sets the interest rate on the lien at 16 percent, but most liens are “bid down” to a lower interest rate – last year, around nine percent. After three years, if the lien has not been redeemed, the owner of the debt can foreclose on the property. If Vora is correct that most property owners are only opting to not pay temporarily, then the odds of a foreclosure in this state on a tax lien might decrease even further than they have already – particularly on liens with lower interest rates. However, since “robbing Peter to pay Paul” often backfires, it could mean that Arizona, already a “hardest hit” state in the housing crisis, could be an ideal place for tax lien investors to focus in the future.

Does the situation in Coconino attract you to Arizona tax liens or would you steer clear?

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[1] http://www.istockanalyst.com/article/viewiStockNews/articleid/4849117

[2] http://www.arizonataxliens.com/tax-lien-faqs.php

Thanks to “slower-than-expected job and population growth and a bigger glut of home foreclosures than expected,” experts at the Urban Land Institute Arizona conference last week pushed metropolitan Phoenix’s housing recovery out another year. Now, the latest forecasts indicate that “the Phoenix area won’t recover to pre-boom levels until 2015[1]. In 2009, the group predicted a recovery by 2012, and in 2010 the forecast was for 2014.

The analysts determined that the housing recovery will remain slow until “enough new jobs are created to attract tens of thousands of new residents annually to the region again.” As is the case throughout the country, high unemployment remains, in Phoenix, a dominant factor in the struggling real estate market[2]. Furthermore, experts at the conference came to the consensus that the area is probably only about halfway through its “foreclosure problem,” which means that if current trends continue, nearly 300,000 houses in the Phoenix area of Arizona alone could ultimately be repossessed by lenders.

The conference’s theme this year echoed concerns, with the think tank focusing on the mantra “It’s all about jobs.” Gadi Kaufmann, a managing director at a Washington, D.C. real estate consulting firm, stated the issue very simply: “No jobs, no housing market recovery.” The median price of homes in the area has fallen more than $50,000 since 2003, and home prices are not expected to rise this year. However, said Kaufmann, they could start climbing by “five to seven percent a year starting in 2012.”

Based on these predictions, while the situation is dire for Phoenix area homeowners, the time is ripe for real estate investors to start looking at this area for good deals and growth potential. Are you currently investing in Arizona real estate? What is your strategy?

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[1] http://www.kswt.com/Global/story.asp?S=13936869

[2] http://www.azcentral.com/arizonarepublic/news/articles/2011/01/28/20110128phoenix-housing-market-recovery-struggles.html

In spite of ongoing foreclosure moratoria and other administrative delays that you might expect to keep homeowners – even the distressed ones – in possession of their homes for longer periods of time, U.S. homeownership rates hit a 13-year low at the end of 2010[1]. While some analysts believed that homeownership might actually rise slightly in the wake of the robo-signer fiascos that threatened to stall many lenders’ foreclosures indefinitely, the Census Bureau reported this month that homeownership fell another 0.4 percent in the final quarter of 2010, bringing homeownership rates to a point not seen since before the turn of the century.

Not surprisingly, rental vacancies have also seen a sharp decline in recent months as homeowners either willingly or unwillingly are compelled to find places other than their own homes to stay. In fact, nationwide, rental vacancy rates are currently at 9.4 percent of available units, which “represents the biggest quarterly decline in rental vacancies…since the [Census] Bureau began tracking the data.” 35-44 year-olds are the most likely to relinquish their homeownership at this time, and the western states have the lowest homeownership rates with an average of 61 percent.

Some economists think that all of these signs point to the housing market coming “full circle” since current homeownership and rental statistics are back at 1998 levels[2]. Do you think that this means that the housing market is slogging its way toward a recovery, or do you think that rentals are the place to invest because our market is going to shift toward rental properties in the future?

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[1] http://community.nasdaq.com/News/2011-01/home-ownership-lowest-in-13-years.aspx?storyid=55520

[2] http://www.economist.com/blogs/freeexchange/2011/01/housing_markets_0

In California, like most other places in the country right now, builders and developers are hurting for work. That makes 2010’s 46 percent increase over 2009 in new permits for single- and multifamily homes in Ventura County something to get cautiously excited about[1]. And when you factor in the fact that multifamily home construction increased in that county from 173 to 398 from 2009 to 2010, even if you had hoped for a “more robust recovery” as did Mike Winn, the California Building Industry Association (CBIA)’s president and CEO, you have to admit to feeling at least a little optimistic.

“It’s good to see the increase in the number of permits issued,” said Winn, calling the increase a “modest” one. Overall, multifamily housing permits were up 78 percent from the year prior, so the main concern is that permits for single-family dwellings remain so low. However, overall, the entire area is experiencing an increase in permit volume over 2009, considered the low point by many analysts, so even thought permits may not have returned to the original volumes, it still is, overall, a good sign for the economy since construction is a key source of employment and a good sign for housing as well.

Are you investing in new development at this time?

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[1] http://www.thecamarilloacorn.com/news/2011-01-28/Community/Housing_permits_up_46_percent_since_2009.html

A county in Georgia is considering adding another factor to property tax collection and to the imposition of property tax liens: rain. In Rockdale County, the board of commissioners is awaiting further information on the proposed idea of adding stormwater collection fees to the list of things that can be placed as liens on properties if left unpaid[1]. Currently, the fees are very difficult to collect from property owners, many of whom “deride it as a ‘rain tax’” or simply move away without paying. Currently, the county has no recourse when this happens.

Stormwater fees are fees assessed property owners based on the amount of “impervious surface” on their properties. Basically, if water runs off it, then that surface is taxed, generally in Rockdale County for a sum around $40. The fees help support building, repairing and maintaining “stormwater infrastructure,” or storm drains, culverts and pipelines. Currently, the board of commissioners is concerned that making stormwater fees like city water bills in that they can be tacked on to property tax liens or simply placed as liens against a property by themselves and eventually, if left unpaid, sold at auction to a bidder who must try to collect the lien themselves, then has the option of foreclosure, could create a larger spending outlay than the situation warrants. Based on some calculations, it could cost $250 to collect the original $40 fee.

However, the county is not ruling the option out, but simply waiting for more information. As more municipal budgets suffer with falling property values leading to lower property taxes and property owners simply failing to pay, this type of additional lien on a home could become more popular as a way to enforce and increase collections. As a tax lien investor, do you support this type of addition or do you prefer to keep property tax liens simple?

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[1]http://www.rockdalecitizen.com/news/headlines/County_defers__on_tax_liens_for_stormwater_fees_114618394.html

Tax lien investors know that the holder of a mortgage on a tax-lien compromised property can be a friend or a foe. If you are hoping to have your lien redeemed, then a mortgage holder is a friend. After all, they would probably rather pay off your tax lien – with interest and penalties of course – to avoid losing their larger investment in the property. On the other hand, if you are hoping to foreclose on the property, a lender holding a large mortgage can be bad news since they will likely prefer to take a loss on the tax lien and foreclose themselves.

If you want to know ahead of time what the debt situation is on a property, you can easily check out the situation at the county courthouse. Liens on properties are matters of public record, meaning that you can simply contact your county recorder or city clerk to find out where a property stands. Generally, the more mortgages on a property, the less likely that all those lenders will opt not to pay off the lien. This may mean that a property is more attractive to you because as the holder of the primary lien – the tax lien – you are in a position to simply pay off that amount, and then foreclose on the property. On the other hand, if you are hoping to have your lien redeemed before foreclosure is necessary, you might want to take a look at properties that have only a tax lien or a tax lien plus a few smaller issues so that you are more likely to get your money from the mortgage company if the property owner does not pay up. Checking out the lien status of a property can be a huge help when you are determining what properties will work best for your personal tax lien investing strategy.

How do you identify prime targets for your tax lien investing?

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Talk about teamwork: when Tim Hardaway, former star of the NBA team the Miami Heat, ran into trouble and ended up with a hefty tax lien on his property, his former team bailed him out[1]. Hardaway faced the loss of everything, including his mansion in Miami which is currently work $2.5 million and has a pool and basketball court that have been customized to show the Heat Logo. His former team stepped up, purchasing the home and enabling Hardaway to remain in the residence, although the property remains for sale.

Oddly, the lien has not yet been released, although the basketball star is not comfortable saying why. He simply asserts that the lien has been handled and that he does not care to comment on why his team bought his house. Likewise, the franchise also refuses to comment on its generous $1.985 million purchase, though observers are noting that if the team can manage to sell the place at market value, they will stand to make a hefty profit on the “flip”[2]. Regardless of the motivation for the move, it certainly gave Hardaway some time to get his house in order, literally. Hopefully, in the end everyone will benefit from this unique display of team solidarity.

What do you make of this unusual move?

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[1] http://www.nbcmiami.com/news/local-beat/Hardaway-Gets-House-Bailout-From-Heat-114725669.html

[2] http://www.cbssports.com/mcc/blogs/entry/22748484/27276338

As newly-elected Republican congressmen and women attempt to hold true to the values that got them elected by initiating cuts in government backing for home mortgages, leaders in the housing industry are making it known that they are less than pleased with their long-time allies[1]. Banking executives and mortgage investors are holding meetings with both republican lawmakers and their staff members to try and elicit a commitment that they will make the government’s role in guaranteeing mortgages a permanent one. However, thus far, many republicans are holding firm. Representative Spencer Bachus, chairman of the House Financial Services Committee and a republican from Alabama, says he’s not surprised that “the industry” is showing up in force: “I would love to make loans and if they failed, let the taxpayers make up the loss. That’s a pretty sweet deal,” he said.

Many members of Congress blame government-controlled Freddie Mac and Fannie Mae for the housing crash, however. As a result, some want the GSEs eliminated and others believe that the entire system will have to be revamped to prevent taxpayers from shouldering further losses. If mortgages are no longer guaranteed, it is likely that interest rates will rise and many will investors will no longer be interested in those investments, say experts. Ultimately, the mortgage market could be “smaller, less liquid and more expensive,” explained Annaly Capital Management director Jeremy Diamond.

Many political analysts believe that this is the issue that will ultimately divide the Republican party and the Tea party representatives. Do you believe that the government should continue to back mortgages in some capacity, or has that time come to an end?

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[1] http://online.wsj.com/article/SB10001424052748704279704576102310308442634.html?mod=googlenews_wsj

Thanks to staggering maintenance costs and skyrocketing medical bills, Zsa Zsa Gabor will be putting her 12,000 square-foot mansion on the market, her husband told reporters this week[1]. The asking price is $28 million, but the famous actress’ husband, Prince Frederic von Anhalt, does not want that hefty price tag to deceive potential buyers who think that he and his wife do not need the money. “This house goes,” he told the Beverly Hills Courier, “Maybe we are famous, but we are not rich.” Von Anhalt blames much of the couple’s financial troubles on the property’s upkeep, which is about $35,000 including the mortgage payment. Zsa Zsa’s medical care costs around $21,000 a month, which means “we are taking about $56,000 I have to raise every month…This house goes,” said the prince.

However, the estate comes with some very unique amenities: Zsa Zsa Gabor and her husband. According to the offer, Gabor, who is 93, and her husband will continue to live on the estate free of charge once the property is purchased. “The new owner has to pay for everything,” von Anhalt explained. While von Anhalt does not himself like being painted with “those three words, ‘rich and famous,” he is confident that someone else in his neighborhood, where “everybody is filthy rich around us,” will buy the house. “It is a must,” he explained.

Would you buy a house with built-in, elderly, famous tenants?

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[1]http://67.59.172.92/article/Local_News/Local_News/Zsa_Zsa_Gabors_Estate_To_Hit_The_Real_Estate_Market/74175

As 2010 came to a close, analysts predicted that commercial real estate would not experience a full-fledged double dip and investors hurried to get into commercial properties while the getting was good. However, there was one type of property that they largely steered clear of: industrial real estate. This sector of the commercial market, which includes mostly warehouses and distribution facilities, had been predicted to lag in recovery behind multifamily housing, resort properties and even retail and office space, failing to make a recovery until 2012 at the earliest[1]. In the first month of 2011, though, industrial real estate looks to be overtaking other sectors of the market and could be gaining some serious momentum in early 2011 even in “hardest hit” areas like Las Vegas, Nevada[2].

One of the latest moves that indicates industrial real estate is about to make a comeback is a “$2 billion bet” by Blackstone Group LP, owner of Hilton Hotels[3]. The firm has built a portfolio of 275 industrial properties over just the last six months, and some insider industry experts predict that the group plans to triple its industrial holdings this year. Because industrial property has not been perceived as particularly attractive in recent years, the sector “had not recovered at nearly that same pace as apartments, hotels or the majority of other sectors,” explains Steven Frankel, a Green Street Advisors analyst. As a result, he added, industrial property pricing has “looked very attractive on a relative basis.”

Currently, Blackstone Group is not commenting on its industrial portfolio or future purchasing plans. However, the big buys have some experts wondering if the group is about to take its industrial arm public. Do you currently have assets invested in industrial real estate? Is this a sector you would consider buying in this year?

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[1] http://www.tulsaworld.com/business/article.aspx?subjectid=32&articleid=20110122_32_E1_Tulsaa462840

[2] http://www.lasvegassun.com/news/2011/jan/24/las-vegas-expected-have-huge-economic-recovery/

[3] http://www.reuters.com/article/idUSTRE70O68920110125