All Forum Posts by: Christian Carson

Let's define what it means. Two comparable markets A and B have the same tangible goods selling at low price A' and high price B'. Arbitrageurs physically carry the goods from market A to market B, thus increasing supply at B and lowering B', and increasing demand at A, thus raising A'. Thus, the equilibrium price that we expect, is (A' + B')/2, or the mean of the two prices. Hence, the arbitrageurs have cause a reversion to the mean.

Real estate is a unique good since it cannot be moved. What can be moved are the warm bodies occupying residential units. The "price" of a piece of improved real estate can be re-characterized as the cost of attracting an owner, which takes into consideration all the neighborhood characteristics traditionally affecting the price of real estate. The potential owner-occupant of the house in the cheaper neighborhood thus actually becomes the "arbitrageur," and so does the corporation which seeks to significantly cut its overhead by relocation. The outsized gap in pricing between first and second-tier markets is historically high, and will not go unnoticed by cost-cutters.

As for "factual evidence," there's plenty of evidence that indicates that the upturn in the major markets is largely fueled by institutional speculation and the influx of foreign capital looking for a haven. The wealthy from places like China, Russia,  Ukraine or any of the crisis-gripped EU nations are seeking to store their capital in sound investments, and it appears to them that a New York condo fits the bill. There's no need to tenant it, of course.

www.cbsnews.com/news/investor-driven-housing-recov...

http://www.naiop.org/en/Magazine/2014/Summer-2014/...

http://fivethirtyeight.com/datalab/why-the-chinese-are-snapping-up-real-estate-in-the-u-s/

 And in an efficient market, arbitrage will lower the spread. Instead of prices approaching the mean, we are seeing a reversal of the expected trend. It's this kind of behavior in the marketplace that is signaling to me that the market is inefficient and irrational. Since many will argue until they're blue in the face about how there's no place like Manhattan, let's instead use the housing market of Secaucus, NJ as an example. There are no mines or oil wells or unique geographical features driving the growth of the greater NYC metro -- just people. Long-run expectations call for a reversion to the mean.

 Does that include vacancy of units not offered for rent, i.e., units held by out-of-country investors for appreciation only? This is an alarming and growing trend in London, New York, etc., and is currently driving luxury prices skyward.

The last time I was in Toronto, an awful lot of those condo towers were nearly completely dark at night.

For what it's worth, I sit in my chair here in Cleveland and simply cannot understand why the market would allow for a Manhattan closet condo to sell for more than an entire city block here. The laws are the same. The freight transportation network is the same. The language is the same. The skills base is the same. We even have a train system (which, by the way, lowers property values here). People are paying absolutely ludicrous markups simply for the opportunity to be Maury Povich's neighbor. This is what I call a bubble--one of misguided soul-seeking and misalignment of priorities. The Internet was supposed to make the world flat, but instead it has made it spiky. Why someone would pay $49 million for a penthouse with a decent view of the SF Bay is as puzzling to me as paying some guy $10 to make potato salad.

If I recall correctly, VA waives the occupancy period (1 year? 5?) if you relocate more than a certain number of miles away for a job. Look into this. If I were in your position, I would try as hard as I could to try to get two loans under the VA terms.

For what it's worth, you will have a much easier time financing a duplex that you owner-occupy rather than one purchased for investment purposes. 

I should add that a court probably isn't going to look at the owner's title on their business card, unless they decide that you're trying to commit fraud by using a certain title.

Well, the answer is complicated. It's of course going to depend on your state's laws and interpretations. As a general overview, Florida treats the powers of creditors liberally through the Olmstead doctrine, which held that a judgment creditor is entitled to all the rights of the LLC owner which he/she may freely assign. In a single-member LLC, that's the entire package of management rights, not just the right to distributions and profits. Other states treat creditors with a more restrictive hand, with some states allowing their rights to attach to distributions that you elect to make.

BIll G. is on the money. 

In a tenancy in common, each tenant's interest in the land is independent of one another. If A, B and C are all TICs, and A dies, leaving his entire estate to X and Y, share and share alike, then the ownership split is like this: 1/6 X, 1/6 Y, 1/3 B and 1/3 C. Each individual splits up his/her share at death according to the will, or intestacy statutes.

The solution to this kind of fragmentation is usually a partition action. There are several methods the court will examine: partition in kind (by actually dividing the parcel into several pieces) or partition by sale (which works like a sheriff's sale). 

Mostly, the partition action is kind of an administrative function of the court and there really is no trial. If the plaintiff has a title interest in that property, he/she has the right to petition the court to partition his/her interest into a separate one.

If you want to stay out of court, you can try to get ahold of the smaller shares by paying the owners of nominal shares to quit-claim their interest to you. This is what a quit-claim deed is for -- when it's indeterminate as to how much property the grantor actually owns. 

Forcible entry and detainer is a legal term of art, left over from the common law days of yore. It's just the way courts name eviction lawsuits, nothing more. It's just an old-school way of saying you're a trespasser (or a squatter).

Gentrifying neighborhoods is your answer. They can be found in almost any market including the Bay area. Buy on the fringe of a hot area, and watch as your rents rise and values appreciate. It's also exciting to be part of a team dedicated to cleaning up an urban neighborhood.

 Are you saying that you have lines of _QUALIFIED_ tenants for these houses? In those types of areas with that rental price point, probably 90% of my applicants fail my screening process. Sometimes we go for a few months without seeing a good applicant. When you're below $700/mo, you're scraping the bottom of the barrel. Think about the type of person who is looking for a place at that price point. Basically, I need someone who is making $12/hr. Many of these folks do not have stellar rent/credit/crime histories. At that point, lowering the rent by $100 is not going to attract a better tenant.