All Forum Posts by: William Jenkins

I have been involved with zoning on the development side now for about 10 years.  If the buildings you describe were built legally when they were constructed (properly permitted or built at a time when there was no zoning or permitting), then they are considered a legal non conforming use.  Typically these buildings would be allowed to remain "as is" regardless of ownership unless the property was redeveloped.  This relates to the actual physical building structure.  

You will also have use restrictions for the zoning district that the properties are in.  You will need to make sure multi family uses are permitted in that district.  If they are not then you will need to obtain a variance from the city for that use via the board of adjustment.

Regardless I would suggest writing an offer contingent on zoning approval/verification and then meeting with the city to discuss these issues.  I doubt they will give you any issues from what you have described.  

This is not legal advise.  

Nice move on selling.   You may have an opportunity to buy them all back for quite a bit less than what you sold them for.  Ha Ha. 

The funds have driven prices up rather substantially her as well, but the price run up has been fading in the last 6 months or so.  The funds have a pretty basic strategy around here  and I would assume this rings true for other areas of the country as well. 

1.  Buy

2.  Rehab

3.  Rent while market improves

4.  Sell for capital gain into recovered market    

They have already moved through steps 1-3, but I see a big problem with step 4 (this may be specific to my market).  What is the problem you may ask....  The retail buyer does not exist in the areas they have been buying in.  The buyer pool for their properties are other investors like me.  Those investors won't pay the hedge funds what they require to make the return they were looking for.  I know for a fact that these funds are upside down on many of the properties they have bought over the years if they were to put them on the market today. 

The next 6-12 months is going to be interesting to say the least.  I think many of them are currently working on strategies to offload their inventory (already see it in small bits and pieces).  Unless they come up with a unique way to clear their books, I think they may be forced to either (a) be long term landlords, or (b) liquidate their inventory at wholesale prices at a loss.  For some reason I don't see them being long term landlords.         

I am in a major metro in Missouri, and I can tell you that most, if not all, institutional investors have put a moratorium on their buying in this part of the country.  Investor properties are still selling albeit more slowly and at slightly lower prices, but the big boys have certainly stepped back from the market. 

I can confirm seeing some institutional selling, although I will admit that it is very small at this point.  I am seeing one here, one there, go on the market and I get the impression that they are slowly working on an exit strategy and testing the strength of the market.  Unfortunately or fortunately, however you look at it, I think they are finding that their model is not working very well in this particular region of the country.  

One interesting thing I have seen in person, is that these funds have been valuing all of their properties quite a bit more often then they have in the past.  Probably a few different conclusions you could reach from that though....