Developer Deliverance: Changes to Development Rules

I am currently on the Hill working on Legislative issues.  One of the committees I sit on is called the Political Subdivisions committee.  It sounds like a bland name but it deals with all kinds of fun issues that address our democratic system and the function of "subdivisions" (i.e. cities and counties) of the State. 

Today we heard a bill in committee by a Representative from Kaysville.  Under current law, cities and counties have the right to change the specifications required on asphalt depth, street width, curb width, and other infrastructure specifications as they see fit.  Unfortunately, this poses a problem when a developer purchases land, begins development and then has the city change the specifications mid-stream.e

The bill we heard today eliminates this as a possibility and fixes the specifications that are required for a development when the development starts.   You would think that this was the law already.  It is not.  Due to the length of time it takes to complete developments, some contractors were running into issues with this. 

Fortunately, it passed out of our committee unanimously and will go to the House floor for a vote.  This should create a more predictable environment for developers and cities to work together.

JUST SOLD! Beautiful Bargain Bungalow

I just closed with a buyer on this fantastic bargain.  Located in Ogden, this home was a Freddie Mac foreclosure.  It was originally listed in February of 2011 for $77,900.  Over the last year, the price has slowly come down and in November the price dropped to $50,000.  We entered a competitive bid situation and adjusted our offer to $56,000 financed with $2,000 earnest money.  Several of the offers we were competing against were cash and very close to our price.  Fortunately, our offer was selected as the winning bid.

The home is in excellent condition and will require some carpet in the basement and a good cleaning upstairs.

  
Once we placed the home under contract we experienced our December Wind Storm.  Unfortunately, the roof on the garage suffered some unsightly damage.

 
We used this to renegotiate the purchase price down to $53,800.  The seller also agreed to pay about $1,000 in my buyer's closing costs. 

Congrats to my clients on a super bargain purchase.  Repairs are estimated around $2,000 to make it rent ready.  Rents are anticipated to be $750-800/mo. 

Rental Repair: When Does It Make Sense?

One of the big questions facing landlords is when to make repairs and what kind to make.  Let me share a recent example.

I accepted a new client in November who wanted to rent his home while he moved out of area.  Like many folks, his home was worth less than what he owed but it wasn't so upside-down to warrant just walking away from the property.  He estimated that he could liquidate the home in about 5 years if he rented it and he could still maintain his good credit in the meantime.  Rents would be slightly less than the mortgage payment but that would beat paying for two homes or sacrifice his good credit.

One of the issues I thought might be an issue was that my client had pets previously.  As they were moving out of the home the carpets were freshly cleaned.  However, I could still tell that pets had been there.  After not receiving any applications for a while we reduced the rent price by $100.  Ultimately, several tenants applied and I was able to approve an application.  The tenants also noticed the pet odor and asked if the carpets could be cleaned again.  We agreed to clean them and have it treated for the odor.  The tenants moved in.

Depending on the kind of pets someone has, carpet odor can be a simple fix or require a complete do-over.  In this case, the carpet cleaning didn't work.  The odor actually got worse and now the tenants were very unhappy.  They had signed a year lease but now were contemplating leaving the premises.

A bid to replace the carpet came in at $1,500.  We received a similar bid for the laminate flooring.  Rents are $1095 a month.  There were a couple scenarios that could have played out:

A.  One option would be to tell the tenants: "You signed the lease.  You knew what this was before you moved in. We aren't fixing anything."  This option would definitely have created some stress for all parties involved.  If the tenants balked and broke their lease, the owner would keep the deposit.  But, we would have more vacancy and still have a house that would not meet the market's needs because of the odor issue.

B.  Another option would be: "We want you to enjoy your stay here.  Let's see what we can do to fix the problem."  This option would involve figuring out a way to fix the problem and do it affordably.

Option A is the slumlord business model.  Option B is the professional business model.  We went for Option B and negotiated a year extension of the lease with the tenants if we would agree to pay for the installation of new flooring.  The tenants agreed to tear out the old carpet and treat the floors with Clorox and Kilz.  I estimated that the floor repair would be paid for by a reduction in vacancy when the tenants signed on for another year.  The scenario is win-win.

Don't ever be afraid to make sensible improvements to your property.  Vacancy, tenant quality, and rents all improve when you put a little money back in to your investment.    

Winter Water Woes

I colleague of mine emailed some photos to me recently of homes that were not prepared for the winter weather.

Swamp coolers are a notorious water problem for homes, no matter which season of the year.  They can also be very ugly. When not coating your roof in ice, they can be found ruining the appearance of your shingles with unsightly hard water deposits.

  
Drippy spicket?  Or cool work of art?

I am not sure what is making the water form brown icy goo.  But, whatever it is, it isn't good.

The moral of the story is take care of your exterior plumbing features BEFORE winter comes.  It looks like the plumbers and handymen will be busy come spring.  

Uncle Sam To Play Landlord?

The vicious cycle of federal encroachment into the housing market is coming full circle in the near future.  Housingwire reports that the Federal Reserve is endorsing a program to allow Federally owned homes to be made into rental properties:

 "Preliminary estimates suggest that about two-fifths of Fannie Mae’s REO inventory would have a cap rate above 8% — sufficiently high to indicate renting the property might deliver a better loss recovery than selling the property," Bernanke's staff writes in a supporting white paper.

"..support for such a program will cost mortgage servicers, bond investors and even taxpayers. But it may be a sacrifice for the greater good.

"Some actions that cause greater losses to be sustained by the GSE in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery," the white paper states.

This would complete the pernicious circle of government intrusion into the free housing market.  Right now Uncle Sam issues about 95% of all home loans.  Presently, many of those loans are being issued on REO homes that are owned by Uncle Sam as well.  Finally, we find out that Uncle Sam will now be wanting to rent all the homes that it owns due to making bad loans in the first place.

This proposition of an REO-to-Rental program is inappropriate.  The article sites tight underwriting guidelines as the reason for the program.  The Federal government created this scenario by keeping unhealthy banks alive and not letting them fail.  Banks have no incentive to lend while they get cheap money to buy Treasuries that yield them a guaranteed (but low) return on investment.  Why would they lend to the man on the street when they can get a risk free ride from Uncle Sam?  Pure folly.

Let's get government out of the housing market.  

FOR SALE: South Ogden Short Sale Condo

I just listed this condo located at 1091 Country Hills Drive in South Ogden.  This one is unit #207.  List price is $49,900. 

The unit is 2 bedrooms and 1 bath and located conveniently close to Weber State University. 

The property was updated in 2007 and has granite surface countertops, updated cabinets and stainless steel appliances.

The unit has 1140 SQFT and one covered parking space.

This property would make a great investment or first time home.  Monthly payments are incredibly low.  If you are interested in learning more about this great opportunity, please email me or give me a call.

Ogden History: The Henry H. Hudman Home

One of the things that attracted Kim and I to Ogden was its rich history.  The older neighborhoods are teeming with stories and a rich heritage.  One of the things I find interesting is to tie the people together with the homes that they owned.  Often, the history of the home is intriguing in its own right.

This weird fascination of mine took me back to the Weber Title Abstract Vault for some more research on my own home.  Here is the story:

In 1907, the lot at 2227 Jefferson Ave. was owned by Leslie S. Hodgeson.  This name might sound familiar to Ogden historical buffs.  He was the same gentleman that designed the Perry Egyptian Theater, Peery Apartments, Ogden High School, Ogden City Building, Forest Service Regional Building, Shupe Williams Candy Factory, Old Dee Elementary School, Ogden Masonic Temple, John S. Houtz Home, LDS Branch for the Deaf, The Hotel Bigelow, Polk School, and many other structures.  Mr. Hodgeson has probably left more of a mark on the city than any other person.

On October 4, 1907, Henry H. Hudman, the Vice President of Pingree National Bank and the Treasurer for the Blackman Griffin Company, acquired the lot from Mr. Hodgeson for the princely sum of $1,200.  Converted to 2010 dollars, that equates with a $28,000 purchase price...all for a .15 acre lot. Mr Hudman proceeded to construct the home with cash.  A building permit was pulled in 1908 and the home was completed likely in 1910.  We know this because the steam pipes in our basement are stamped with the year 1910 on them.

(This structure existed at the current site of El Matador's at 26th and Ogden Ave.)

The home was constructed for a family of four.  Henry and Anne Hudman had a son and a daughter.  Their son served in The Great War (World War I) and their daughter worked as a stenographer.  The home has a master bedroom with two closets on the main level.  I am sure Mrs. Hudman had the larger walk-in closet with window and Henry was relegated to a much less impressive closet that I use today.

(Located on the 24th block of Washington where the plaza north of Markestar is today.)

On April 29, 1920, Mabel Hudman, the daughter, received a life estate from her parents and it was finally recorded at the county office upon Henry's death in 1937.

Mabel owned the home until October 9, 1952 when Leonard Bauman purchased the home for $9,750 (just $79,000 today).  Mabel seller financed $5,250 of the purchase which the Baumans finally paid off on July, 2, 1969.

The Baumans owned the home for 50 years until 2003 when it was sold to some investors in Salt Lake City for an undisclosed amount.  The investors procured private hard money financing and then proceeded to default.  By early 2005, we had purchased the home from the lender who repossessed it.  We paid $72,500.  A lot of damage was incurred during that short two year period in which the investors owned the property.  It wasn't helped by the fact that the Baumans made their last significant improvement to the property in the early 1970's.

Here are some photos from when we purchased the home:

Cool woodwork. But the cool wallpaper had been ruined.  

Here you can see the shards of glass and the rock (left of the fireplace) that had been thrown through the window. 

The home was coated in wallpaper and it required a lot of scraping to get rid of it all.  You can see the latch on the top of the door.  The investors tried to turn the property into a boarding home.  I am sure that worked for then until the boiler stopped working.

Of course, no old home would be complete without a creepy basement.

The restoration process has been extremely rewarding.  We have grown to appreciate the amount of workmanship that went into home building so long ago.  We look forward to preserving our home for another generation to own in the decades to come.