Opportunities in the Housing Market

2012 is likely to be similar to 2010 and 2011 in many segments of the real estate industry.  However, the residential rental market is frequently mentioned as a bright spot. There is more demand than supply to meet the needs of the market place.  Apartment communities and apartment buildings will surely meet most of the need with an already existing ready to go inventory.

The over building and easy credit  of the pre-recession period put many homeowners into properties which are presently under water.  The lenders are faced with the decision to either:

1.  Foreclose and sell;

2.  Amend and extend the loan; or

3.  Allow the homeowners to short sell.

 

None of which are good options for anyone.  Employment opportunities make increasing family incomes difficult to achieve; so even employed homeowners which are not in default can not keep up as their homes lost market value as a result of foreclosures and over supply.  The best thing for the home owner is to remain in their home, keep it up and seek to stabilize the neighborhood. 

 

We can wait for the government to legislate a solution, or we can consider what is best for our lending institutions, communities and neighbors.  Richard Florida in his book The Great Reset identifies the problem, cause and some solutions such as:

 

1.  Reduce interest rates to reset the home financing to a level in which the homeowner can afford to remain in the home.  Surely, this would cost less than foreclosing and selling a home at a loss.

 

2.  Agree with the homeowner to take a deed in lieu of foreclosure, transfer ownership of the home to either the lender or a rental company; rent the home to the former homeowner at a market rental rate; and give the homeowner or renter the option to buy the home back (with appropriate credits for previously paid equity etc.).

 

Keep the home occupied by the people who will take care of it the best and give them an opportunity to once again become a home owner.  Everyone wins when the property values in a neighborhood stabilize. 

 

Lenders and developers can create opportunity where everyone benefits and the capital cost is low.

Sales Tax Alert

The Ohio Department of Taxation has been enforcing the obligation to pay sales taxes by contractors and property managers for services received when the invoices do not separately identify sales tax as a specific line item.  Look at all of the invoices received for any services contracted for and make sure that sales taxes are separately broken out.  This will avoid an assessment for the unpaid sales tax and related penalties.  Of course the obligation can be shifted to the provider of the service by inserting appropriate language in the contract or invoice.

A Fuel Cell for the Rest of US

Recently, 60 Minutes aired a story about Bloom Energy, a Silicon Valley  alternative energy start-up, which has developed fuel cell technology capable of taking us off of the electrical grid.  The video speaks for itself so watch it below.  As you watch it, think about how technology such as this will transform the real estate industry.  Besides the reductions in electric costs, how power is brought into a facility or development changes with this technology.  Green energy/alternative energy is only going to make us all better at what we do !

 


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No Exclusive Cable Contracts for Apartment and Condominium Projects

The U.S. Court of Appeals for the District of Columbia recently upheld a 2007 Federal Communications Commission ("FCC") order prohibiting the owner's of apartment buildings, condominiums and other multi-unit residential properties from entering into exclusive contracts for providing cable T.V. services.  The FCC relied upon Section 628(b) of the Communications Act.  The FCC's position is that to restrict a multi-unit residential project's access to only one cable provider forecloses the expansion of fiber and phone, video and internet bundling services; thereby, denying residences the benefits of increased competition, lower prices and improved content and services. Take note of this ruling when the issue arises in the multi-unit residential projects you own, manage or are developing.