Entries Tagged 'Speculation' ↓

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Having your IRA in stocks and bonds is the traditional way of investing for your retirement, but using the IRA to invest in real estate is gaining traction. While using your personal IRA to invest in real estate is not a easy proposition like buying a mutual fund, the benefits can be much greater as long as you go through the governments hoops and regulations.

These regulations for a self directed individual retirement account can be daunting, you have to have an agent, the properties can not be used to have a cheap place for Mom while the home appreciates, or it can not be a condo at the beach that you happen to use 2 months of the year.

But if you follow the rules and understand real estate investing, a self directed IRA with real estate in the portfolio can be a great investment decision.

The Internal Revenue Code 4975 defines what are prohibited transactions for IRAs, said David Nilssen, chief executive of Guidant Financial Group Inc., a Bellevue, Wash.-based company that he says is rolling over about 200 accounts each month. Basically, any investment the IRA participates in must be for the exclusive benefit of the IRA, Nilssen said.
For instance, you can’t use your IRA to buy a home for your mother to rent because there might be a conflict of interest to act in the best interest of the IRA (eviction) should Mom fail to make the rent payments.
For the same “exclusive-benefit” reason, self-directed IRAs cannot be used to purchase a principal residence or a vacation home. They can be used to buy income property, such as land or an apartment building. The title to the property would be held by a custodian, who acts as a trustee for the account and does not offer investment advice but functions essentially as a conduit for your wishes as they relate to buying and selling. The custodian would collect rent checks, pay the mortgage and taxes and handle the other financial aspects of your ownership - for a fee. via the baltimoresun.com.

The meltdown in the subprime market is slowly rapping up as 100 percent loans and loans to those with damaged credit have dried up in the marketplace. So what next, it is time for the Federal bureaucrats to come charging in and start their investigations. The SEC announced yesterday they are commencing on a broad look at the Subprime sector including the big Wall Street firms that have been active in securitizing these loans.

Isn’t it amazing that the government has decided to investigate these issues now, after the free market has already recognized the issue and is rapidly correcting itself? The government could have launched these investigations a year or two ago and they would have been very effective.

Instead, they will just create a media storm, go after a couple of parties to make an example of (and to justify the cost of their investigation), and issue some new guidelines that will adversely impact the marketplace that has self corrected already.

That is why I am such a big fan of big government.

It has been known that the SEC was examining accounting practices at New Century Financial Corp., the nation’s second-largest maker of subprime mortgages - higher-priced home loans for people with tarnished credit or low incomes.
But comments by SEC Enforcement Director Linda Thomsen on Monday were the first public acknowledgment that the agency was involved in a broad examination of the subprime sector within the mortgage industry.
“We’re looking at subprime,” Thomsen told reporters following an address to an investment conference. “. . . As with anything, we’re going to look at all the actors and their roles.”
She declined to provide further details. The SEC as a rule does not comment publicly on current investigations.
The role of major Wall Street investment firms in the subprime market debacle also is under scrutiny. In Massachusetts, the state’s top securities regulator said last week that he had issued subpoenas to two major firms - UBS Securities LLC and Bear Stearns & Co. Inc. - as part of an investigation into whether their analysts’ research ignored subprime lenders’ mounting financial problems.
The Bush administration’s housing secretary, Alphonso Jackson, disclosed last week that the government was preparing to punish some subprime mortgage lenders that have been under investigation for discriminatory practices. He did not name the companies. HUD’s Office of Fair Housing has brought several cases against mortgage lenders and insurers for predatory practices, and those enforcement efforts are continuing, the department said. via Bradenton Herald

The gold rush that was real estate investing has slowed to a crawl and now investors in some of the more exotic investments are seeing their investments fall apart. In Indianapolis the investment group run by Mehran “Nick” Valiyi convinced people to provide the down payment and credit to purchase low income homes to be remodeled and resold with his group splitting the profits.

When environmental concerns forced the EPA to shut down the project, it unraveled and now there may be almost 500 foreclosures hitting the Indianapolis market, many with underlying lead paint issues that will have to be resolved.

Lenders and homeowners are less than thrilled and I can see many lawsuits flying around in the aftermath of this fiasco.

Hammer, in an interview, said LRTB’s internal reports show it and Cooperative Action were involved in about 490 house purchases by dozens of investors. SMC originated loans totaling about $7.8 million on 121 of those houses, Hammer said.
Cooperative Action, known as CARE, also recruited an unspecified number of investors to buy, fix and sell run-down houses in the city, Hammer said.
The houses are in neighborhoods within three miles of Downtown.
The Indianapolis real estate market already is notorious for foreclosures that chip away at the tax base. LRTB’s deal stands out because it could trigger the city’s largest wave of foreclosures.
The state’s inquiry into LRTB comes as loan problems have emerged among U.S. lenders who poured money into residential real estate purchased by low-income buyers.
This is the way the LRTB deal was supposed to work:
LRTB would arrange the purchase of a house using the name and credit of an individual buyer, who then would receive a commission of up to $2,500 from LRTB. The house would be repaired by another Valiyi company, LRTB Services. Meanwhile, LRTB would find tenants for the home and, later, a new buyer.When the house was sold, LRTB and the original investor would split the profit.

But the project fell apart. Many houses were not fixed. via the IndyStar.com.

One of the regions of the country that saw the biggest run up in real estate prices over the past 5 years was Baltimore. So when the slowdown occurred, most were expecting carnage in the city. But as the Baltimore Sun reports, real estate prices can not be quantified by a geographic region such as a metropolitan marketplace.

While some sections of the city and surrounding areas have lost value, there are pockets that saw over 20 percent increases last year. Is this surprising, maybe is you are thinking the sky is falling. However,  those that watch markets work know that buying and selling real estate know that moving over a couple of streets can change the characteristics of the marketplace.

So buying a home in a part of town that has appreciated greatly may not make a whole lot of financial sense right now, but look around and you may find a part of town that is gentrifying or is transforming and tremendous profits may be out there for you.

Areas with declines were generally expensive, with homes costing $500,000 on average, while many of the fast-appreciating communities were more affordable, according to a Sun analysis of home sales data that offers the first detailed look at the post-housing-boom landscape. Half of the region’s 10 most costly ZIP codes in 2005 saw a drop in average price last year, from Monkton in Baltimore County to Davidsonville in Anne Arundel.

Local real estate agents say they believe the market is on an upswing after months of sluggishness. January seemed to bear that out, with sales rising for the first time in more than a year just before the all-important spring season. But even last year, average prices increased at least 10 percent in a third of Baltimore’s suburban communities — and in a remarkable three-quarters of city neighborhoods.

Prices in half of the city’s neighborhoods, in fact, jumped at least 20 percent.

“That just confirms what I see and what I hear,” said Joseph T. “Jody” Landers III, executive vice president of the Greater Baltimore Board of Realtors. “We see pockets where there have been some slight declines … but you continue to see some strong gains. … You also have to put that into some historic context: For two decades, there was no price appreciation in many of these neighborhoods.” via baltimoresun.com

The merger talk in corporate leasing and property management is heating up with word that the Agnelli family through their Ifil Holding Company may be looking to purchase Cushman & Wakefield. The  valuation of the company is a little under 1 billion dollars so this would be a substantial purchase.

Italy’s Agnelli family is considering a return to investing in the US and is negotiating to take control of Cushman & Wakefield, the real estate services company. The Agnellis, who founded Fiat and still own 30 per cent of the Italian industrial group, once owned 20 per cent of Manhattan’s Rockefeller Center but pulled back to concentrate on European investments in the late 1990s. They have lately been looking again at opportunities in the US and in Asia.
Japan’s Mitsubishi Estates owns 70 per cent of Cushman & Wakefield, a stake that could be worth up to $650m, analysts estimate. Talks are well advanced, people close to the negotiations said, but there are still obstacles to overcome and other potential bidders involved. via Financial Times Business News

McKinney, Texas is to soon be the home of a 1 billion dollar development in the Craigs Ranch community. They focus of the development will be built around the existing Cooper Aerobics Center and consist of 51 acres in this community just north of Dallas. Dr. Kenneth H. Cooper and his son Tyler will oversee the development and operation of the community.

Craigs Ranch is a 2,500 acre master planned development in McKinney.

The development will be anchored by the existing 75,000-square-foot Cooper Aerobics Center at Craig Ranch, a cardio and strength training center and spa. Homes in the development will range from single-family cottages and town homes to brownstones, row houses and luxury mid-rise condominiums.
Construction is scheduled to begin in September.
“I’m now pleased to announce Cooper Life, a nurturing, utopia-like community that will provide all the tools and support mechanisms needed to achieve and maintain optimum health and wellness every day,” Cooper said.
Cooper Life will boast a mixed-use pedestrian plaza with retail, café dining and loft residences. Residents of the community will be able to access outdoor exercise and stretching areas situated amid nature trails, gardens, parks and winding streams. Back yards will open to common green spaces and jogging paths.  via the Dallas Business Journal:.

Business 2.0 has an article on the future of real estate that thinks we are going to leave the suburbs to a new concept called New Villages. These housing groups will resemble the small villages of the previous times where the  homes are all within walking distances.

While this sounds great and utopian, I sincerely doubt that the majority of the population is going to leave our present housing system to revert back. Present city dwellers may make this transition, but unless there is a fuel shortage that limits transportation, I can not see this working. The study that was quoted was done by an advocacy group that obviously has a dog in this fight so it must be discounted.

“New Villages,” as community planner Robert McIntyre dubs them in the latest issue of The Futurist magazine, are compact, pleasantly urban settlements located well away from city centers. They share some of the charms and amenities of cities, thanks to their density, but have the mostly rural surroundings that originally drew people out to the suburbs, as well as the friendly feel of a small town where you know your neighbors.
The concept of New Villages shares some similarities with the so-called “transit villages” you can already see around the country. Starting in the mid-’90s, when architects and local planners became more interested in more pedestrian-friendly, urban developments, transit villages started to spring up outside cities along revitalized rail lines, from Mission Valley near San Diego, to Ballston and Bethesda outside Washington, D.C.
They were very attractive to young city workers and empty-nest parents. Their defining characteristics: They were eminently walkable, densely constructed without feeling overcrowded, and offered a real community feeling with plenty of common spaces.
The difference between transit villages and New Villages is location: While transit villages mostly reinvented older suburbs that are close to cities, New Villages promise to reinvent the sprawl further out.
The demand for such developments is real, and it’s only going to get greater as consumer preferences rapidly shift away from the McMansions preferred by boomers. According to a study by the nonprofit Congress for New Urbanism, while less than 25 percent of middle-aged Americans are interested in living in dense areas, 53 percent of 24-34 year olds would choose to live in transit-rich, walkable neighborhoods, if they had the choice. via Business 2.0

The deals for commercial real estate are getting bigger mainly because the commercial marketplace is nearing its peak. There is a window in which public companies have to report the slowing earnings, thus lowering their market value, while private investors can extract value still. The torrid property value increases have been very good to REITs, but the stock market punishes lower earnings even when they are exceeding the market at large.

The best alternative for the  REITs at this stage is to offload some of their moderately and poorly performing properties to lock in the capital profits and maintain their stock prices. Then when the markets dip, try to buy in on the cheap.

From 2000 to 2003, acquisitions of real estate companies totaled about $12 billion annually, Ingrassia said. About a third involved public-to-private deals. By 2005, the total reached $50 billion and 62 percent involved private money buying public companies. So far this year, the total has reached $35.6 billion, with about 55 percent of the deals involving public-to-private transactions.
“We’re on target again to have a record year,” Ingrassia said.
Private marketplace values real estate more highly than the public markets, said Stephen Furnary, chairman and chief executive of ING Clarion Partners LLC, part of Dutch ING Group (ING.AS: Quote, Profile, Research).
Private players can place greater debt on the properties than public players can because they don’t face public shareholders via Reuters.com.

While parts of the country are in a housing recession, other regions such as Nashville are booming. The Signature Tower has increased the planned size of the building by 10 stories with the addition of a hotel in the building.

Developer Tony Giarratana has added 10 floors of hotel space to his plan for Signature Tower, a move that will make the project taller than New York City’s Chrysler Building.

The move raises Signature’s height to 1,047 feet and its price tag by more than a third to $275 million. The hotel will have a separate entrance from the residential component and its amenities, which will include a spa, will take up the first three floors of the tower.

Last November, when Giarratana and Nashville Mayor Bill Purcell announced the approval of a tax-increment financing plan for Signature, which will be located at Church Street and 5th Avenue, plans called for it to house about 500 residential units on 55 floors, 50,000 square feet of street-level retail space and a seven-story parking garage below ground.

Signature’s condo count is now 400, which includes 11 units of two-story townhomes. The smallest unit is a one-bedroom, one-bathroom unit measuring 1,100 square feet. The largest will be 6,000-square-foot custom-designed units that will take up an entire floor on the top six levels.

Giarratana says adding hotel space will not affect the TIF because the hotel will be financed separately. And since the project is in the commercial core zoning district, where there are no height restrictions, no additional approvals were needed to make the addition.  via the Nashville Business Journal

Phoenix,  Arizona keeps on growing and the newest addition to the city may be the 900 million dollar CityScape project. With 4 40 story buildings, CityScape will house 1,200 residential units, 150 hotel rooms, and over 800,000 square feet of office space. To compliment this project, there will also be somewhere between 170,000 and 280,000 square feet of retail space and 100,000 square feet filled with public plazas.

Paperwork was filed with the Phoenix government Friday by the developers RED Development, LLC and Barron Collier Co.

The residential component of CityScape would be the responsibility of the Novare Group, which has developed high-rise mixed-use, residential and hospitality projects in Austin, Texas; Atlanta; Charlotte, N.C.; Nashville, Tenn.; and Tampa, Fla.
The massive urban project in downtown Phoenix, covering up to three city blocks and 2.5 million square feet, would take about five years to complete. It includes 100,000 square feet of public plazas and 170,000 square feet of retail space. The retail space could be increased to 280,000 square feet, depending on development restrictions on an adjacent block.
The city’s financial involvement in the project, according to the proposal, consists of constructing underground parking with 4,500 spaces and leasing the parking back to the developers. via the The Business Journal of Phoenix

The Arizona Republic has more information on the CityScape Project, including some of the issues that developers will have to contend with.  

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