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BTW my building are issues all stem from being fannie/freddie eligible. During Fall 2002 and Fall 2007 condos went from around 260K to 460k in five years.
Older folks took reverse mortgages, owners did cash out refinances and HELOCs and around 20% of building sold units to new owners at prices between 360-500K who put only 3-10 percent down.
This led to 2009 when almost 25 percent of building was no longer paying maint and units fell in value to 210K-290K.
The arrears made the building ineligible for mortgages and fact we were running at a negative balance.
The last six sales have been cash and these folks wont default, We have like 8 folks who either just sold at a loss or defaulted. The remaining folks even if overpaid we are 8 years removed from last bubble sale and those folks now have equity.
Around 1-3 years the last of the bubble era folks will be gone or have equity.
Allowing fannie/freddie back in building will immediately cause prices to rise. But it will once again allow folks paying inflated prices with low downpayments. Which means next real estate crash we are back where we started.
we only issue full financials once a year. I think by 2016 or 2017 building will be turned around. Those finanicials come out in 2018. By then we have a decade as a cash only building where folks cant refinance or HELOC.
If you aren't Fannie/Freddie compatible you shrink your market and that's not going to help your financials either. As long as there are loans extended to a broader audience, you want your home to be eligible as the larger the buyer audience the better the price you can get and the more easily you could move your home.
You're mistaking low down payment people w/ speculators who are willing to take outsized leverage risks to flip homes. Back in the day NINJA loans w/ 10+% interest were popular (b/c you had half a dozen other homes bought w/ zero down that you didn't want a bank looking into) and people would dump the house for a profit before the ink was dry. Those loans do not exist today and almost all low down payment plans are exclusively for owner occupied + good credit homes. It's a tiny fraction of the bubble and also they aren't building at anywhere near the pace of the bubble while housing is consumed over time.
If your condo was virtually unbuyable during the boom (you stayed at 260k through the boom), you would probably be pretty mad if you had to sell during that period and replacement homes were all 460k. If the home is in a geographically desirable place and replacement value is difficult, you're better off w/ a larger buyer's market than not.
20% down payments are obviously better than 0 down but it doesn't solve every problem just like checking credit scores isn't perfect. Past history can only account for so many future risks. Plenty of people who put in 20% still lost their homes. Cash only deals simply aren't common enough to depend on them and many buyers would look at it w/ extreme concern as to why it's disqualified.
If you aren't Fannie/Freddie compatible you shrink your market and that's not going to help your financials either. As long as there are loans extended to a broader audience, you want your home to be eligible as the larger the buyer audience the better the price you can get and the more easily you could move your home.
You're mistaking low down payment people w/ speculators who are willing to take outsized leverage risks to flip homes. Back in the day NINJA loans w/ 10+% interest were popular (b/c you had half a dozen other homes bought w/ zero down that you didn't want a bank looking into) and people would dump the house for a profit before the ink was dry. Those loans do not exist today and almost all low down payment plans are exclusively for owner occupied + good credit homes. It's a tiny fraction of the bubble and also they aren't building at anywhere near the pace of the bubble while housing is consumed over time.
If your condo was virtually unbuyable during the boom (you stayed at 260k through the boom), you would probably be pretty mad if you had to sell during that period and replacement homes were all 460k. If the home is in a geographically desirable place and replacement value is difficult, you're better off w/ a larger buyer's market than not.
20% down payments are obviously better than 0 down but it doesn't solve every problem just like checking credit scores isn't perfect. Past history can only account for so many future risks. Plenty of people who put in 20% still lost their homes. Cash only deals simply aren't common enough to depend on them and many buyers would look at it w/ extreme concern as to why it's disqualified.
We went from around 260k in average in 2000 to 460K on average in 2006 back down to 260k today.
We were mortgagable from day building was built right up to the Lehman Crisis.
The condo board and I struggle a bit on market value of units. It is only a concern to folks selling and soon to be ex-owners. Plenty of folks in building plan on going out "feet first" They care about keeping maint low, keeping property taxes low etc. We also struggle with improvements. Plant new bushes and paint new lines on parking lots and you will get twice as many complaints as compliments.
Also it is not hurting our sales the lower prices. Last two purchases were folks using it as a primary residence. One said and I quote. I paid 250K cash for unit all done. Unit up road that is fannie freddie eligible wanted 400K I have to put down 20% or 80K. And then I have 30 years of large mortgage payments. For just an extra 170K cash I am mortgage free. Both were empty nestor type folks trading down who had cash from the sale of a home.
However, as treasurer I will get values back up big time in 2017 or 2018. By them I will have taxes at around 50 percent less than the other condos nearby and by fact we are scrapping along I am building up a war chest of cash.
We actually filed liens and personal lawsuits and towed cars of folks in arrears and that was 21% of building all in one week. That is full monty of collections. That was turning point of whole building.
I like what one broker told me take two side by side condos one full of folks in their 70s and run down and one full of folks in their 40s and all new. Flash forward 25 years and the tables will turn. Condo owners dont stay young neither does new roofs and fancy lobbies.
And the deadbeats are pretty rich. One played in the NFL for over 12 years and drives 100K cars.
You can rent in that building if you buy the property within an LLC. You can buy and rent in most condo buildings if again, you buy in an LLC. I know a few original owners in there who bought at the peak and bypassed HOA bylaw's rental restrictions by forming an LLC.
You tell the HOA the occupant is a designee of the LLC. They have no recourse.
You have to understand that Atlantic Station was a bit of a bust in terms of condos. Lot of speculators snatched up inventory and drove price skyward when it opened up. Then the crash came and values were literally cut in half. Prices have crept up and perhaps they keep creeping. Its really anyone's guess as to how great of an investment it turns into.
Beware, the massive Atlantic project is going to convert back to condos if they haven't started to already.
I recently purchased in that building. My unit came with a "Lease Permit" from the previous owner. As long as a unit with a "Lease Permit" does not go more than 180 days without a tenant the lease permit is valid and can be transferred. My unit had sat for 130 days without a tenant before I closed, but was able to find a tenant in 2 weeks. The building is well built and in a prime location. It is adjacent to Midtown and some would even call it "Midtown". HOA fees are high. About $360 for a 750 sqft unit. The only utility that comes with the HOA is internet. Electricity and water are charged extra and are billed by the HOA so you your tenant won't get a separate bill from Georgia Power or the water company. You will have to get reimbursed from your tenant after the HOA bills you. Also beware of a bill from the HOA called a "Chilled Water" bill. That building and many of the other buildings in Atlantic Station use a system called "Chilled Water" for their HVAC. Refrigerant is not used locally in each unit, instead chilled water from the basement is pumped and circulated through the building. This is good and bad. Your HVAC system may never need to be replaced. All you have in your unit is a system that circulates the cold water. It is a very simple system that removes the need for maintenance or replacement of an old HVAC, but you do have to pay for the "Chilled Water" circulating through the basement. The more your tenant or you use the HVAC, the higher your "Chilled Water" bill will be. I don't know how expensive it is because I have not received my first bill from my HOA.
That LLC designee may work. I don't know any people who have used it to get around the lease restriction. I do know that if you have a mortgage, transferring the ownership from an individual's name to an LLC could cause the bank to "Call" your loan. In short, they can demand full payment of your loan. You are basically altering the ownership of the loan without approval. If they find out you went to the court house and put property into another entity's name you better make sure you are prepared to pay the loan in full immediately. Also, Twelve has a bylaw that requires an LLC to pay a HUGE fee whenever a "designee" is changed. I think it is $2,000. I might be $2,000 a year per designee. They are fee happy in that building so be careful. The HOA president is an HR lawyer by profession so it appears to be ruled with an iron fist. Imagine your living arrangements being decided by an HR lawyer. Frightening isn't it? On the other hand, having a strict HOA board is a good thing. That building had such a bad reputation in the past and the real estate values suffered. Values are steadily rising and that may be due to the restrictions the HOA have recently put in place. There is also new development in the neighborhood. Many of the old restaurants are being replaced, failing stores are being shut down, and the successful ones are expanding. Also, empty lots in Atlantic Station are being filled in. More employees will need a place close by to live, so things are looking up if you have an apartment that can be rented.
Thank you for the insight.. I have researched the prices and I think that the prices are probably up 10 to 20% from the crash.. I don't think that there is a possibility of prices going down unless there is an other major market correction which I don't see in the near future..
Can you please throw some insight into the re-conversion part.. Did you mean that they are going to convert the hotel part back into condos?
I am answering this 3 years after you posted. If you bought back in 2015 you should be sitting pretty. Did you buy back then?
Does the LLC trick work for a house as well? And if you bought as yourself, can you form an LLC and sell it to yourself?
Not without violating your mortgage. You would be altering the agreement with your mortgage company. They have the right to "Call" your loan and demand immediate payment. If your home has no mortgage then it should not be a problem. I recommend you consult with an attorney.
For one, you can take depreciation come tax time. Huge tax savings. This is reason alone to take a break even property for many.
People like to think of "break even" as Income - All Expenses which includes a loan. Say he is only making $200/mth. If his loan is amortizing, he is also receiving a good chunk of principal pay down each month.
Poor advice in my opinion on dividend stocks. Stock market is rigged if anyone hasn't noticed. Greed of a few will crush many again and again. I'm about 30% stock, 70% RE and the RE is laughing at the equities.
My grandfather is a good example. He raised 7 children starting out in the Navy and then becoming a landlord using a lot of leverage in the beginning to get started. Today he is in his 90s and his net worth is astonishing to me.
Excellent point. I invest in the stock market. Technology companies, and REITS are the bulk of my stock plays, but I also invest in Atlanta real estate for the past 12 years. I have never taken any money and put into my pocket. Luckily, I have never needed the income. I just pay off my loan and pay down the principal as FAST as possible. That may not be the best move. Some people don't mind the loan. I just sleep better at night knowing I owe less money. I am writing this in May of 2018. Anyone that bought in that building back in January 2015 is sitting on lots of equity. The person I bought from bought his unit for $135k back in 2015 and rented it out the entire time. I bought for much more and still paid much less ($50k) than it was originally purchased for back in 2005. I say diversify.
There is no reason to form an LLC to bypass any rental restrictions for a house, because there are none.
If you bought it yourself, you can quit claim to an LLC. If you have a loan, your lender will probably have issue with this.
Best bet is to talk to a local bank and have a loan made to the LLC and personally guaranty it.
It does, if the HOA has to report it to a prospective lender as such. However, with an LLC the HOA doesn't have to report that its a non-owner occupant. For all intents and purposes, it is owner occupied.
To keep fannie and freddie around HOA's need to be at 25% or below. Once you lose those your values plummet. Unless you go 100% rental restriction free at which point you will then attract investors (see cross creek) and value will be relatively stable and correlate to the rent owners are able to generate.
If the house is in a community and governed by an HOA there may be an issue.
Just stayed with my friend who bought in this bldg a few months ago. Nice amenities, nice view, location has good potential...seems like really good value overall.
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