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Real estate market in Kalamazoo shows no signs of slowing

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KALAMAZOO, MI – Katelynd Dreger and boyfriend Craig Hotchkiss have spent the last month settling into their new home, which they closed in May.

Unlike many homebuyers who submitted more than 10 offers before they were accepted, the couple were lucky enough to score on the third try and get a three-bedroom, two-bath house right down the street from Hotchkiss’ uncle in parchment get hold of.

The secret of your happiness in finding a home so quickly? Find one that wasn’t even listed.

Thanks to Hotchkiss’ uncle, who took an evening stroll in the neighborhood and started talking to the sellers, the couple were able to go straight to the negotiating table before the house was listed.

“We contacted the original owners of the home and then our agent came out and had a look at the home with us and basically walked us through the whole process,” Dreger said. “It was a pretty easy negotiation. We submitted our offer and didn’t have too much back and forth. “

Related: Millennials are looking for dream homes, but Michigan’s competitive housing market keeps them out of reach

The months before the purchase were anything but easy for Dreger and Hotchkiss, who rented a one-room apartment in Sturgis for six months in February and are still paying rent there.

While the couple reached their destination of being in a new home no later than August when the lease was due for renewal, the journey quickly became bumpy, Dreger said.

“It was a roller coaster ride, a lot more than we expected,” she said. “The houses went so fast.

“When we started it was fun looking at the different houses, but after a while it got a little difficult. We would like a house and it would be sold or we would see an offer and it would look great in the pictures, but not so very personal. “

All in all, they only spent a little over a month buying their home, much less than the average buyer in the market today, said their real estate agent Colleen Lucas, of the Harrington team at Five Star Real Estate.

Lucas said it’s not uncommon for customers to bid on at least 10 homes before receiving a quote. Often times, she said, it takes that long because a buyer may face two dozen offers on a home – that can go on the market on a Thursday and close deals on Sunday evening or Monday morning.

Dreger, a teacher at Plainwell, and Hotchkiss, a chemical technician at Hammond Roto-Finish, competed with this large number of potential buyers on their first round. They bid on a house in the Westwood neighborhood of Kalamazoo. Though they fetched $ 15,000 above list price, they lost to a cash offer that was received shortly before the offer closed, Dreger said.

“We were told at the beginning that we wouldn’t go under $ 15,000 as the market is,” she said. “And with a tight budget of a maximum of 250,000 US dollars, we could only achieve so much with our offers. Fortunately we had a good broker by our side. “

Redfin said 52.2% of all homes in the Kalamazoo market – which includes Kalamazoo county and parts of Allegan, Van Buren and Barry counties – were sold above list price last year, up 83.7% year over year corresponds to. Only 7.8% of the homes in the Kalamazoo market saw price drops over the past year. The market received a rating of 81, or very hot on the Redfin 1-100 scale.

Lucas said she told all buyers that the retail price will be at least $ 15,000 above list price when it first hits the market. If it’s still on the market and not pending after 10 days, the list price can be treated like the actual price. That still doesn’t guarantee you’ll get a house on or above the list, she said.

For Dreger and Hotchkiss, the second house they bid on was in Martin. The house matched that bill and had been on the market for a few weeks. While they were discussing submitting an offer, they received a message that the seller’s deadline for accepting offers had been brought forward. When they felt the competition, they came back to $ 15,000. And again they lost.

“It was intense,” said Lucas. “It’s about finding ways to get creative.

“I currently consider several offers to be standard and we are really happy if we only compete against 3-5 offers. It gets really intense when you compete against 15, 20, 30 offers. “

Creative buying

Just a few years ago, says Lucas, it was customary in negotiations for a seller to bear the buyer’s closing costs. Now the opposite is happening.

“As an agent, you have to find the best way to compete,” she said. “Each buyer you work with is unique in their own situation and you are trying to find the best way to improve their marketability because when you have 20 deals that are roughly the same price, you have to look at different terms and conditions See Every single buyer presented and figured out which one works best, not the actual price. “

Related: Unprecedented housing market leaves real estate agents stunned: “Never seen anything like it”

In addition to offering to cover the seller’s closing costs, this may mean agreeing to buy the home as it is – regardless of the outcome of the inspection – or giving the seller 45 days of ownership after the home has been closed grant so he can find their next home in a hotly contested market.

“From the point of view of the industry, different rules of the game apply to us,” said Dan Jaqua, owner and president of Jaqua Realtors in Kalamazoo. “How you structure your closing time frame is now part of the negotiations. If you can provide the flexibility the seller exactly wants, whether it be closed in a week or three months, it will increase your potential for acceptance of your offer.

“Right now the market obviously prefers sellers, which is a bit of a contradiction in terms because it only favors sellers who don’t have to buy anything else. I know my house is selling fast, but how long will it take to find one? It’s about managing the other aspects of real estate that aren’t actually real estate, but rather strategy. “

In-game inventory

Jaqua said even though the inventory is much lower than before, the inventory is still there. It just doesn’t stay on store shelves long, especially in the mid-income $ 150,000 to $ 300,000 price range where most homes move in a single weekend.

On June 27, 147 single-family homes were for sale in the Kalamazoo Market. 270 new homes hit the market last month, a strong indicator of how quickly they are getting in and out.

Related: ‘Wild’ housing market ‘like nothing I’ve seen’ in Jackson, Realtor Says

“The inventory is difficult to calculate because nothing stays on the shelf,” he said. “Imagine a grocery store that has nothing on its shelves, but there are things to be stored in the storage room. Every time the stock boy comes out to put something on the shelf, it is picked up. That’s the way it is right now. The shelves are still being filled.

“It would be very different if these things didn’t make it onto the market. Things come out on the market, but they just don’t stay. “

However, Lucas points out that there were about 600 homes listed in the Multiple Listing Service database as of May 2020, and if you go back when the recession hit in March 2008, Kalamazoo had 3,800 homes listed.

Even if the situation cools, no one should expect inventories to rise to recession levels.

“I can imagine it will eventually go back to 600-800 houses,” she said.

What people need to understand, said Jaqua, is that the Kalamazoo market has been hot for some time, it’s only now getting hotter.

“We have said year after year for seven or eight years that this is the best year in real estate,” he said. “And I’m talking about volume, not units, and that includes the year of COVID, which was up 8% in volume.

“We went from $ 225,000 at the end of 2020 to $ 236,000 in the first quarter to now $ 244,000. It keeps escalating. “

This current average sales mark is 103.5% of the average list price according to MLS data.

How COVID changed the market

Both brokers agreed that the low inventory and the fast-moving market held a lot of people off.

Many of these people have chosen to stay where they are, enjoy record low interest rates, and get refinance, but there are many other factors that have put existing homebuyers looking for a new home in the past few months, said Lucas and Jaqua.

While a homeowner may be able to easily refinance and withdraw money at a better price, this keeps the contractors safe and the construction costs are high. Plus, there are many people who feel they have outgrown their homes during the pandemic, as work and school from home have left many feeling the need for something different, Lucas said.

“The problem is, they’re not exactly sure how to jump to the next house,” she said. “You know the house you are in has a lot of equity and is selling very quickly, but where are you going? It is very scary for a seller to know that if you build your home, it will sell in 5-7 days.

“And finding a short-term rental in Kalamazoo is incredibly difficult. One of our last rentals managed by the Harrington team received 120 applications. In my opinion, renting in Kalamazoo can actually be more difficult than buying a home at a certain price. “

Also on MLive:

Michigan unemployment rates lowest since March 2020

Kalamazoo researchers are helping develop a COVID-19 vaccine that will be donated to zoo animals across the country

Nearly 500 people have died on the streets of Michigan so far this year, continuing the 2020 deadly trend

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Sydney real estate: Man owns six properties at 32

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A Sydney father, aged 32, can boast a portfolio of six properties valued at $ 2.7 million. That’s how he did it.

At the age of 32, Bobby Haeri owns six properties in two different states with net worth of $ 2.7 million.

The Sydney father bought his first property at the age of 18 after sharing the cost with his sister and father.

Since then, he has pushed his way through loans, rent, mortgage insurance, and his salary to buy another five properties.

“The reality is that you have to make sacrifices, maybe not go on vacation for a few years, budget, or work 12 hours a day,” he told news.com.au.

“Working just eight hours, five days a week, will be difficult to achieve in the early stages.”

Mr Haeri says he now works 12 hours a day, six days a week and runs his own real estate agency while he and his wife Dionne raise their daughter Mia, 1.

Although he admits he currently has $ 1.89 million in debt, he has healthy cash flow.

His tenants bring in around $ 10,000 a month and he only has to pay off $ 7,000 a month on his mortgage, which leaves him in his pocket.

Immediately after graduating from high school, Mr. Haeri went full-time, started his own gardening business and bought his first property in 2008.

It was a $ 550,000, two-bedroom, two-bathroom apartment in St. Ives, north Sydney.

“At that point in time there were government grants and incentives, it was about a five percent contribution. You didn’t have to pay stamp duty, you paid stamp duty and then you get it back, ”he recalls.

They spent $ 27,500 to secure the apartment.

When he was 21, he used his share of the equity on his first property to buy his second.

This time it was a two-bedroom, one-bathroom apartment in Killara, a neighboring suburb of St. Ives, for $ 570,000.

“When I worked in the gardening business, I listened to podcasts and read books 11 hours a day. I felt like I knew a lot about real estate, ”he said.

Both properties had tenants covering his mortgage fees.

A year later, Mr. Haeri decided to sell the apartment in Killara as he had just become engaged to his current wife, Dionne.

Since it was in Sydney during the housing boom, the apartment cost $ 100,000 more than he paid for it.

Two years later, at the age of 25, he used part of this money to finance his wedding and honeymoon. The rest went to a new home for him and his wife, which, like the previous apartment, cost $ 570,000.

It was a one-room apartment in Brookvale, Sydney’s Northern Beaches.

The $ 2,200 a month mortgage payments were “convenient” as his gardening business was doing well and Dionne was earning a post-graduate engineering salary. Together they made just over $ 100,000.

Because of this, Mr Haeri said, “You definitely want to try (building a real estate portfolio) with someone” as a piece of advice.

With two qualities in his name, Mr. Haeri decided it was time to try something different.

In 2017, he heard that Grafton, a town in the Northern Rivers region of NSW, was going to have many government infrastructure and construction projects going on.

“This is how the area gentrifies when you see these regional cities experiencing strong growth,” he said, adding that he wanted to diversify his portfolio.

The couple bought an established home in Grafton for $ 290,000.

“The thought process was that we knew we wanted to build a real estate portfolio, but the cash flow income in Sydney wasn’t there,” Haeri said.

“You can’t own more than two properties in Sydney because it’s too difficult financially.”

He believes 90 percent of investors are “stuck” with the two-property brand.

Then they grabbed a 700-square-foot block of vacant land valued at $ 65,000, also in Grafton.

They divided the empty lot in two and built two completely identical houses with three bedrooms and two bathrooms.

Each house cost $ 260,000, but they only needed a 10 percent down payment to build.

At that time, in 2017, Mr. Haeri owned five properties.

A year later, Mr. Haeri and his sister sold their very first property.

“I wanted to keep building my portfolio and my sister didn’t,” he said.

“It was easier to go away with my money, she’s gone with her money.”

They had held the St. Ives apartment for 10 years. It sold for $ 790,000, up from $ 550,000 when they originally bought it, bringing him an additional $ 100,000 straight into his pocket.

In the same year, in 2018, Mr. Haeri stepped down from his gardening business and delegated the tasks to others, but still reaped the rewards, which gave him the time to set up the real estate investment agency.

They also moved out of their Brookvale home and opened it up to tenants. So they could live cheaper elsewhere and the rent covered their mortgages.

The couple had worked hard to repay their mortgages “fairly aggressively” and felt ready to buy again in early 2020.

In March of last year the Haeris looked even further into the distance – this time to Queensland.

They got a $ 300,000 house in the southern Brisbane suburb of Kingston, a 30-minute drive from the CBD.

In July of the same year, their daughter Mia was born.

Just three months later, in October, they did bought a $ 302,000 lot in Deception Bay on the northern outskirts of Brisbane.

This was his sixth simultaneous quality.

They are in the process of building granny flats behind the two houses in Brisbane and one of the Grafton houses.

The couple make a quarter of a million dollars together.

Mr. Haeri’s wife, now an Associate Engineer, makes $ 130,000 while making $ 120,000 a year.

Mr Haeri said his impressive portfolio of six properties would not have been possible with the lender’s mortgage insurance or LMI.

He used LMI to secure the Brookvale property and both Brisbane.

LMI, in his opinion, isn’t as scary as it sounds.

“People shouldn’t be too obsessed with it,” he said.

“If you have $ 100,000, you could buy a home for $ 400,000 and you’re not buying an LMI. Or you can buy two properties with increasing value.

“These properties, which are increasing in value, will far outweigh the LMI costs.

“Then you can pile up your real estate twice as fast.

“Don’t focus too much on saving a 20 percent deposit.”

LMI is required when you have a down payment of less than 20 percent of the property’s value.

It is a one-time, non-refundable, non-transferable premium that aims to protect the lender from financial loss if the borrower cannot afford to pay back their home loan.

It can either be prepaid or added to your home loan.

Mr. Haeri said some of his loans were principal and interest while others were just interest.

However, for the next year he plans to transfer everything to interest only.

“We take some time off to spend with Mia, that way we have the passive income,” he said.

Read related topics:Sydney

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Hard Money Loans – When a Real Estate Investment Needs Fast Financing » RealtyBizNews: Real Estate News

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There are many ways to successfully invest in real estate. Hard money lending isn’t that much noticed these days, but it still has a valuable place in the investment world. Coin lenders generally do not value real estate in the same way that most investors and other real estate professionals do. Hard cash loans can be easier to come by, but they can be expensive. Despite the cost, they are an indispensable tool for investors. Knowing when to use hard money and how to get it is crucial.

As an investor, you should know your local market inside out. After a quick tour, you should instinctively have a good idea of ​​property value. What is different for coin lenders is that they often lend money outside of their local market. It can be in a distant city or across the country. Coin lenders cannot physically view the property themselves, nor do they have a solid understanding of local property values.

Every private contract is written for the mutual benefit of both the investor and the lender, but there are general rules that drive the hard money market. Hard money lenders do not use the standard underwriting process that banks use. Banks focus on the borrower’s credit history and income. A bank loan is usually 90% or more of the home value.

Coin lenders focus on the value of the property rather than the borrower’s creditworthiness. While they will look for a professional assessment, it is not the only assessment tool they rely on. Often times, they want at least two and possibly three assessment models to help them make an informed decision. Coin lenders will look through tax bills, but again this is not a reliable method of valuing property. Tax assessment districts calculate values ​​annually at best and many only every two years. In addition, the tax office only evaluates real estate from the curb. You do not have access to the inside of the house.

Broker’s Price Opinion (BPO) is another tool that moneylenders use to value real estate. A BPO is an estate agent’s appraisal of the property’s value. However, hard money providers are also skeptical of these valuations, as brokers tend to overvaluate real estate in the hope of a higher listing commission and an optimistic view of the local real estate market.

The value a hard money lender attaches to a property has nothing to do with the purchase price you negotiated. It is based on the market value of the property.

In the end, tough money lenders take all of the information available to make an informed decision. You ask yourself questions like: “When the market has bottomed out, can I get the money I borrowed for the property back? Will I still benefit from this feature if I have to take control in the event of a payment default? “

To fully protect themselves, hard money lenders typically only loan out 50 to 70% of the property’s value. As an investor, you must either negotiate a purchase price of this magnitude or have additional financing available. Also, remember that a tough moneylender knows the fix-and-flip business as much as any investor does. You want to know your exact plan for the property and need to approve it along with the value of the property.

Most hard money lenders provide short-term loans with an average duration of six months to two years. In general, the greatest benefit that hard money brings is getting it closed quickly. Since there is no credit check, the closing can take place a few days after an application has been approved. Once you’ve established a relationship with a hard money lender, loans can be funded in a matter of hours. A hard money investor needs to know what documents are required to approve the application.

If your ducks aren’t all in a row, funding can take a few weeks, but just three to five days are possible. If you have a trusting relationship with a hard money lender, you may have cash within 24 to 72 hours.

Hard money is not for everyone (or even most people). The only reason to get such a loan is for a large investment that requires a quick response. It can cost you 10% of the loan amount for interest and loan fees. But if you can make 30% on a deal in weeks or months, it’s probably worth paying more for quick funding. When a good investment doesn’t keep you waiting, a hard cash loan may still be the best answer.

What else do you think investors should know about hard money loans? Please share your findings and experiences by leaving a comment.

Additionally, our weekly Ask Brian column welcomes questions from readers of all levels of real estate experience. Please email your questions, inquiries or article ideas to askbrian@realtybiznews.com.

Photo by Frederick Warren on Unsplash

Author Biography: Brian Kline has been investing in real estate for more than 35 years and has been writing about real estate investing for 12 years. He also has over 30 years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives in Lake Cushman, Washington. A vacation destination near a national and Pacific ocean.

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Teetering property developer Evergrande sparks contagion fears for China’s economy

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Real estate developer China Evergrande Group is on the verge of collapse, burdened by a huge burden of debt and billions of dollars in real estate that it cannot sell as quickly and profitably as expected.

While trouble has been brewing for a year, it is now coming to a head as the company missed a loan payment in June and more are expected. Evergrande offices have been the scene of angry protests this week, and things could get even uglier on Monday if the company is likely to miss another key interest payment to its increasingly concerned financiers.

Evergrande’s potential collapse raises fears that it could drag other parts of China’s housing market with it – and affect business interests outside of China as well.

Here’s a quick explanation of what you need to know about history.

What is Evergrande?

Evergrande was founded in 1996 in the Chinese city of Shenzhen, across the border from Hong Kong, and is primarily a real estate developer whose core business is buying land and converting it into residential property. Company founder Hui Ka Yan is a former steel worker who was responsible for the real estate boom in China in the 21st

The company has built more than 1,300 housing developments in 280 cities in China and is planning an additional 3,000 projects in various cities across the country.

But like any good conglomerate, it has spread to all sorts of other businesses, including bottled water and groceries, electric vehicles, theme parks, a Netflix-like streaming service with nearly 40 million customers – and even a professional soccer team.

Why is it in trouble?

Debt – and a lot of it. The company has nearly two trillion yuan in debt on its books, which is more than $ 300 billion. The company has aggressively borrowed money to buy more land for development and quickly sold low-margin homes to raise enough cash to start the cycle again – which works well as a business model until it stops working .

In late 2020, new rules that took a closer look at the company’s finances showed a higher-than-expected debt burden. This, coupled with increasing construction delays, frightened buyers and started a vicious circle. The company began its descent to pariah status as lenders and buyers lost their nerve in lockstep.

Every attempt by Evergrande since then to distract from his problems has only served to draw more attention to them. The lenders became more and more insecure. Existing owners were upset. New sales slowed, creating a feedback loop that made lenders even more nervous.

CLOCK | Investors furiously protest outside Evergrande offices:

Chinese real estate jitter

Buyers of Chinese property developer Evergrande are demanding responses from management as fears grow that the company may collapse under its debt burden. (David Kirton / Reuters) 0:34

In June, the company admitted it had failed to pay a loan. The next month, a Chinese court froze a $ 20 million bank deposit at the request of one of its lenders. At least one believer, a paint supplier, is reportedly getting paid in apartments that won’t be ready until 2024.

According to Bloomberg, advance sales on two projects in Hunan were suspended on July 19. Three days later, Hong Kong banks stopped offering mortgages for the company’s incomplete projects in the city. On August 9, two more projects in Kunming halted construction due to defaulted payments, followed by similar halts on projects in Nanjing and Chengdu. There has been snowballing since then. The company’s stock price plummeted 90 percent last year, and most of its bonds are in junk status.

The company is behind on its commitments to more than 70,000 investors. There are more than a million buyers of unfinished projects in the balance. And the pace of problems is increasing. “Sales could continue to plummet as the property developer may struggle to restore the confidence of potential homebuyers,” said Lisa Zhou, an analyst at Bloomberg Intelligence.

Monday numbers are a turning point for the company as Evergrande is set to make a $ 80 million interest payment on one of its many loans, and there is next to no chance it will pay them – which could make the watch ticking towards some undesirable results.

What could happen?

There are a number of somber B-words on the table – bankruptcy, separation, buyout, or bailout – and none of them are ideal.

The first option would be the most painful.

“If Evergrande defaults on its debt as expected and goes through a restructuring process, I don’t see why this should be curbed,” Michel Lowy of distressed investment firm SC Lowy told Reuters.

The delayed Emerald Bay residential project in Hong Kong has scared buyers. (Lam Yik / Bloomberg)

But given the Chinese government’s longstanding pursuit of stability, this is also the most unlikely outcome. The company owes money to 128 different banks and has behind nearly every 20th property sale in China in the past five years. Evergrande has nearly 200,000 permanent employees, but hires nearly four million people annually to work on various projects.

With such a broad reach, analysts covering the sector are confident Beijing won’t just let the company collapse. “Evergrande’s escalating crisis could prompt government action to prevent social instability,” Zhou said.

More likely, a version of the next two options, a split or a buyout, where the company sells assets to raise cash and enlist help to manage things, is more likely. “State-owned companies or other developers can also take on Evergrande’s projects after Chinese officials send accounting and legal experts to review the company’s finances,” Zhou said.

However, a full government bailout is also unlikely. China has cracked down on its soaring tech sector, trying to regulate and ban cryptocurrencies and curb excesses in all possible sectors. Evergrande’s problems could be a test case of Beijing’s desire and ability to manage every facet of the growing economy.

A man walks past a banner promoting the Emerald Bay housing project in Hong Kong amid news that the developer is on the verge of collapse. (Lam Yik / Bloomberg)

Bank of Montreal economist Art Woo said in a statement Friday that he also doubts a bailout will come. “Who could bear the losses is honestly difficult to predict, but we think it is reasonable to assume that the authorities are unlikely to bail out shareholders or creditors to keep moral hazard from increasing and improve financial discipline,” he said .

Organized processing is more likely in order to keep the damage as low as possible. “We don’t think the government has any incentive to save Evergrande (which is a private company),” Nomura analyst Iris Chen said in a customer note.

“But they will not actively push Evergrande down and from our point of view monitor a more orderly default, if at all.”

CLOCK | CBC reported on China’s “ghost towns” of empty towers nearly a decade ago: CBC’s Adrienne Arsenault explains how empty skyscrapers are casting shadows on Canada’s economy. 2:31

Are there any effects outside of China?

Not much, right, although Evergrande has assets in Europe and North America – including the posh Château Montebello resort in Quebec – but the company’s troubles are nonetheless a warning to people everywhere.

China has been in a real estate boom for more than two decades as more and more people are investing money in residential real estate – almost regardless of the price or demand for the underlying asset.

The video went viral on social media this month when a 15-tower condominium in Kunming was blown up for being a ghost town with no real residents, eight years after it was built.

While it wasn’t an Evergrande project, the concern is that there are plenty of others out there who like it.

Again the breathtaking demolition videos showing the oversupply of housing in China: 15 skyscrapers in China, which were part of Liyang Star City’s Phase II project, have just been demolished after standing unfinished for eight years because there was no demand from the market . pic.twitter.com/UByqjk8QXX

– @ Jon_Hartley_

China’s Lehman Brothers Moment?

The 2009 financial crisis was triggered by the collapse of two investment banks, Bear Stearns and then Lehman Brothers

That may be far-fetched for the economy as a whole this time around, but it is certainly on the table for the Chinese housing market at least.

“Lehman [was] Quite different from the way it slipped through the financial system and frozen activity, “said Patrick Perret-Green, an independent London analyst.

“Millions of multi-party contracts, each trying to determine their risk,” he said. “With Evergrande, it’s depressing the entire real estate industry.”

“There are other developers who have the same lack of access to liquidity problem and have expanded too much,” Lowy said.

Simon MacAdam, an economist at Capital Economics, believes the Lehman parables are unjustified.

“The story of the Lehman moment in China is far from it,” he said. “Even if it were the first of many property developers to go bankrupt in China, we suspect it would be a political misstep for it to result in a severe slowdown in its economy.”

Regardless, the Evergrande saga is a cautionary tale about the downside of unrestrained property speculation everywhere.

As Woo put it, “Default or bankruptcy doesn’t pose a Lehman-like threat … but it’s still bad news for the economy.”

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