Waterfront Auction Ends Today

The current real estate market can have some real interesting deals happen.  In the go-go days of 2004-2006, super luxury and unique homes were auctioned off quickly and easily.  Today many auctions don't even attract a buyer if the home is over $1MM.  Other times the banks are putting such a high reserve that nothing happens.  


I am not talking about the foreclosure auctions on the courthouse steps, rather I am talking about the big auction houses online and offline.  Last year I was the high bidder on several properties with bids under $50,000 and the banks wouldn't let me have them.  That was my first clue the market was turning, or at least the banks thought they could stop the dive by not letting homes go so cheap.  I don't know why they stopped taking any bid but they did, and it has been that way ever since for homes that are a FHA qualifying prices.


When you break $1 Million though, the rules are still all over the board.  Family greed and squabbles do funny things at estate auctions.  For probate, the courts are just telling the trustees to sell, and I am seeing some movement in those markets.  Even the short sales of homes over $800,000 have seen a decrease in the average closing times.  So where does that leave us today?


In Corona Del Mar California I have been watching a certain auction with a keen sense of interest.  Originally the property was listed at $14 Million, then over time lowered to $9.9 Million.  As an agent in the area $9.9 Million was a good starting point but it had been on the market so long the buyers just weren't interested for whatever reason.


The trustee decided to send it to Auction.  The property is one of the few original ocean front homes left in Southern California that hasn't been knocked down.  Walking the property I could clearly envision a new Tuscan style home featuring a subterranean garage.  I started emailing all of my clients who might consider such a project.  No interest at all.  One said "That isn't where the money is going."  Now I knew this would be interesting.  That came from a pretty savvy investor.

After really walking the property, and noticing all of the little details.  Details like the kitchen with the polished concrete floor still scarred by the tile squares, and the white washed wood vaulted ceiling in the master, and the 1960's style electrical light dimmers with clear switch plates, my wife looks at me and says "I could live here just like this."  With the opening price of $5.5 Million, it was clearly out of this weeks budget so I knew it wasn't going to happen at this auction.  I put a couple more feelers out to my friends who could write a check like this while I was admiring the view from the back yard.

My wife is always the romantic when it comes to homes and real estate.  I am generally more business.  Somehow I started to picture myself sitting in a wicker style chair writing my next book on the back lawn overlooking the Pacific.  I wrote my first book sitting on a balcony of my Texas McMansion overlooking a lagoon pool with a tropical garden as the backdrop.  How much cooler would it be to be sitting on a cliff above the Pacific writing that next book that is swirling around my head.

As I checked in this morning, the property was just approaching $6.0MM.  As an investor, that is still a bargain with a lot of room to make money.  As I write this there are just over 10 hours to go so I am interested to see if this is like poker and the two real bidders are waiting in the wings to make a snipe attempt at the end or if some lucky person is going to get a once in a lifetime buy on this land.

If I could just get that big advance for the next book or find a .05% interest only 5 year loan, I would buy it for $6.0MM and worry about it later, and that just isn't how I do business, there is something romantic about this property.

If you want to see it or bid on it in the next 10 hours, call me.

This Weekend In PCH Real Estate

This week in Real Estate along PCH in SoCal offered some interesting new listings and a change that I will be following closely.  The biggest change for me of course was bringing my marketing and business skills on board with my wife at Keller-Williams.  I have officially made the move from investor to agent/investor.


Back the the weekend notes, I found some interesting things, starting at the north end of OC.  The Seal Beach super home offered for $12 Million appears to have been taken off the market already.  After personally seeing the house,  I wish I still had the sheiks financial advisors number.  The house was fit for a king.  In fact I am still digging hoping to find that business card just in case. 


At the same time at the south end of my area in Corona Del Mar, not one but two Cameo Shores tear downs hit the market empty and running.  This is something I haven't seen in the nearly three years I have been monitoring the Cameo Shores and Cameo Highlands areas.  Just 18 months ago I was trying to put together an offer just under $2.0MM for a home that didn't even have a view just to get into that area.  The home sold before i could get a lender to commit.

The big news starts with an ocean front home sitting on a stunning lot that is going to auction.  It was originally listed at $14MM and had no takers for over 6 months.  The tax value is very low indication an original owner, so I am guessing the family for whatever reason just wants to sell it and get the money.  


The Auction information lists a starting price of $5.5MM making the property a smoking bargain.  The agent dropped the price to $9.9MM before the seller agreed to auction off the house.  If you are interested in more information call me, and I'll get you the details on bidding.  There are some great architects and builders in the area that could turn this property into a once in a lifetime buy.  

I think the lot at $5.5MM is a deal beacuse you could knock down the house or live in it.  There aren't many lots for sale at a price like this that include a livable house.  Just up the street off the water is a another original house with some great ocean views for $2.5MM.  

Having two homes in Cameo Shores at lot pricing isn't something that happens every day and both of them will likely sell this week unless the ocean front home has a high reserve at auction.  For those of you that don't know Cameo Shores, it boasts one of California's few private beaches.  There are three access points for the homes that are off water.  Several waterfront homes have a private path to the water.  

Both of the properties have a great opportunity to build some stunning subterranean space and create a very unique finished property.  For the short term the property might not be a huge profit move for an investor, but givin the current market changes, I'd bet my commission that by the time the new houses are finished they will be money makers.

Some time ago I said the sub $1MM bottom had hit Orange County, and the numbers are backing that.  Above $1MM there is still a lot of concern and homes are all over the board.  

In between Seal Beach and CDM there are a couple of nice new waterfront listings in the Huntington Harbor.  More than once I have heard the Huntington Harbor called the "half price Newport Harbor".  This might be true, a nice waterfront home with Viking Appliances and a 50 foot boat dock came on the market this week for $1.975MM.  Less than the price of the knockdown with a view in Newport. 

For buyers in the $1MM-$5MM market there are some deals to be had, digging for deals below $1MM is getting tougher every day.  Word on the street is the auctions have dried up at the courthouse and the banks are holding out.

If you are thinking of buying or selling along the coast in OC give me a call.  If you see something else happening, let me know your thoughts.

Rental Real Estate

I am sitting here in Maui enjoying a condo just across from the beach.  The condo is one of hundreds that are here on the islands which are available by the week.  A well run vacation rental can be a great money maker that lets you have a condo or a house in a great location for up to 14 days a year basically for free.

Basically there are a couple of things to keep in mind, both have to do with 14 days.  The first is how often it is rented each year.  If you rent your property for more than 14 days each year, it triggers tax rules for rental property.  If you use it 14 days each year or less yourself then you get the better deductions like depreciation if you want them.

There are another set of local rules that have to do with sales taxes and hotel taxes.  Hawaii is considering legislation to force vacation rental owners to use a local property manager because they believe the mainland owners are renting properties and not paying taxes.

Nothing good can come of this.  The assumption is that more people are cheating than following the rules.   If that is the case then maybe the rules should be reviewed.  As an agent, forcing owners to use a local property manager only will increase the cost and decrease the benefit of owning a vacation rental.  Generally these increased costs drive down value.  Driving down value drives down price.  When you drive down price, you drive down property taxes and real estate sales commissions.

All of this sounds counter productive to long term revenue generation which is what Hawaii is really looking for isn't it?

This is a case where I don't know the good answer.  The hotel industry of course wants a fair playing field and if they have to pay a hotel tax, then the condo owners should pay some taxes too.  I get that.

The reality is that the income from the tourism, food, drink, souvenir and tour sales is money they don't want to lose either.  If Hawaii is going to force the owners to use a local property manager, then they may need to cap the rates much like many areas do for Taxi cab drivers or smog check stations.  Say some fixed cost of $20 per rental when the owner finds the renter?  How much more work could collecting the checks be for the property manager than smoking an old car?

Your thoughts?