Property Taxes are a Bitch

Address: 2610 31st Street - 90405

Details: 2 bed/1 bath 1,216 sq ft house, 9,000 sq ft lot - "sold as is"

Description: Sunset park home with huge 9000 sq ft lot with room to expand for a remodel, or tear down and build new home. Sold as is condition. Listing agent/broker is owner.

Previous Purchase: 6/12/07 - $1,200,000

Listing History: 1/15/08 - $1,225,000

First off, lets give some credit to this seller/agent for making a prominent and very public disclosure that they are the owner. I know many here have disagreed with me with respect to thinking that a disclosure is a big deal but I like to see it. This agent/broker must have been studying too hard for the real estate exam and not paying enough attention to the rapidly deteriorating market conditions when they bought this place though...we jokingly suggest this because this agent/broker's license was issued in August 2007, just 2 months after the purchase was made. Bad timing...


Now lets think about taxes for a minute...Of course we don't personally know this seller/agent but if you are in the real estate business, late 2007/early 2008 was likely a tough time (even for the best veterans of the industry).

Installment 1			Installment 2
Tax Amount	$6,146.29		Tax Amount	$6,146.28
Penalty Amount	$614.62		Pen/Cost Amount	$0.00
Total Due	$6,760.91		Total Due	$6,146.28
Paid Amount	$6,760.91		Paid Amount	$0.00
Balance Due	$0.00		Balance Due	$6,146.28
Delinquent If Not Paid By			Delinquent If Not Paid By	04/10/2008

Here we can see that the very first property tax payment was late (thus generating a late fee of $614.62). The second one appears to still be outstanding and due in a few weeks...

This is a tough situation because as a potential buyer in this situation you clearly have the upper hand...but even if this seller wanted to lower their price to get it done, they might not be able to without getting the bank to accept a short sale (assuming the property has a high CLTV). Can anyone dig up some loan info?

I think they are dreaming with their price and would be lucky to get anything much higher than $1.05M. If you think I am crazy, take a look at foreclosure.com or foreclosureradar.com and check out all the NODs in the area and the foreclosure on 32nd. There is clearly distress in this hood coming down the pipeline which will bring with it lower prices in the future. Lastly, anyone live around here or have experience with this area? I am less familiar with this part of SM and would be interested in hearing the pros/cons and maybe a discussion of proximity to Ocean Park Blvd, the airport and the 10 freeway.

How About A 2004 Rollback On The Water?

2221 Ocean Ave #207 was first featured in December 2007 as our second ever 2004 rollback candidate (see post below this for an update on our first 2004 candidate).

Previous Purchase: 8/4/04 - $580,000 (90% financing)

Listing History: 9/8/07 - $699,995
Reduced: 09/23/07 - to $685,000
Reduced: 10/14/07 - to $625,000
Reduced: 10/31/07 - to $585,000

And now for the update:

Sold: 1/23/08 - $579,000

Wow, not only is this our second confirmed 2004 rollback, but this selling price represents a whopping 17.3% discount to the original asking price. While this is a one bedroom unit (and one bedrooms have shown more stress than 2 or 3 bedrooms), we have to recognize that this is a unit in a building literally ON THE BEACH. No, waterfront properties, even you are not granted "immunity".

Update On Our First 2004 Rollback

607 Ocean Park was first featured here and then here.

1. 607 Ocean Park is a 1,495 sq ft, 3 bed/2 bath townhouse
2. This townhouse was purchased on 1/6/05 for $1,000,000
3. 100% financing was used with both loans from "Impac Lending Group"
4. Townhouse was put on the market around 6/22/07 for $1,099,000
5. No sale was made, and the foreclosure went through on 10/3/07 with Deutsche Bank Trust 2006-Opt3 becoming the new owner for $832,150
6. Property was listed on 11/21/07 for $950,000

Now for the update:

Sold: 12/24/07 - $935,000

Another 100% financed property that couldn't sell and got foreclosed on. This appeared to be a pretty nice unit, close to the water...and now, it is an official 2004 rollback.

90405 - Negative Cash Flow *Update 1*

Back in September 2007, we previously featured 2432 21st - 90405. This 3 bed/2 bath house (1,200 sq ft) was featured as one of our "negative cash flow" properties where it was for sale and asking $1,149,000 while simultaneously also for rent (completely furnished...including 60" TV) asking $4,500/month.

Remember, this appeared to be a distressed situation based on the purchase price of $1,100,000 on 4/4/07.

So what ended up happening? Did it get rented out or did it sell?

Well...neither. Our update comes today in the form of another spring re-listing.

New Listing History: 2/21/08 - $990,000 (short sale)

New Description: Location, location, location. Sellers loss, buyers gain, tree lined wide street, close to all amenities short sale

So here we see someone who bought in 2007, couldn't sell, couldn't rent it out, and is now throwing in the towel. Looking at the selling history a little further back, we can actually see that this is a 2005 rollback based on the previous sale of $1,030,000 on 11/28/05 (97% financed).

22% Loss Foreclosure

Address: 229 Bicknell Ave #105 - 90405

Details: 1 bed/1 bath condo, 602 sq ft, $250/month HOA, foreclosure

Description: REO!!! Santa Monica close to the beach, 1/2 block from main street. Community pool. Vacant and easy to show. Sellers choice of Escrow and Title Services.

Previous Purchase (Person): 8/28/06 - $525,000

Bank Buyback (WaMu): 7/5/07 - $481,000

Listing History: 9/30/07 - $480,000
Reduced: 11/27/07 - to $456,000
Reduced: 12/28/07 - to $433,200
Reduced: 02/02/08 - to $411,550

Ok, lets go through this. Flipper bought this in 2005 and sold it to our unlucky foreclosure "victim" on 8/28/06 after holding for just 16 months (and made nearly $100K in profit). Our 2006 buyer must have only made a few payments (if any) because WaMu foreclosed in less than a year. WaMu then took almost 3 months to get this puppy on the market with an agent...notice the original asking price is almost identical to how much they "bought it back" for.

The price has now been cut 3 times and still no sale...maybe that is because this unit looks like crap (see pics above) and because paying over $400K for a 600 sq ft unit doesn't make any sense. At the current price they are asking $684/sq ft. The current buyer should have a down payment of $80K and an income of over $100K. Do you think these types of buyers want 1 bedroom units that are 600 sq ft big? Note also that there are many other short sale attempts and some foreclosures in this neighborhood that we have previously featured...so as a buyer you have lots of options and lots of negotiating leverage.

Your monthly nut at this price would be $2,850 for interest, taxes and HOA. I would imagine that this would rent for somewhere in the neighborhood of half that amount. Man, all the other sellers (and owners) around here are going to be pissed as the bank continues to cut this price.

Judging from the comps, a 2003 rollback would be at $300,000 and a 2002 rollback would be around $200,000. I have no problem imagining a 2003 rollback here and possibly even a 2002.

What Is Going On Here?

Address: 2606 Highland Ave - 90405

Details: High end, newly (2006) constructed modern house. 2 bed/2.75 bath

Description: Material honesty & structural integrity are honed in the “House of Sand”. The steel H-columns frame the floor to ceiling windows creating a seamless dialogue bwtn the interior & exterior. The primary pool level of this “smart house” offers the master suite connected by a gallery to a generous flex space for private or public usage. The 2nd story, connected by floating ebony stairs, encompasses the open kitchen, living rm + a secondary private space. Ocean views & plenty of subterranean parking.

Previous Purchase: 8/17/07 - $3,000,000

Listing History: 1/11/08 - $2,999,999

The gentleman who appears to have constructed this house bought the tear down back in 2002 for $593,000. This man was also a real estate broker who had/has his office on Main Street here in Santa Monica. He put the house up for sale in mid 2007 and found a buyer willing to pay $3M.

Something must have gone wrong in our buyer's life or maybe it is just a change of heart. But for some reason, just 4 months after shelling out $3M, he is now trying to get his money back via listing the house for the same amount he bought it for...except even if he can get his price, there will be somewhere around $150,000 in transaction costs.

Why would this buyer be so quick to try to bail? If he could afford a $3M place, one would think he wouldn't care about the market falling further, right?

If this were a house out in the inland empire, many who read OC Renter's blog might think that this 2007 buyer was a "straw buyer" or something of that sort. I am not suggesting that, but I am genuinely curious as to what is going on here. Anyone have any more info?

90405 - Flippers Under Pressure **Update 1, A New Year Relist**

We last featured 834 Maple back in October. See the previous post for more details but to recap, this is a remodel/flip attempt being done in a location which we are not that excited about (block from Lincoln/carwash/Arco).

This flipper bought almost a year and a half ago for $1.2M, did an "exquisite" remodel and then listed in mid/late 2007 for a whopping $2.1 million. They then cut the price down to $1.975 million but still couldn't find a buyer. So they did what so many other failing flippers did and went for the "relist in the new year/spring".

New Listing History 1/9/08 - $1,829,000

This represents a price cut of almost 13% from its first listing price. Some people think that list prices aren't falling. I guess if you didn't know this was listed last year for more then you might not get it. Others will look at this and say "values are going up" because a $1.2M property is now selling for much higher (of course the upgrades make up the difference).

Others who are paying attention and can see the writing on the wall see this as yet another bailing speculator who won't be back once he gets rid of this alligator. Is should now be exceedingly obvious that speculators and funny money drove most of the bubble (and yes, prices in SM). This was a pretty depressing week as far as economic news flow, market action, credit worries, etc. As bearish as this blog is on real estate, we don't celebrate recessions, job losses and general contractions. Rather, we try to face the facts and stare reality head on. After seeing what is going on across all risk based markets (yes, SM real estate is in there) and after seeing example after example on this blog, how can you not agree with what we have been saying all along?

100% Financed, Investment Property Short Sale **Update 1 + Now Competing With A Bank**

We previously featured 2045 4th #107B because it was a classic example of an "investor" trying to unload a tenant occupied, 100% financed property via a short sale.

To recap, we are looking at a 1 bed/1 bath unit that is 630 sq ft. It was purchased in late 2005 for $501K and was first listed exactly two years later in late 2007 as an attempted short sale for $459K.

Our update comes in the form of a price reduction on 12/29/07 from $459K to $425K. Additionally, we found a late added comment on this blog which stated the following:

"The building has termites and the owners are going to be accesed (read: assessed) big time early next year. I rent in the building and know the Pres of the HOA. Wouldn't buy this for $375,000. Ms. Catalina is busted."

Obviously we don't have any way of verifying this (yes, this is a blog...not the Times) but thought we would post it anyways. Do your own due diligence.

To further complicate (or make more entertaining for us on the sidelines) the situation, we now have a fresh foreclosure in the same building.

Address: 2045 4th #306B - 90405

Details: 1 bed/1bath, 699 sq ft, $310/month HOA

Description: Bank owned foreclosure. Bright & breezy 1bed + 1bath condo w/ lush landscaping courtyard, pool & spa! Great location! Close to pier, beach, shops, restaurants, farmer's market & 3rd st promenade. Well maintained property. Serene private balcony. Hurry, won't last long!

Previous Purchase: 8/30/06 - $540,000

Listing History: 12/17/07 - $499,900

"Bank Buy Back": 6/21/07 - $460,113 (owner now listed as First Franklin Trust 2006-Ff15)

..."Hurry, won't last long!" I have a hard time believing this.

While this foreclosure is 70 sq ft larger than the attempted short sale still on the market, it seems like they may have a hard time selling it as they are a full $75K higher than the short sale property. So it will cost you $1,000 for every square foot that this foreclosure is larger than the short sale, the horrible rent/own numbers combined with the high HOA make this impossible as an investment to rent out, and then there is the potential termite issue to deal with. I think the bank will be very lucky to get their $460K back.

Sunset Park - The Airport Flip **Update 1, NOW AVAILABLE FOR RENT**

Address: 2314 Pier - 90405

We previously featured this attempted (and currently failing) flip here back in September.

Also, Westside Bubble did a post on the property when it was available pre-flip.

Our update today is that since this flipper couldn't afford face reality and lower the price anymore, they have now put the property up for rent as well (at $4,950/month)!

Rental Description: Most beautiful view home in Santa Monica. Off of 23rd St. Totally redone inside and out in exquisite taste. Most gorgeous back yard. All fenced in for privacy and security. Two car detached garage. A/C. Tank less water system. Elaborate security system. Most outrageous, brand new, never used kitchen and baths. Shimmering hardwood floors. View terrace. Must see!! Also for sale for $1,195,000

Previous Sale: 3/23/07 - $920,000

Listing History: 7/9/07 - $1,250,000
Reduced: 08/17/07 -- $1,250,000 to $1,195,000

Rental Asking Price: $4,950/month

Not sure when it first went up for rent (maybe 10/12/07 since it is the last "updated" date on the MLS rental entry), but now after 152 DOM and only one stale price cut, this thing still looks overpriced on both a rental or purchase basis.

Again and again, we see these flippers and speculators thinking the market will come back in a short period of time. Our advice would be to find the market price and sell because time is only going to make the loss worse. If this property were to actually find someone willing to rent it out at this high rental price, this would then become yet another piece of the "phantom inventory" that we have discussed before. We don't think the market is coming back anytime soon and we have no sympathy for these failed flips. If we knew how much they spent on upgrades we could calculate the loss but in the mean time, we can see that their expenses have to be somewhere in the $7-$9K/month range (at least $1M cost at 6.5% interest +1.1% tax +expenses, fees, etc).

This is a classic example of what can happen to you if you ignore market cycles and don't accept reality. Trying to flip a home on an airport that you bought in early 2007 was not a good choice.

2004 Rollback - From Delusion To Reality

Address: 2221 Ocean Ave #207 - 90405

Details: 1 bed/1 bath condo, 859 sq ft, $315/month HOA

Description: Open house sunday 2-4 pm** super spacious single level, light filled interior spaces with sophisticated designer upgrades -recessed lighting + crown moldings - 42" wall mounted plasma tv, samsung refrigerator/freezer, tandem parking for 2 cars, 200 cu. Ft. On-site lockable, storage, gentle ocean breezes year round. Steps to beach, trendy main street restaurants, and shopping. Easy walking distance to 3rd street promenade. ** open house sunday from 2-4pm. **

Previous Purchase: 8/4/04 - $580,000 (90% financing)

Listing History: 9/8/07 - $699,995
Reduced: 09/23/07 - to $685,000
Reduced: 10/14/07 - to $625,000
Reduced: 10/31/07 - to $585,000

This is our second 2004 rollback featured on this blog. This seller first thought they could walk away with a nominal profit of $120,000 when they listed in early September. That type of delusional thinking quickly faded as three price cuts have brought us back to reality. Judging from the pricing strategy, it seems like we are overdue for another price cut...but another cut brings the asking price below the original purchase price way back in 2004. That is an emotional barrier that is hard to break (unless forced) for a lot of sellers.

This exact unit sold for $300K in mid 2001 and several comparable units in the building sold for $325K and $335K in mid 2002. We aren't sure what year or level that prices will roll back to, but if you think we could unwind the majority of the bubble then maybe these are levels to look at. Its your call.

Lastly, we have heard a lot of banks, lenders, builders, investors, etc come out and talk about loan vintages as if anything prior to about early/mid 2005 is fine or at significantly less risk because HPA (home price appreciation) will prevent losses...we are becoming increasingly skeptical as we find more 2004 and early 2005 rollbacks. Luckily for the lender, these people put 10% down as a cushion but this could easily be wiped out with another price cut.

90405 - Townhouse Rollbacks **Update 2: OUR VERY FIRST 2004 ROLLBACK!!!!!**

Link to listing

Today's property was one one of two previously featured townhouses here

Address: 607 Ocean Park - 90405

First, we will recap and start from the beginning:

1. 607 Ocean Park is a 1,495 sq ft, 3 bed/2 bath townhouse
2. This townhouse was purchased on 1/6/05 for $1,000,000
3. 100% financing was used with both loans from "Impac Lending Group"
4. Townhouse was put on the market around 6/22/07 for $1,099,000

Now for the update:

5. No sale was made, and the foreclosure went through on 10/3/07 with Deutsche Bank Trust 2006-Opt3 becoming the new owner for $832,150
6. Property was listed on 11/21/07 for $950,000

Description: Bank owned foreclosure!! Stunning architectural townhouse! 6 blocks to ocean. Beautifully redone. Oak hardwood floors, large balconies, recessed lighting. Too much to mention. Must read privae remarks.

This appears to be our first legitimate 2004 rollback. This is a high end unit near the beach and it is a townhouse...not a crappy apartment conversion on the border of town.

And how about the lender that issued the 100% financing for this unit? Looks to be out of business or at least significantly disrupted.
Impac Mortgage Press Release
The implode-o-meter has more info as well

Again, we agree with BlackRock's CEO when he recently talked about how you don't find a bottom until there are liquidations. The flood of foreclosures will be the main mechanism which will bring prices down...in this case to 2004 levels.

Lastly, could the real estate agent at least do a spell check on the description before posting? "Must read privae remarks"

Have a nice weekend

Another Listing on 4th...Another Short Sale

Link to listing

Previous 4th Street Posts:
2045 4th #107B
2002 4th #212

Address: 2233 4th Street #1 - 90405

Details: 1 bed/1 bath condo, 697 sq ft, $216/Month HOA

Description: Bright and spacious unit with ocean breezes. Private balcony. Great location close to area beaches and main st. Building has new premium roof installed in 06'. Call listing office for showings. Sale is subject to existing lender approval due to "short sale" status. Unit is tenant occupied.

Previous Purchase: 7/29/03 - $340,000 (100% financing)

Listing History: 6/30/07 - $429,000

The first thing you might be wondering is "how can this be a short sale if they are asking more than they paid"? Well, we see that we have 100% financing so we had 0% equity from day one. The first mortgage appears to be a variable rate and could certainly be an option ARM with some built up negative amortization. Or, this owner could have taken a HELOC at some point in the last few years...it is hard to know but if anyone has access to loan info please feel free to help.

Secondly, we have another brilliant "investor" here. The owner is listed as having an address in Venice and we also see the description as saying "tenant occupied". I wonder what the negative cash flow is...

But please don't worry about the Santa Monica housing market. Everything close to the water will always be desirable and will be immune no matter what. Nothing to see here...move along.

Sunset Park - Another Airport Flip...Even CLOSER To The Jets ** Update 1 **

This property was featured here about 2 months ago

Address: 2224 Navy Street - 90405

This flip was purchased on 7/31/06 for $700,000. It was subsequently "Totally redone with hardwood flooring throughout the house, new kitchen with granite counter top, viking appliances, recessed lighting, new bathroom, paint".

After getting spruced up, it was listed on 6/5/07 for $1,250,000 and then cut to $1,150,000 on 7/31/07. It currently is sitting at 174 days on market.

**We have now found this property listed on Craigslist as available for rent at $3,950/month.

Lets see how much it would cost to "own" this property at its current asking price of $1,150,000:

Interest Only/Opp Cost (6.5%, no PMI): $6,229/month

Property Tax: $1,054/month

Water, Trash, Insurance, Repairs: $500/month (estimate)
_____________________________

Total: $7,783/month...just for reference, the total including expenses for a 30 year fixed rate amortizing mortgage would be $8,823/month

So once again, we see that it currently costs about half as much to rent as it does to own. The ownership costs should generally always be higher than rental equivalent costs but we think that a 2 to 1 margin is wider than it should be and that this gap will close over time via marginally higher rents and significantly lower prices.

Lastly, we are seeing more and more cases of investors who can't sell their properties turning to the rental market. We believe this is contributing to a "phantom inventory" situation (OC Renter term) where instead of pent up demand, we may actually have a case of pent up supply. We are finding many cases of people who hope the market will come back in the next year or so. BlackRock's CEO recently talked about mortgage market conditions and said: "The bottom has not been achieved yet". "There have been no liquidations."...we believe this is key to watch for in both the mortgage market and the local housing market.

Aloha Loss

Link to listing

Address: 2002 4th Street #212 - 90405

Details: 1 bed/1 bath condo, 678 sq ft, $216/month HOA

Description: The ultimate in california style living. This beautifully redone santa monica beach condo has hardwood floors throughout. Very bright with east/west exposure, smooth ceilings, built ins, good floor plan & low hod with earthquake insurance.

Previous Purchase: 12/13/05 - $490,000

Listing History: 10/11/07 - $495,000
Reduced: 11/7/07 - to $479,000

Just two posts ago we featured the attempted short sale of 2045 4th Street #107B. Well, we found today's property to be just across the street. From what we can see it appears that this time we have a 20% down payment. And of course, this is another investor situation...except this time, our investor is listed as living in HAWAII!! Aloha 2005 rollback.

Hawaii...beach close SM...real estate...it all goes up all the time, right?

100% Financed, Investment Property Short Sale

Link to listing

Address: 2045 4th Street #107B

Description: Excellent beach area location. Upgraded unit with stainless steel appliances, tile counter tops, hardwood floors in living room. Balcony/patio opens to courtyard area. Complex has heated pool and spa. Well maintained property. Sale is subject to existing lender approval due to "short sale" status. Unit is tenant occupied. Call listing office for showing instructions.

Details: 1/1 Condo, 630 sq ft, $310/month HOA dues

Previous Sale: 10/20/05 - $501,000 (100% financed)

Listing History: 10/23/07 - $459,000

This is a classic example of just about everything wrong with the real estate market today. Lets see why.

1. $0 down, 100% financing (1st mortgage is adjustable rate and 2nd is fixed)

2. Don't actually live in it...rent it out at negative cash flow

3. After you buy your "investment property", go buy a 4 bedroom house for yourself in 90405 on 2/23/06 for $1,111,500. I will withhold the address as a courtesy to these speculators...but if you have access to loan data, I would like to see the financing for it. E-mail me for the address.

4. When things don't go your way and you realized you bought your "investment" at the peak of the bubble (not to mention your $1M+ house), let the bank eat the loss with a short sale. Its not like you have anything invested anyways ($0 down).

In cases like these, it is hard to figure out who was more irresponsible. The lender gave out the $0 down loans which was stupid. The person thought buying and renting it out was a good idea; which of course was also stupid.

Maybe the bank should do a little homework and see that these people bought their own house which they appear to be living in just 4 months after closing on this "investment". If they can keep making payments on a $1M+ house, surely they should be able to take on whatever losses arise from this situation, right?

Lastly, an identical unit (#308B) in this building sold on 4/5/05 for $457,000. That means we are already looking at an early 2005 rollback before any price cuts. I think we will see 2004 rollbacks soon...this is such a train wreck.

More Speculators Leaving The Market...And Taking Losses Along The Way

Link to listing

Address: 2724 6th - 90405

Details: Fixer/tear down on a 4,000 sq ft lot

Previous Purchase: 6/20/06 - $1,089,000

Listing History: 2/19/07 - $1,125,000
Reduced: 04/18/07 - to $1,075,000
Reduced: 07/07/07 - to $999,000

Holding Costs: $6,900/month or $115,000 to date

Transaction Costs: $50,000

Total Loss: $255,000

The status of this property is currently "looking for backup". Assuming they get their current asking price of $999K, they stand to lose over $250K. Losses like these should remind people just how important it is to understand what phase the real estate cycle is in.

Maybe I am missing something here but even at this reduced price, paying $1 million for a 4,000 sq ft lot seems crazy. Property Shark shows the zoning as SMR3 so that could explain it. Maybe a multi-unit potential here?

Another Agent/Owner 2-Year Loss

Link to listing

Address: 2441 14th - 90405

Listing Description: Adorable cottage with original hardwood floors, quaint fireplace in living room, formal dining room, updated features, all appliances included. Nice size lot and room for expansion. 1/2 block to elementary school and 1 block to junior high school. Also can walk to grocery store and restaurants. Ready to move-in. Freshly painted and updated. Owner is licensed california real estate agent.First showing and open house 10/2/2007. Great buy in good area of santa monica.

Previous Purchase: 6/24/05 - $850,000

Listing Price: 9/27/07 - $899,000

Once again we have found an example of a real estate agent who bought a property approximately 2 years ago and is now trying to sell (and is acting as their own listing agent). We aren't quite to the point of a nominal loss here, but if you include the costs of "updating" the structure as well as taxes, interest, etc you will be seeing a loss here...the only question is how much. And yes, there is something at stake here because it appears that these people put 10% down. Taxes and interest/opportunity cost alone come to about $140,000 for the past 28 months of ownership.

Maybe this real estate agent and the last one actually lived in these houses and did not have any extra properties during the last few years. It is hard to know. But we are speculating that more than a few people in the "real estate industry" got a little too bullish, drank the kool-aid, and went ahead and bought multiple "investment" properties. This activity would have helped fuel the buying frenzy on the way up and should now be helping fuel the selling frenzy on the way down. This is another reason why we are short term bearish. The speculators have not cleared out of the market yet...they have to be able to sell first.

Lets try to keep the comments clean and avoid real estate agent bashing please.

Ashland Architectural Rollback

LINK TO LISTING

Address: 1621 Ashland Ave - 90405

Westside Bubble already did a post on this property HERE

Anyways, we are doing a brief update because we are getting closer to a late 2005 rollback on a single family home.

Original Purchase: 10/31/05 - $1,450,000

Asking Price: 8/13/07 - $1,675,000
Price Reduced: 09/06/07 - to $1,650,000
Price Reduced: 09/20/07 - to $1,610,000
Price Reduced: 10/17/07 - to $1,585,000

This place is also for rent furnished or unfurnished for $6,850. The owner appears to have a $1 million first mortgage and a $305,000 second. The owner is also the realtor selling it. Spare us the negative comments on realtors, we get it already.

When taking into account holding costs (taxes + interest/opp cost) we get to about $220,000 over 2 years. The kitchen may have been upgraded and of course we aren't including any insurance, maintenance, closing costs, etc. We also are not including any tax benefits or selling fees (maybe these roughly cancel each other out). It looks like a loss will be occurring here no matter how you break it down.

It also seems just a little too convenient that the property was purchased almost exactly 2 years ago. That will make any nominal gain here (assuming final sales price is over the purchase price) tax free. How convenient. Happy Halloween.

90405 Flip and 90402 Spec Update

Address: 1741 Maple - 90405

Details: 3 bed/2 bath 1,368 sq ft house on a 7,800 sq ft lot...some upgrades?

Description: "Low Security Deposit, No down-payment-OK! Perfect seller financing possible. Will consider all offers. Need fast sale. Visit KlondikeInvestments. com for full list. Notice your commission. Seller credit for closing cost! House is all remodeled."

Previous Sale: 4/5/06 - $1,300,000

Listing Date: 10/15/07

Asking Price: $1,590,000

Asking Rental Price (per Klondike page): $4,000/month

Holding Costs To Date: Approx. $150,000
Selling Fee: $79,000
Profit: $60,000 MINUS any money spent on any upgrades. This could already be negative (i.e. a loss) or very close to it.

We aren't quite sure what is going on here but this situation looks dicey (unless we are missing something?). The description says "house is all remodeled" but from the pictures it looks like an updated kitchen and maybe some other minor upgrades.

What is up with this no down payment, seller helping with financing thing? And what is the story with Klondike Investments? I don't see how money is going to be made here but maybe I am missing something? Also, we can't tell if it is for rent or not...the asking rental price seems low.

Lastly, jumping over to 90402, 333 14th cut its price for a second time and is now down to $4,595,000 with a DOM of 114. Also anyone know what happened to 239 14th? I can't find it anymore and it had been the most aggressively reduced spec house ($4 million asking price, which was a reduction of over 10%).

90405 - Flippers Under Pressure

Address: 834 Maple - 90405

Details: 3 bed/2 bath house with a pool, pool house, and guest house...on a 6,600 sq ft lot

Description: Stunning spanish showplace in sunset park that has it all! Exquisitely remodeled 3br+2ba home w/a guest house,pool house & beauty salon/ofc. Home features dark wood flrs, fpl, arched doorways,arched ceiling, surround sound, recessed lights & more! Open kitchen highlights top of the line thermador stainless appliances.Gorgeous master bath has steam shower.Master br w/french doors open to the pool.Permitted pool hse has its own bath.Legal guesthse has a full kitchen & full bath.

Purchase Date: 8/4/06

Purchase Price: $1,200,000

Listing Date: 8/24/07 (55 DOM)

Asking Price: $2,100,000
Price Reduced: 09/29/07 -- $2,100,000 to $1,975,000

This house has been completely redone and it is pretty nice both inside and out. A substantial amount of money must have been spent to get it in its current condition.

The problems arise when you realize that apartment buildings are right behind you and you are one short block away from Lincoln (and subsequently a do-it-yourself carwash and an Arco gas station). And you have less than 2,000 sq ft on the main house and everything is jammed onto a 6,600 sq ft lot.

The property has been held now for 14 months and carrying costs are likely around $8,000/month for taxes and interest (or opportunity cost) on the initial purchase amount. That comes to a total of around $200K if we add these up and include a 5% selling commission. That leaves $600K that will be split between remodel costs, interest/opportunity costs on remodeling funds, and of course, profit...of course this all assumes they can get their current price.