Archive for the 'Investment Properties' Category
Multi Family Property in Distress
I had some downtime last night, so I decided to look through the MLS to see how the multi family markets are holding up in the current environment. Although multi family properties can be found throughout the region, they make up a small fraction of the overall residential market in most towns. I started by identifying the towns in which they represent a meaningful portion of the housing stock, which makes the data more interesting and relevant. I settled on Hartford, New Britain, New Haven, and Waterbury as the focus of the research.
All data was pulled from the CT MLS and reviewed and compiled manually. “Distressed” property to me means that either a bank already owns the property or the sale will require lender approval because it is a Short Sale. This analysis does not include properties going through foreclosure if they are not listed in the MLS because there is no central data source which collects that information. And when I say “reviewed manually” that means me going through every single MLS listing for that type of property and counting it manually. The MLS does not require agents to enter in the owner, nor does it require us to enter in a Short Sale, although those data fields do exist. Some agents fill in the information, but most do not, so the easiest way to gather the data is just to look through and manually count. It is not fun, but is doable while sitting on a couch on Tuesday night, watching TV. I counted a property as Distressed if the owner was listed as Corporate or a bank, if the Short Sale field said Yes, or if anywhere in the listing description or agent remarks it said that the sale needed lender approval, was bank owned, or was a short sale.
Here’s what I found. Remember, data from the MLS is deemed reliable, but not guaranteed. My ability to count correctly while watching House Hunters is deemed fairly reliable, but also not guaranteed…
Some Observations…
1. The levels of distress among multi family properties is consistently above 20%, and in some cases above 30%. In absolute terms, these numbers are higher than we have seen in previous years and show that the Connecticut’s cities have felt some of the impact of the “housing crisis.”
2. The levels of distress among multi family properties is generally higher than among single families. Unfortunately, the data does not give any clues as to why multi families have become distressed at a higher rate. There are many factors that play into a property owner’s decision to default, but the most likely explanation is that investors took on too much debt to buy marginally profitable properties in hopes of continued price appreciation.
3. Inventory levels vary between the towns. This suggests that there are more buyers shopping in New Haven, where the multi family inventory is 7.3 months, versus Hartford. The other side of the coin is that there may be more opportunities for buyers right now in Hartford.
Connecticut is experiencing distress in its multi family markets, and seeing it at a higher rate than the single family properties in the same markets. This creates opportunities for buyers with cash, whether they are looking for investment properties or plan to live in one of the units themselves. Next month’s market statistics post will include updated data for distress in the single family markets of our usual towns.
Change to Tax Exclusion on Sale of Primary Residence
The Housing and Economic Recovery Act of 2008 changed the tax rules around the sale of primary residences in a way that has not been widely discussed. Homeowners may no longer be able to claim a full $250,000 (or $500,000 for married filing jointly) capital gains exclusion for a primary residence despite living there for 2 of the past 5 years.
The new rules, which went into effect at the beginning of 2009, still use the 5 year look-back period. They also retain the exclusion limits of $250,000 and $500,000. However, sellers now need to scale the exclusion by the percentage of time that the property served as their primary residence over the past 5 years. A quick example is the easiest way to illustrate the change. Suppose an owner lived in a property for 2 years, then rented it out for 3, and is now looking to sell. Because they lived there for 2 of the previous 5 years, they would be eligible for 40% of the credit. Under the previous code, they would have qualified for the whole thing.
Like all laws, this can get complicated quickly. And portions could be open to interpretation. So, investors and second home owners planning to take advantage of this gains tax exclusion need to consult with their people (accountants and/or attorneys) to make sure that they are on track to achieve their real estate goals.
For Your Further Reading Enjoyment:
The Housing and Economic Recovery Act of 2008 (refer to Section 3092 near the end)
IRS Section 121 Code
A Warm Welcome for Kyle
I’m very excited to announce that Kyle Bergquist has joined the Greater Hartford Real Estate Blog and my residential real estate practice on a full-time basis.
As many of you know, Kyle is my husband and has been a regular contributor for quite some time. His bio has been available on the site for a while so I’m not going to rehash the gory details. I will say that he is a smart, creative and hard-working guy, and it never hurts to add people like that to your business.
Kyle has been working part-time as a licensed agent for almost a year now, so he’s going to be able to step right in and begin working with clients. We expect that he will focus mainly on buyers, giving our team twice the availability for showing properties. To the extent that we work with investors, he will likely take the lead there so that clients can benefit from his considerable experience analyzing opportunities (his full-time job for the past 5 years). Finally, he’ll also be active on the operational side of the business, working to support our various initiatives.
On a personal level, I’m really looking forward to seeing Kyle more often and having him partner with me. We both have different business strengths and ideas, and I think this is going to help take our customer service and overall business to an entirely different level. I can’t think of anyone else I’d rather have on my team! 
Welcome, Kyle!
UPDATE: A few of you inquired, Kyle was not laid off, he chose to leave his previous position to help me expand my business. This was a carefully planned decision which we’ve been working towards over the past few months.