The "Affordable Housing" Discussion in GR

[arcturus]

I'm seeing a ton of 'owner is agent' listings on Zillow these days, more than I recall.  Most have been recently purchased, renovated, and are now being flipped.  Generally, they appear to have been purchased at great prices even when factoring the improvements going in which makes me wonder if their access to MLS or pre-MLS is the primary reason many get licenses, not necessarily for clients but for their own pocketbook.  I'm not in the business myself ... just curious.  

[GR8scott]

There's no doubt that happens and how can you blame the agents that have access and want to make something quick on the side. The sad thing is sometime the renos are done badly and the buyer has to redo things to their liking. 

[GRDadof3]

On 3/3/2018 at 7:24 PM, arcturus said:

I'm seeing a ton of 'owner is agent' listings on Zillow these days, more than I recall.  Most have been recently purchased, renovated, and are now being flipped.  Generally, they appear to have been purchased at great prices even when factoring the improvements going in which makes me wonder if their access to MLS or pre-MLS is the primary reason many get licenses, not necessarily for clients but for their own pocketbook.  I'm not in the business myself ... just curious.  

Because of the anemically low number of listings on the market, and the huge number of licensed realtors in the community, a lot of realtors have gotten into flipping homes to make money. In addition, if you are a home flipper, it only makes sense to get your license and pay the annual dues of a  couple of $thousand, and then not have to pay as much realtor fees when you sell or buy.  Especially if you are doing multiple properties. 

[arcturus]

21 hours ago, GR8scott said:

There's no doubt that happens and how can you blame the agents that have access and want to make something quick on the side. The sad thing is sometime the renos are done badly and the buyer has to redo things to their liking. 

No blame but there's no denying the already chronic shortage of resales isn't being helped by realtors who cherry pick from the available pool, leaving even less available.  And if it so happens my realtor owns a place they want to sell my first question will be 'why didn't I hear from you before YOU bought it?

[GRLaker]

1 hour ago, arcturus said:

No blame but there's no denying the already chronic shortage of resales isn't being helped by realtors who cherry pick from the available pool, leaving even less available.  And if it so happens my realtor owns a place they want to sell my first question will be 'why didn't I hear from you before YOU bought it?

Exactly.

[GRDadof3]

7 hours ago, arcturus said:

No blame but there's no denying the already chronic shortage of resales isn't being helped by realtors who cherry pick from the available pool, leaving even less available.  And if it so happens my realtor owns a place they want to sell my first question will be 'why didn't I hear from you before YOU bought it?

I do agree that flipping needs to subside a bit in this market. The amount of money and work you need to put into a place to flip it and make a good profit is way more than if you buy a place, fix it up, and rent it out.  All of these flippers taking those stupid house flipping courses from the HGTV you-know-whos I think is hurting the market on the affordability side. 

[jthrasher]

On 3/5/2018 at 11:21 AM, arcturus said:

No blame but there's no denying the already chronic shortage of resales isn't being helped by realtors who cherry pick from the available pool, leaving even less available.  And if it so happens my realtor owns a place they want to sell my first question will be 'why didn't I hear from you before YOU bought it?

Most people aren't interested in buying a home that needs renovations and doing it themselves.  That's why realtors and others like myself buy and fix up homes and sell them because most people want to buy a move in ready home.  It doesn't hurt the market at all, if anything it helps get rid of properties that have been sitting a while and bring their neighborhoods down.  

[GRDadof3]

2 hours ago, jthrasher said:

Most people aren't interested in buying a home that needs renovations and doing it themselves.  That's why realtors and others like myself buy and fix up homes and sell them because most people want to buy a move in ready home.  It doesn't hurt the market at all, if anything it helps get rid of properties that have been sitting a while and bring their neighborhoods down.  

I think that depends on how much is put into the flip. If you buy a home for $125,000 and put $35,000 into it, and put it on the market for $200,000 because you want to maximize your profit according to the risk (which there's nothing wrong with), then you've just pushed the values of comp homes in that area up 75%.  It's the reason why landlords sell homes and the new landlords have to almost double the rent for the current tenants, to pay the new mortgage and the increased (reset) property taxes.  

I think you'd be surprised how many people would have bought the $125,000 and maybe put $5000 into it and would've been happy as clams. I'd say there's literally over 1000 people in the market right now who would have. And they would have kept the house up and not brought down the neighborhood as you insinuate. And many, many young people don't mind buying a house and putting some work into it. That's the essence of a first-time homebuyer, they almost expect to have to do it. 

Flipping homes, like everything else, is fine when done in moderation. 

 

[x99]

49 minutes ago, GRDadof3 said:

I think that depends on how much is put into the flip. If you buy a home for $125,000 and put $35,000 into it, and put it on the market for $200,000 because you want to maximize your profit according to the risk (which there's nothing wrong with), then you've just pushed the values of comp homes in that area up 75%.  It's the reason why landlords sell homes and the new landlords have to almost double the rent for the current tenants, to pay the new mortgage and the increased (reset) property taxes.  

I think you'd be surprised how many people would have bought the $125,000 and maybe put $5000 into it and would've been happy as clams. I'd say there's literally over 1000 people in the market right now who would have. And they would have kept the house up and not brought down the neighborhood as you insinuate. And many, many young people don't mind buying a house and putting some work into it. That's the essence of a first-time homebuyer, they almost expect to have to do it. 

Flipping homes, like everything else, is fine when done in moderation. 

Well, by the time you pull about $20,000 in transaction and holding expenses out of that flip, that profit drops a lot...  $20k return on a $160k investment is not good for the risk involved... 

But the property tax uncapping on rentals?  That's just a killer.   A lot of rentals are seeing a doubling of taxes.  That must come straight of of tenant pockets until the wheels come off again and rental values fall back.  Which is going to happen.  We've hit the crazysauce point again where mom and pop "investors" are buying stuff with low single digit or even negative returns.  How is this possible that these garbage prices appraise?  4 units or less only goes through a "market comp" appraisal.  They generally do NOT do an income analysis.  Prices on this junk can march ever higher, completely detached from any economic reality.   To salvage the situation, cash gets dumped into a new kitchen, bathrooms, etc., driving the prices even higher.  

[arcturus]

41 minutes ago, x99 said:

Well, by the time you pull about $20,000 in transaction and holding expenses out of that flip, that profit drops a lot...  $20k return on a $160k investment is not good for the risk involved...

What risk in a crazy market like this?  Besides, doing it 3 -4 times a year isn't exactly chump change.

[GRDadof3]

1 hour ago, x99 said:

Well, by the time you pull about $20,000 in transaction and holding expenses out of that flip, that profit drops a lot...  $20k return on a $160k investment is not good for the risk involved... 

But the property tax uncapping on rentals?  That's just a killer.   A lot of rentals are seeing a doubling of taxes.  That must come straight of of tenant pockets until the wheels come off again and rental values fall back.  Which is going to happen.  We've hit the crazysauce point again where mom and pop "investors" are buying stuff with low single digit or even negative returns.  How is this possible that these garbage prices appraise?  4 units or less only goes through a "market comp" appraisal.  They generally do NOT do an income analysis.  Prices on this junk can march ever higher, completely detached from any economic reality.   To salvage the situation, cash gets dumped into a new kitchen, bathrooms, etc., driving the prices even higher.  

Exactly my point. It's not a problem when a handful of people are doing it, but when every one and his brother takes a Tarek and Christina class and they think they can make it rich flipping homes, it makes it difficult for most homeowners to find a home they can afford. And it makes it difficult for organizations like Habitat to find homes they can renovate. Almost impossible actually. 

45 minutes ago, arcturus said:

What risk in a crazy market like this?  Besides, doing it 3 -4 times a year isn't exactly chump change.

Are people actually able to find 3 - 4 homes a year that are good flip candidates? Unless you have a ton of cash and don't need financing, I don't know how anyone can get their hands on enough homes and make a living out of it. And actually $60 - $80,000/year is chump change considering how much risk you're taking. Just get a job as an accountant, you'd make way more money and get benefits.  Reminds me of when I met someone who owned 5 pizza delivery stores here in GR (I won't name the chain). With how cutthroat the pizza market is, especially competing against Little Caesars $5.55 pizzas, they only NETTED about $20,000 per store per year. On top of dealing with people who no-call no show and health department visits. $100,000/year wasn't enough for the hours and headaches. They had decided to go look for a "job." lol. 

[arcturus]

1 hour ago, GRDadof3 said:

Exactly my point. It's not a problem when a handful of people are doing it, but when every one and his brother takes a Tarek and Christina class and they think they can make it rich flipping homes, it makes it difficult for most homeowners to find a home they can afford. And it makes it difficult for organizations like Habitat to find homes they can renovate. Almost impossible actually. 

Are people actually able to find 3 - 4 homes a year that are good flip candidates? Unless you have a ton of cash and don't need financing, I don't know how anyone can get their hands on enough homes and make a living out of it. And actually $60 - $80,000/year is chump change considering how much risk you're taking. Just get a job as an accountant, you'd make way more money and get benefits.  Reminds me of when I met someone who owned 5 pizza delivery stores here in GR (I won't name the chain). With how cutthroat the pizza market is, especially competing against Little Caesars $5.55 pizzas, they only NETTED about $20,000 per store per year. On top of dealing with people who no-call no show and health department visits. $100,000/year wasn't enough for the hours and headaches. They had decided to go look for a "job." lol. 

Didn't say make a living out of it, just a nice alt investment.  Using 160K as the purchase price and flipping for a modest 20K net profit after outsourcing the improvements to a contractor twice a year is a tidy 25% return.  How much time does that take, a few hours a week for 2 months to make sure the contractor doesn't put a toilet in the kitchen?  Keep the day job and go in an hour earlier.  The 160K isn't that risky (and for many chump change) as you've probably cherry picked a property in advance with sufficient due diligence that at worse gets your money back if you don't spend a dime.

My neighbor next door did exactly that.  Has a day job and his wife conveniently is the realtor.  I think they were in the pizza business at one time lol.

 

[GRDadof3]

59 minutes ago, arcturus said:

Didn't say make a living out of it, just a nice alt investment.  Using 160K as the purchase price and flipping for a modest 20K net profit after outsourcing the improvements to a contractor twice a year is a tidy 25% return.  How much time does that take, a few hours a week for 2 months to make sure the contractor doesn't put a toilet in the kitchen?  Keep the day job and go in an hour earlier.  The 160K isn't that risky (and for many chump change) as you've probably cherry picked a property in advance with sufficient due diligence that at worse gets your money back if you don't spend a dime.

My neighbor next door did exactly that.  Has a day job and his wife conveniently is the realtor.  I think they were in the pizza business at one time lol.

 

How many homes have they done this with? 

Have you tried finding a good contractor lately who has time to do small jobs? And doesn't charge a fortune for management? 

I just looked on the MLS and there's exactly one house on the market on the West Side of GR between the price range of $100K - $175K.  1, uno, currently. 

If you expand to the entire city of GR, there are 31 homes on the market currently for a city with a population of about 200,000. 

I'm not suggesting you don't do it. But I have had 3 people in the past year ask me about flipping homes (not on UP) and I told all 3 "don't do it."  Buy a home as an investment and rent it out? Go for it. 

[jthrasher]

11 hours ago, GRDadof3 said:

How many homes have they done this with? 

Have you tried finding a good contractor lately who has time to do small jobs? And doesn't charge a fortune for management? 

I just looked on the MLS and there's exactly one house on the market on the West Side of GR between the price range of $100K - $175K.  1, uno, currently. 

If you expand to the entire city of GR, there are 31 homes on the market currently for a city with a population of about 200,000. 

I'm not suggesting you don't do it. But I have had 3 people in the past year ask me about flipping homes (not on UP) and I told all 3 "don't do it."  Buy a home as an investment and rent it out? Go for it. 

flippers who are doing it full time aren't buying homes they find on the MLS.  By the time a house hits the MLS there's a reason a full time investor hasn't snatched it up.  Most investors look for off market deals.   They drive around looking for dilapidated homes,  get in touch with the owners  and try and make deals with them.  The margins for most houses on the MLS are too slim.  Every once in a while you can find one but they are getting harder and harder to find here in GR.  

[arcturus]

14 hours ago, GRDadof3 said:

How many homes have they done this with? 

Have you tried finding a good contractor lately who has time to do small jobs? And doesn't charge a fortune for management? 

I just looked on the MLS and there's exactly one house on the market on the West Side of GR between the price range of $100K - $175K.  1, uno, currently. 

If you expand to the entire city of GR, there are 31 homes on the market currently for a city with a population of about 200,000. 

I'm not suggesting you don't do it. But I have had 3 people in the past year ask me about flipping homes (not on UP) and I told all 3 "don't do it."  Buy a home as an investment and rent it out? Go for it. 

They've done 7 over the past 3 years.

I personally haven't looked for a contractor but know they don't limit themselves to registered ones.  Depends on the job.

According to Harger's column on Mlive today inventory in the metro area has hit rock bottom, roughly 1200.  The 160K figure is an example and not necessarily reflective of their target price range.  You have to figure with real estate prices jumping so has their acquisition costs.  I do recall them mentioning about partnering on some of the purchases to split costs.  But yes, if you limit the inventory to a specific price range within a smaller geographic segment the scarcity is apparent.   

[ModSquad]

Here are some numbers to blow everyone's hair back:

As of 15 min ago on the GRAR site:

• Only 94 single family homes for sale at any price point in Grand Rapids.  Cheapest is $58,900 most expensive is $1.4 M for a home to be built in the Belknap neighborhood.
• Since this is an affordable housing discussion I am looking at the $159K to $189K price range.  There are only 9 homes for sale.
• In all of Kent County there are only 676 homes for sale at any price point.
• Back to affordable home ownership, I chose the same price range as above and there are only 38 homes for sale.

This is a full blown crisis.

[GRDadof3]

39 minutes ago, KCLBADave said:

Here are some numbers to blow everyone's hair back:

As of 15 min ago on the GRAR site:

• Only 94 single family homes for sale at any price point in Grand Rapids.  Cheapest is $58,900 most expensive is $1.4 M for a home to be built in the Belknap neighborhood.
• Since this is an affordable housing discussion I am looking at the $159K to $189K price range.  There are only 9 homes for sale.
• In all of Kent County there are only 676 homes for sale at any price point.
• Back to affordable home ownership, I chose the same price range as above and there are only 38 homes for sale.

This is a full blown crisis.

The answers probably aren't going to make people very happy.   Minimum square footage adjustments and lot size adjustments in the suburban areas would help but it will probably never fly. 

Townships in Kent and Ottawa County need to come together to create a better "fast-track" system to get developments approved. This years and years of process in many cases takes way too long and takes way too much money/risk. Developers have to invest quite a bit of money to even see if a project will get approved.

But even if that were improved, I can think of 3 single-family developments in the last 2 years where approvals were in hand, earth-moving equipment was on site, and the projects SAT and SAT for months and months waiting for experienced equipment operators to start developing the project. Those are just the ones I know about.

Tax laws should be changed so that landowners who do look at selling for development are not hit with such onerous federal taxes. I've had several landowners explain to me why they'd be willing to sell at a lower price per acre but it doesn't make any financial sense once they pay capital gains. These are mostly retired ex farmers who don't really need the money anyway. 

We can't build our way out of this problem in the city of GR anymore, it's gotta be in the surrounding areas. The first ring cities are the best places to start, IMO. 

 

 

[GRDadof3]

4 hours ago, jthrasher said:

flippers who are doing it full time aren't buying homes they find on the MLS.  By the time a house hits the MLS there's a reason a full time investor hasn't snatched it up.  Most investors look for off market deals.   They drive around looking for dilapidated homes,  get in touch with the owners  and try and make deals with them.  The margins for most houses on the MLS are too slim.  Every once in a while you can find one but they are getting harder and harder to find here in GR.  

On that we can agree. Which again makes it difficult for the average buyer who is just looking for a home. "Change of plans honey. Forget GR, we need to start looking in Dorr." 

[arcturus]

Home Depot donating $50M to train construction workers.  Hoping others directly tied to the construction industry do the same.

https://www.usatoday.com/story/money/2018/03/08/exclusive-home-depot-donate-50-m-train-construction-workers-address-severe-shortage/403659002/

[GRDadof3]

6 hours ago, arcturus said:

Home Depot donating $50M to train construction workers.  Hoping others directly tied to the construction industry do the same.

https://www.usatoday.com/story/money/2018/03/08/exclusive-home-depot-donate-50-m-train-construction-workers-address-severe-shortage/403659002/

I know at least one residential builder in the area is looking at partnering with MSU's construction management program, which sadly MSU is apparently one of the only schools left in Michigan that has such a program.  It's in the very early stages but it sounds pretty cool. 

[arcturus]

Grand Rapids front and center in today's Wall Street Journal titled 'The Next Housing Crisis: A Historic Shortage of New Homes' subtitled 'Fewer new houses are being built in America than at almost any time before; ‘It’s a good time to be here in Grand Rapids, if you can get a house’

Not sure if it's pay walled.  I have a subscription.

https://www.wsj.com/articles/american-housing-shortage-slams-the-door-on-buyers-1521395460?mod=e2twg

[GRLaker]

7 minutes ago, arcturus said:

Grand Rapids front and center in today's Wall Street Journal titled 'The Next Housing Crisis: A Historic Shortage of New Homes' subtitled 'Fewer new houses are being built in America than at almost any time before; ‘It’s a good time to be here in Grand Rapids, if you can get a house’

Not sure if it's pay walled.  I have a subscription.

https://www.wsj.com/articles/american-housing-shortage-slams-the-door-on-buyers-1521395460?mod=e2twg

It is pay walled unfortunately.

[HomePortSupplyCo]

FWIW,  I hit the pay wall via that link as well.   I then searched for the article in Google News on my phone and it let me read with no issues...

[GRDadof3]

I was able to read this one:

https://www.wsj.com/articles/american-housing-shortage-slams-the-door-on-buyers-1521395460

Everyone interviewed pretty much nails it. 

[RegalTDP]

29 minutes ago, Onekama said:

FWIW,  I hit the pay wall via that link as well.   I then searched for the article in Google News on my phone and it let me read with no issues...

+1. I did that as well.  Often I've found paywalls do not block returns that come up on a Google search.