2009-12-01 23:36:58
Isn't it ironic? No, it's just capitalism.
So, round and round the Free State (that's Maryland - wikipedia it) I go, doing my BPO's.
I suppose I need to do a blog one of these days on BPO's - "broker price opinions," but I think I said enough for you to know what they are in my last blog. Basically they're mini-appraisals, but don't tell your appraiser I said that. The appraisers would rather the banks that hire me the capital "R" Realtor® to do these mini-appraisals for $50 or $75 or $100 instead pay them the capital "A" Appraisers $300 or $350 or $400 or $450 to do the maxi-appraisal, otherwise known as the plain old appraisal. In fact, I'm pretty sure that the Appraisers' lobbyists are working Capitol Hill and the fifty state legislation mills to legislate the BPO into extinction.
But that's another story...
Back to this tale, so round and round the Old Line State (that's also Maryland - I had forgotten that until I Wikipedia-ed "Free State") I go, doing my BPO's, cause, these days, that's how I do...
...and every now and then, I come across a fairly remarkable property.
In the last couple of weeks, I came across two.
This fabulous Victorian-styled Baltimore rowhome,
on this - a whole block of fabulous Victorian-styled rowhomes, and said scene literally took my breath away.
and,
I also came across - this one,
Semi-luxuriously outfitted - all 6 bedrooms have a private full bath; the master john has what is practically its own Roman Baths!
But all the walls in the house are painted in that sort of almond or whatever it is they call that generic beigy-brown color. All the walls, except one child's room, which features sandwiched between the beigy-brown walls a beach-scene done in Sponge Bob aquamarine, I guess.
I guess this because in the adjoining private bathroom I find Sponge Bob himself.
What am I saying? That this home is luxuriously tacky? Mmmm, maybe. But I don't really think that's what I'm about.
The house I live in is genuinely retro. Genuinely because the Brady Bunch Blue kitchen walls were really painted that color when the idea of a prime-time television show about two divorcee's joining their split families together for love and laughs was a fairly racy proposition. We've got the golden-rod carpets from the same era. It's practical. Do you think I worry about the teen soda spills or the dog barf?
No, I am not here to wax high-brow on the greatness and class of the Victorian age, its architecture, its aesthetics (its Aestheticism - ahhh Oscar Wilde!),
nor to bemoan our own time of the junky ticky-tacky McMansion, classless monuments to the Nouveau Riche, who it turned out were really faux-riche poseurs faking their way to Nouveau Riche-dom with the financial prosthetic known as the sub-prime mortgage.
No, I am not here to screech out crustily ("crustily?" Jeez - Stephen King warned me about using adverbs): "THEY JUST DON'T BUILD THEM LIKE THEY USED TO!"
So, what am I saying?
I guess what I am edging toward expressing is a sadness about the whole damn thing, the whole damn boom, the whole damn bust.
The Boom was crummy and we were all dummies for drinking the kool-aid. We all drank it. We did. Unless you lived on a kibbutz from 1989 - 2007, you participated in some fashion, you in some way believed or participated in the belief that Alan Greenspan was the shizzle-dizzle.
And out of the Crummy-Dummy Boom we got the McMansions and the ticky-tackies, and out of the Boom was borne the faith that plastic chateaus slapped down on one-tenth acre lots could really be worth three-quarters of a million dollars U.S.
That kool-aid was yummy. The sugar gives you a buzz, don't it?
Yeah, yeah. Sub-prime - bad. MacMansions - bad. Ticky-Tacky's - liked'em then (I didn't really), but now, well, I've got this sugar hang-over.
Nothing new I'm saying here.
What I do want to say, with just a small measure of sadness in my voice, is, that, it wasn't ALL bad.
Before the boom, this Baltimore street of fabulous Victorians and hundreds of blocks like it were in a state of utter decay. Same was true throughout the National Bohemian State, throughout Hagerstown, Frederick, the whole stretch of real estate between the DC line and the DC Beltway - all places with high density housing inventory, much of it of very rich aesthetic, historic, structural, functional value, and all these blocks and neighborhoods falling into the worse kind of social and economic distress.
Now, many will argue that one of the goals of the Great Policy Makers that be - which I guess would be the Fed and Fannie and Freddie - was to grow the good ol' American Dream of Homeownership, and that this is a flawed policy, because just like there will ALWAYS be an equilibrium-slash-necessary-slash-acceptable rate of unemployment, so will there always be a certain percentage of the population who will never be equipped to handle home-ownership. I think that is true. So, one of the Great Flaws of the Greenspan Giant Pool of Money Policy is that it put people into mortgages who historically never got there, and that's because historically, we had it right.
Again, I probably agree with that notion. I also believe that this colossal mess is the result of the private sector's brilliant capacity to capitalize - literally - on a flawed public policy, the whole thing is a great example of government and business working together to not work...
...but that's a different story, and I don't want to get into that!
But I bring it up, and I know it's taking me a LONNNNGGGG time to get to my point - because while the policy of putting dna-designated-renters-for-life into McMansion-homeownership may have been flawed, disastrous, PAINfully disastrous - - -
- - - that same loosy goosey monetary policy and Wall Street's brilliant leveraging of same made possible an inarguably laudable achievement that government has been struggling with for decades, and still isn't getting it done - and that is the goal of driving investment and human beings back into the blocks of these magnificent old blocks and neighborhoods, where we already have the homes built, and the public infrastructure to service the families who habitate here. (Wikipedia Smart Growth.)
During the boom, an investor who could look at a tough Baltimore or Hagerstown block and see a vision of restoration and magnificence could also find the financing to take the risk, and could be reasonably sure that rising real estate values would all but guarantee that the revitalization project - no matter how small or grand - would succeed on some level. And once one investor got in on a block, well, it was a veritable Field of Dreams - - - if you build it...
...and they did come. To Washington Village. To Fells Point, they came.
To Hampden and Canton, to Ridgely's Delight and to Union Square, they came.
Even to Park Heights and Liberty Heights, we came!
To Takoma Park and to College Park, to Capitol Heights and to District Heights and to Suitland, they came.
To Frederick and then to Hagerstown, they came. We came.
A lot of the rehab work was crappy. True, and I suppose that's part of where the fantasy gets shown for what it was...
...in any case, so now, all that has stopped, and this Baltimore block of old Victorians which peaked with a sale of $480,000 in December of 2006, is struggling to hit $275K now. Fixer-upper foreclosures here are now dropping down under the $100K mark. I don't think I am supposed to discuss the value I gave on this BPO I did, but it's stunningly tiny, even given those figures I just cited. And it was based upon solid nearby comps, so, I am anticipating this is where this block is headed.
And so, the whole paradigm has shifted. Back in the day - the day being roughly 2003 to 2007 - an investor could pretty easily find financing to buy and restore one of these beauties, and set out on a path of building up equity, using the equity to move onto the next project, because values were going up up up, right?
Now, today, an investor would have a beast of a time finding a mortgage to renovate this property, and let's say he or she was able to purchase the rowhome for less than $100K, and was able to renovate it for less than $150K, well, that doesn't sound like a bad proposition ---
--except, oh, wait a minute, by the time the renovation is done - who knows? - values on the block may have slipped down to the low $200K's.
The equity strategy is SO 2006.
These days, it's all about cash flow. Forget about whether your investment will be worth more or less in a year or two. The new question is - can you turn the property into a cash-flow positive business, and that way, build up what is the Golden Calf these days, cold-hard cash?
On this block, or a million others like it throughout Baltimore, and throughout "The Wire" State, yeah, you bet. Rents on this baby would bring anywhere from $2400 - $4800 a month (it's divided into a four-unit now). That makes for a pretty good cash positive scenario, even if you finance the deal.
Problem is, no bank is gonna lend you the money, unless you've already got it, right?
So, this is the era for the cash investor. For the guy or gal who is flush in cash and who is ready and willing to pump that pile of cash into - - -
Real Estate???
HAHAHAHAHAHAHAHH
HAHAHAHAHAHHHAAHAHAHAHAH!
in Baltimore??
HAhAHAHHAHHAHAHAHHAHAHAHAH!!!!
But, but, but, there are so MANY GREAT DEALS out there, it's just sickening to watch them rot!
Now NOW is the time to buy, when prices are so low, and there are good good cash-flow fundamentals to support these ventures - - -
but, but, but, there's no cash to buy. no cash, no where.
Isn't it ironic?
Donchya' think?
No, it's capitalism. No cash, means no demand, no demand means falling prices, falling prices means no financing, no financing means no cash, right? Duh. It's that *&^%^ing simple.
Yeah yeah. So what about the 6,700sf McMansion on 3.6 acres?
Well, idunno, anyone looking for a great deal on a Sponge Bob Bathroom?
Anyone, anyone, anyone - oh I really shouldn't do this, but I can't stop myself - -
anyone who is flush with cash, that is?
yeah, I shouldn't've. But I did.
respectfully submitted from the Ed Norton State.
~d
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