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Archive for the ‘florida’ Category

A couple of days ago, I talked with the third person I have met that has been burned by a Cabana Cay investment. About two years, the Cabana Cay investment pitch was making the rounds on the real estate investment clubs/seminar circuit. Cabana Cay was in the building of building or refurbishing resort properties, mostly in Florida. From what I gathered the deal was a preconstruction opportunity that, when finished, you would own a resort condo that would lease out to vacationers at high rents providing lots of cash flow.  The deal was sweetened by a developer lease back for a year or two, and/or the ability to put your down payment towards mortgage payments, so there was very little out of pocket.

Fast forward a couple of years and everyone I have met is trying to get out of the deal by selling the unit as a short sale. They have all stopped making mortgage payments (which were big once the funding for them – lease back/down payments – ran out), which of course has trashed their credit. There are allegations of fraud as it appears that consistently the units were valued higher than what they were worth. Promises of refurbishing a resort into a 5 star property never happened and Cabana Cay, as a real estate developer, apparently is defunct. Although you would never know it from browsing the internet.

There appears to be a viable Cabana Cay property in northern Florida.  I couldn’t find the other ones.

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I been struggling to think of some witty post for this blog. To post some upbeat story that gives a glimmer of hope for this awful market which threatens to stretch on for years and bankrupt a lot of people. Then it hit me, I’ve got tons of material to write about. Just none of it is very fun.

I really hate it when people don’t return phone calls. When a rent check doesn’t show up in the mail, I call. And I get really irritated when I have to call again and again, leaving voicemail that is never returned.

Ok, so what to do? Well the next step is to figure out how to evict a tenant that doesn’t pay rent and doesn’t return phone calls seeking an explanation. With the internet, it was really pretty easy to find out. In Florida, before you can begin an eviction you have to serve a 3 day notice to pay up or to cede possession of the property. There are numerous downloadable pdfs on the web you can use. I used this one from a CSEU course.

Pay attention to the fine print, it’s only 3 days if you hand deliver the notice and the tenant can pay the rent at a physical address. The 3 day notice starts when the notice reaches the tenant, and you may need to allow for snail mail time for the rent to reach you. And you can not count weekend days and holidays. So in the end the time period ended up being 2 1/2 weeks. If you mail the notice you need to use certified mail w/ return receipt requested. Make sure to make three copies of the notice for use in the next step (the actual start of the eviction) if the 3 day notice expires without payment or possession delivered to you. You might want to read this article about how you can get tripped up by the details by a tenant lawyer.

Before the notice period was up, I received the rent in the mail along with an explanation. I am sympathetic to my tenants plight as one of them is really sick, but my mortgage company is not sympathetic at all.

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We have a condo under contract that we don’t want to keep.  Why?  I’ve decided that I’m not moving to Florida.  I just have too much going on here.   The good news is that there is equity in this condo and it is in a very sweet project.  This one will do well over the long term. 

I firmly believe that if this style of living is not the way of the future, it should be.  With the price of gas going up and people looking for community, living in a mixed residential and commercial upscale developments with natural gathering spots such as coffee shops is going to be the wave of the future.

 Check it out and make us an offer.

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I recently talked to a Floridian realtor about the Orlando condo market. Her view was that the market was flooded with condo conversions, making a slow market even worse. A condo conversion is an apartment building that has been “condo-ized”, converted to condos. During the boom, this was a popular tactic and a lot of people made a bunch of money doing this. However, these buildings were not always built to the standards that true condos were (depends on the state), and of course you got to sell them to make money.

Prices for Orlando condos have dropped 5-10% over the last year and there is 15-18 months of inventory on the market.

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While the rest of the country swelters, I’m wearing long pants, socks and two thermal tops. Welcome to summer in San Francisco. I live close to Lone Mountain near Geary Blvd.  Most days, especially in the afternoon, the wind from the ocean races up the broad expanse of Geary avenue, when it hits the hill it whips all around the side streets making it seem even colder than it is. Night before last I went to a real estate seminar in downtown San Francisco (one takeaway from it: the subprime mess is going to add a year or two to the downturn) and when I got off the bus I was almost blown off my feet. You could see masses of fog gusting past. Brrrr.

It is days like this that make me think it might be OK to be forced to live in Florida because I can not sell the property I own there. I’m seriously considering it doing it in six months if the market is still soft. I would save on the rent I pay here and not live in a drafty crumbling building. This building is a total tear down and is only worth the land it is sitting on. There are gaping holes in the garage roof from the water damage. I’m subletting a rent controlled apartment and as per usual for such places, only one heater works and it costs over $300 a month to keep the place in the high 60s during the winter.  Despite the masking tape I’ve used, you can see the cold breeze from the outside moving the curtains.  Florida is warm and everything I own there is newer, has way better insulation .. air conditioning too ! People sacrafice a lot to live in San Francisco.

I was over in the Haight yesterday and ran into a large number of people who were milling about waiting to see “Martial Cage Fighting”. There was a guy in a beige suit that had textured strips that looked exactly like my bed sheets (I have nice 500 thread count ones .. but still). San Francisco is such a microcosm of diversity and it’s really interesting the look and vibe you get from a particular segment. This group looked similiar to the hard rock metal rock audience you see at shows. I’m a student of marketing and one concept I’ve been introduced is segmenting the audience not so much by their demographics (age, geo, gender .. etc) but by their interests, spending habits etc… I was wondering if I could leverage this new approach in marketing my houses (ie. the typical first time buyer who now can’t get a loan might really want to buy my house on a wrap). Something to investigate more.

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Bad day

Today was a bad day. It seems like my investments are not doing well at all. I was hoping to sell a pre-construction deal (now completed) for break even and I find out that nothing is selling in the area and there is a glut of brand new empty houses. It was a progression of optimism to pessimism. The builder told me it would sell for $212K within 2-4 months. I then talk to a realtor who says nothing is selling and it would take at least 6 months to sell, and oh by the way, the going rent is $150 less than what the builder told you. I then talk to another realtor who say the area is glutted with empty houses, the lots are selling for far less than they did before and that he didn’t think the area would turn around for 5-7 years. I keep asking myself why I ever got into this deal in the first place.

Holding it would cost me $300 a month if it rents. Just what I need, more negative cash flow .. I’m in it because when I tried to get out of this deal nine months ago, I would have paid at least $18K to walk away, plus lawyers fees, most likely.

The target market for these houses was the first time buyer. Well those first time buyers can’t get loans anymore …

So I decided to gaze at my stock market investments for a while. My portfolio of mutual funds and retirement accounts is doing quite well. I’ve heard that real estate and the stock market move in opposite directions, and that certainly seems to be the case. Last year my market securities were 25% of my portfolio, I just did the numbers and my 401k and taxable accounts now comprise 37% of my portfolio. That’s how much the real estate market has gone down .. and the stock market has gone up.

It’s good to step back and take these big picture views, I suppose I should consider myself lucky, I was only somewhat stupidly aggressive (although in my mind I was way overboard in my enthusiasm) in my real estate investing. I also was very diversified and spread my money around. I keep running into stories of the guy who bought 10 houses where I bought 1 and they are all in foreclosure. And the person who is negiotating short sales because the 3 houses they own are underwater … and unrentable because they need rehab.

So this is a report from the real estate investor trenches. I haven’t written for a year because it hasn’t been very fun. But maybe I can help others with these posts. So I’m going to make it a point to post regularly.

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