Real Estate in the Napa Valley

GLEN COVE SHOPPING CENTER SELLS FOR $12.9 MILLION

2009-07-09T10:52:00.001-07:00

VALLEJO, CALIF. — Newport Beach, Calif.-based Yacoel Properties has purchased Glen Cove Shopping Center, a retail property located in the Glen Cove section of Vallejo along Interstate 780. The 66,000-square-foot property sold for $12.9 million, which equated to a 7.71 percent cap rate. A 50,360-square-foot Safeway supermarket anchors the center. The seller is a joint venture between Kimco Realty Corp. and Prudential Real Estate Investors.

-Western Real Estate Business

SUNSTONE HOTEL INVESTORS SELLS MARRIOTT NAPA FOR $36 MILLION

2009-07-09T10:43:00.001-07:00

NAPA, CALIF. — Sunstone Hotel Investors Inc. has completed the disposition of the 274-room Marriott hotel in Napa. The property sold for $36 million. Sunstone estimates that the hotel would require approximately $6 million in near-term renovations to comply with Marriott brand standards. The gross proceeds of $36 million, plus the $6 million of renovations that Sunstone will not have to spend, equates to a 10.5x 2009 EBITDA multiple. The buyer was not disclosed.

-Western Real Estate Business, July 2009

Loan Modification Companies to Avoid

2009-06-24T16:43:00.001-07:00

The Department of Real Estate has a list on their website of loan modification and foreclosure rescue companies who received a desist and refrain order from the Department of Real Estate:

http://www.dre.ca.gov/cons_drs.asp

-Burt

Quick Q & A on FHA, Credit, Down Payment, Bankruptcy, Short Sale, Foreclosures and More

2009-06-13T11:59:00.001-07:00

This is the most current info and changes often:

Is there an advantage to doing a short sale vs. a foreclosure?

Yes. With a short sale some lenders allow a person to buy again after 24 months, but on a foreclosure it’s generally 36 months.

How long does a borrower have to wait to purchase a home after a BK?

On FHA and VA: Chapter 13 = 1 year from filing date as long as payment history is satisfactory. Chapter 7 = 24 months after discharge date. Conventional = Generally 4 years

Can a borrower with no credit score or “thin” credit get a home loan?

Yes, using alternative credit, such as utility bills, cell phone bills, cable TV bills, or rental history.

Chain of Title: Are bank-owned properties an exception to the 90 day chain of title rule on FHA loans?

Yes, www.fha.gov # 4155 will cover this topic.

FHA 203k fixer upper loans: What items can NOT be repaired under the 203k program?

Structural and Pool. What is the maximum repair amount? $35,000.

How many financed properties can an individual borrower own?

Fannie Mae allows up to 10.

If there is pending litigation on a specific condo complex, can a borrower still get a loan?

It depends. If it’s a structural issue, then generally not. If other issues, then possibly.

Can a borrower get a loan on "manufactured home” or “double wide”?

Yes, as long as it was converted to “real property” and manufactured after 1976.

What are the minimum down payments in today’s market?

HUD homes: $100 down, VA: $0 down, FHA 3.5% down; second home and investment properties: 10% down

What is the minimum credit score nowadays?

600 middle score.

What’s the deal with the $8000 tax credit for first-time buyers, and what is a "first-time buyer?”

In short, what this new announcement seems to indicate, is the $8000 tax credit can NOT be used for the minimum 3.5% FHA down payment, BUT it can be used for: additional down payment, interest rate buy down, or closing costs, which will help buyers qualify for a more expensive home OR it will help borderline buyers qualify for something, rather than nothing at all. This tax credit expires on December 1, 2009 http://www.hud.gov/news/release.cfm?content=pr09-072.cfm. The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

How do I find out if a specific condo project is Fannie or FHA approved?

https://www.efanniemae.com/sf/refmaterials/approvedprojects/index.jsp?from=hp
https://entp.hud.gov/idapp/html/condlook.cfm?CFID=1318400&CFTOKEN=9c57314bac1b7ef7-DD1133B5-B1F5-2C90-75FF9D8F2543C965

By Dan Sherbondy of Direct Access Lending

3790 Sonoma Blvd., Vallejo | For Sale and Lease | Retail, Office, Restaurant, Medical Uses

2009-06-06T13:46:00.001-07:00

Great opportunity for ownership of a landmark property on Sonoma Blvd. in Vallejo. 5,200 SF building is suitable for a wide-range of uses including: retail, office, medical or restaurant. Ample parking, great visibility with the potential for a drive-through.

$1,195,000 or $0.99 psf NNN

For more details see the website.

-Burt

301 Post Street, Napa | For Lease | +/-1,525 sf (with 385 sf storage/garage/shop), Office/Service/Retail

2009-06-03T07:51:00.001-07:00

New Listing…awesome location on Silverado Trail in Napa. Multiple private rooms, large/conference room, reception area, parking. Plus, an added bonus of a shop/garage with a roll-up door for storage, vehicle, shop, etc.

Wide variety of uses possible: office, service, retail, dog grooming, beauty salon, spa, interior design, commercial food/bakery, upholstery business, gym, auto electronics, etc.

$2,400/month.

For more information please check out our website.

-Burt

Tenants Take Control

2009-05-01T10:23:00.001-07:00

Good brokers can make money in any market, but fewer tenants and more concessions means you have to market and negotiate like never before.

If you’re lucky enough to be on the tenant side of the commercial leasing equation these days, you and your client are sitting pretty. Even smaller tenants are in a position to ask for—and get—some of the best leasing deals seen for two decades.

"Everything is on the table in a lease negotiation today. It’s easy for an office tenant to grab two to four months’ free rent," even in New Orleans, relatively insulated by the oil economy, says Richard Juge, CCIM, SIOR, owner of RE/MAX Commercial Brokers there.

If you’re sitting on the owner’s side of the table, the view’s not quite so appealing. "Sometimes, it seems as if prospective tenants have brought out their Christmas wish lists," jokes Bill Gladstone, CCIM, SIOR, an office leasing broker with NAI CIR in Harrisburg, Pa. "People get a certain perception of the market and think they can get anything."

Even in a market with a 96 percent occupancy, like medical office buildings in Seattle, tenants are asking for rent concessions, says Paul Carr of CB Richard Ellis.

"It’s the psychology of watching news reports and expecting the market to get worse. It’s required some re-education of tenants on our part." Other owners are going with the concession tide. One is even giving away a new Smart car to brokers when a tenant signs a substantial lease.

Many multifamily properties, too, are moving into free rent territory, says Greg Martin, CPM®, with Draper and Kramer in Chicago. A glut of unsold condos, and renters and former home owners doubling up or moving in with family, add up to higher vacancies in markets like Chicago. And higher vacancies translate into one or two months of free rent for prospective tenants as well as free utilities and parking, says Draper and Kramer’s marketing and leasing director Lynette Vander Heyden.

Of course, the size of the lease and the creditworthiness of the tenant, as well as the owner’s financial position, affect what sort of deal can be offered. In many cases, loan documents prohibit owners from letting a property’s cash flow drop below a certain level, says Greg Schenk, SIOR, who exclusively represents tenants at The Schenk Co. Inc. in Columbus, Ohio. Owners with significant equity interest in a building have more flexibility to negotiate. (See Commercial Outlook: National Leasing Projections chart)

Find the Strong Tenants

Rent concessions aren’t the only challenge. Finding tenants in this era of downsizing requires brokers to work harder and market more aggressively than they have in a decade. "You have to get very aggressive and really pound the phones," says Ed Kearney, who specializes in industrial and warehouse space with Sperry Van Ness/Kearney Commercial Group in West Palm Beach, Fla. Like many practitioners, Kearney has ramped up his e-mail marketing with strategies like purchasing a list of top trucking companies that might need his warehouse properties.

Reaching out to brokers as well as tenants is also more critical than ever. To spark new marketing ideas for his leasing team and better assess the competition, Larry Culbertson, CCIM, who heads The C Group at Keller Williams Commercial in Atlanta, started a "visit the winners" program. It works like this: High-occupancy buildings in a marketplace hold an "open house" so leasing brokers can tour the facility, ask questions about amenities and incentives, and discover what the building is doing right. "Commercial brokers often have a reputation for not wanting to share information, but we’ve had a great response," he says.

You can also be proactive by working with city development authorities to reduce permit costs or allow new uses for vacant space. "Maybe you think your retail center could increase traffic with an ice cream shop, for example. Work with city officials to waive fees and make the move more attractive to tenants," suggests Mahnaz Khazen, CCIM, owner of Coldwell Banker Commercial Bay in San Jose, Calif.

To ensure that deals get done, target tenants with the cash or the business model to weather the downturn. On the office side, look for businesses such as accountants, bankruptcy lawyers, and outplacement agencies that will do well in tough times. In retail, focus on retailers with cash reserves such as Forever 21 and Kohl’s, says Khazen. She is also finding that retail strip owners are more willing to lease to smaller mom-and-pop retailers, especially if they’re able to pay a few months’ rent up front as a security deposit.

Be Cagey on Concessions

"Price is still the best way to attract or keep at tenant," says Kearney, but you can make concessions less onerous for owners. Spread any free rent over the term of the lease rather than offering it up front. "At least that way, the tenant is paying some rent," he says. Spreading out free rent also makes it less likely the tenant will just use up the free rent and move on.

Another option is to offer free rent up front, but add on the extra months to the end of the lease, extending the overall lease term, says Gladstone. Using up free rent early may do less damage to a building’s cash flow and value when it’s time to sell, he notes.

Another way to minimize the long-term damage of concessions is to offer a shorter lease term to tenants. "We suggest that owners who have a stronger tolerance for risk offer a two- or three-year lease instead of a five-year one so that they can get the benefits when the economy recovers," suggests Neil Shupak, a Philadelphia-based broker with GVA Smith Mack. Other options are to build in a rent increase after three years or to charge retail tenants a higher percentage rent.

Owners can get another boost to cash flow by spreading out leasing commissions over several quarters, notes Culbertson. "We’ve been offering that option to a few owners for about a year; now we’re doing it more broadly," he says.

Keep the Tenants You Have

While landlords will offer a lot to find new tenants, "the biggest challenge today is actually keeping the tenants you already have," says Culbertson. Start by approaching office tenants with good credit a year or more in advance of lease expiration and offering the opportunity to extend a lease, suggests Bill Finnegan, an office broker representing owners for GVA Smith Mack.

"Tenants don’t want to spend a nickel on moving and they don’t want to rewire," so if you make a reasonable offer, they’ll often stay, he says. In some cases, the deal will also let tenants reduce their overall square footage. To offset lost revenues from this returned space, Finnegan has been offering these small parcels as temporary "plug and play" spaces.

Educating tenants about the cost of relocation is another way to make staying put seem like a sound financial decision, says Schenk. "It can cost $25,000 to move even a moderately sized office tenant, plus another $2 to $4 per square foot to remove cabling for phones and computers." Retail tenants face the significant added risk that their customers may not follow them to a new location, even a nearby one, he adds. And all tenants that move face business disruption and lost productivity.

It also pays to be proactive if you think your tenant may be facing financial troubles that could lead to the inability to pay rent. "Get into their businesses a little bit. Check to see if retail and office parking lots are full, and stores have inventory," says Culbertson. If you see signs of trouble, consult with your owners and then "open a dialogue with the tenant about taking a smaller space or temporarily lower rent."

Make It Work

While it may be painful to give out concessions and watch owners’ cash flows fall, "skilled commercial brokers can make money when the market is moving up or moving down," says Juge. "It’s all a matter of getting educated and adjusting to the times." For the next few years at least, negotiating and the ability to understand and respond to tenants’ needs and challenges will be the skill sets in demand.

It’s also important in all lease deals to work on building a relationship rather than take a single-transaction approach, says Schenk. "Owners and tenants want someone they can trust long term." Combine that with a lot of hard work, and watch your buildings fill.

Mariwyn Evans is the commercial real estate editor for REALTOR® Magazine. You can reach her at mevans@realtors.org.

Homebuyer Tax Credit Chart

2009-04-22T22:09:00.001-07:00

For California homebuyers, tax time is now tax relief time too. Thanks to two recent laws, a California homebuyer may qualify for $18,000 in tax credits for buying his or her piece of the American dream. The two tax credits are a first-time homebuyer credit up to $8,000 under federal law, and a new home credit up to $10,000 under California law. Here’s a quick summary of the two tax credit laws:

Homebuyer Tax Credit Chart

Where to Get Foreclosure Help

2009-04-22T22:04:00.001-07:00

With all the dubious assistance programs and out-right scams preying on home owners facing foreclosure, it can be difficult to find legitimate help.

Here’s a list of programs that are either operated by the U.S. government or have its seal of approval:

To find a counselor, contact the U.S. Department of Housing and Urban Development (HUD) at (800) 569-4287 or (877) 483-1515, or go to www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm

Call (888) 995-HOPE, the Homeowner’s HOPE Hotline to reach a nonprofit, HUD-approved counselor through HOPE NOW, a cooperative effort of mortgage counselors and lenders to assist homeowners.

Visit NeighborWorks America’s Web site at www.nw.org/network/home.asp

Go to this Web site for information on federal mortgage modification and refinancing programs: www.makinghomeaffordable.gov

The Controller of the Currency’s consumer information site for banking-related questions is www.helpwithmybank.gov

OCC Customer Assistance Group and consumer assistance site: www.occ.gov/customer.htm

Federal Trade Commission: www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm

Federal Reserve Board: www.federalreserve.gov/pubs/foreclosurescamtips/default.htm

NeighborWorks America: http://www.nw.org

HOPE NOW: www.hopenow.com

Source: Controller of the Currency (04/21/2009)

What Appraisers Look For in a House

2009-03-26T07:54:00.001-07:00

By Barbara Ballinger | REALTOR Magazine | April 2009

Here are some of the factors that appraisers Joni L. Herndon of Real Property Analysts/Gulf Coast in Tampa, Fla., and John A. Hillas of Hulbert & Associates Inc. in Modesto, Calif., say they consider when determining value.

Incentives and concessions. Most of today’s buyers expect to pay the lowest possible price and still get some extras. Sellers and home builders are offering money toward closing costs, remodeling and decorating, upgrades, and association dues. The price set initially may not be the final price once concessions are factored out. Appraisers care about that final number.

Closing date. Forget what comparable neighborhood houses sold for a few months back. Appraisers want prices from the most recently closed transactions. “If a sale was more than 45 days ago, even 35, the price may be irrelevant,” Hillas says.

Condition and curb appeal. Appraisers typically find several properties with similar interior and exterior features to determine value. When markets are healthy, blemishes matter less, but when markets soften, problems—a dated kitchen or barren lawn—can reduce prices and deter buyers. “The difference in value is not just the repair costs but the time and hassle to make them. It’s better for sellers to do work in advance,” Hillas says.

Foreclosures. Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market, says Herndon. “But when several neighborhood homes are abandoned, it’s hard not to caution sellers that this is a troubling trend and may affect home values,” she says.

Changing demographics. If a house is in an up-and-coming area, the value can be expected to rise. A location that’s perceived as safe also may help attract the increasing number of single female buyers.

Economic clouds. If there’s an oversupply of comparable homes for sale, or if the local job market is suffering, buyers may be hesitant to invest. Hillas advises setting prices aggressively from the get-go.

Chemistry. It’s hard to account for those times when buyers fall in love with a house, despite a high price, poor condition, or tough economy. “Emotional attachment is a factor that can’t be predicted,” says Herndon. Hillas agrees, “It’s what makes it harder to appraise homes versus commercial buildings, where buyers care more about the bottom line.”

Disposition of Personal Property Left on Commercial Property

2009-03-16T16:16:00.001-07:00

AB 2025 went into effect Jan. 1, 2009. This law assists commercial property landlords with the disposition of personal property remaining on the premises at the termination of a tenancy. If the landlord reasonably believes that the total resale value of the personal property is the lesser of $750 or $1 per square foot of the premises occupied by the tenant, the landlord may retain the property for his or her own use or dispose of it in any manner; otherwise, it must be sold at a public sale. The law requires that a “Notice of Right to Reclaim Abandoned Property” be sent to the person the landlord reasonably believes to be the owner of the personal property (other than the former tenant).

Details of the Bill

-Burt

Tax Exemption for Mortgage Debt Forgiveness

2009-03-16T16:08:00.001-07:00

The good news! Homeowners will be getting some relief on their taxes this year and the years to come. The Mortgage Debt Forgiveness Law allows a homeowner to not have to claim the debt forgiven from a short sale or foreclosure as income.

The bad news! The State of California lost the exemption January 1, 2009. The Federal exemption continues to December 31, 2012.

Check out the summary below and more details at Franchise Tax Board Article. More information on the options available you.

-Burt

California law, SB 1055, which went into effect Sept. 25, 2008, conforms California Revenue and Tax Code Section 17144.5 to the federal Mortgage Forgiveness Debt Relief Act of 2007 with the following exceptions:

(1) The maximum amount of acquisition indebtedness is $800,000 for couples filing jointly and $400,000 for individual filers;
(2) The maximum amount of debt relief income that can be forgiven is $250,000 for couples filing jointly and $125,000 for individual filers; and
(3) California’s debt relief statute applies to property sold on or after Jan. 1, 2007, and before Jan. 1, 2009.

Tax Implications of a Short Sale

2009-03-13T17:38:00.001-07:00

There is a plethora of information available regarding foreclosures, short sales and deed-in-lieu of foreclosures. Where does someone start? My recommendation is to speak with a qualified tax accountant or CPA, of which I am not. However, here is start of some good information regarding the tax implications of debt forgiveness from the disposition of your personal residence.

Please keep in mind you could have a taxable event if your home sells in a short sale or foreclosure for less than the outstanding loan amount. There is a possibility the lender could even pursue a deficiency judgment from you in satisfying the difference between the two. This is a possibility, but it does depend on whether you refinanced or have a second mortgage (see blog entry Refinancing and Recourse vs. Non-Recourse Loans). There is also the chance a lender would not pursue a deficiency judgment because of the fact they have a lack of resources in doing so.

When you speak with your tax accountant ask him or her about IRS Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). You may be able to file this form with your tax return and relieve yourself of the tax implications.

With that said here are a few sites that may be helpful in your quest:

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

Tax Implications of Debt Forgiveness

Debt Settlement and Income Taxes

-Burt

Mortgage Workout Programs for Homeowners

2009-03-13T08:03:00.001-07:00

Mortgage Workout Programs for Homeowners

On Wednesday, February 18, 2009, President Obama announced his new Homeowner Affordability and Stability Plan to help troubled homeowners avoid foreclosure. This plan will offer assistance up to 9 million homeowners and applies only to primary residences. The first component of the plan allows homeowners who are current to refinance an existing Fannie Mae or Freddie Mac conforming loan with a loan-to-value ratio up to 105 percent. The second component addresses homeowners who are at risk of foreclosure on their mortgages, but they do not have to be delinquent. The government will work with the lenders to ensure that monthly mortgages do not exceed 31 percent debt-to-income ratio. Furthermore, the government will seek to create clear and consistent guidelines for loan modifications.

The details of the Homeowner Affordability and Stability Plan were released on Wednesday, March 4, with the introduction of the Making Home Affordable plan. Please look at the appropriate charts below to read about the summary of these new programs.

For more information about the Making Home Affordable Program, click here.

The following information is intended for REALTORS® and homeowners seeking information on existing mortgage workout programs. In general, the loan modification programs on the chart (see link below) and consumer information sheets (see links below) are intended for primary residences only.

For a lender comparison chart on existing mortgage workout programs (revised 3/09), click here. The chart is a compilation of programs offered by the larger lenders and government entities. If a specific lender or loan servicer is not on the chart, homeowners may wish to contact the lender or loan servicer to determine if a workout program is available.

For consumer information sheets containing detailed information on specific programs that REALTORS® can share with their clients, please click on the appropriate link below.

^.Making Home Affordable Refinance
^.Making Home Affordable Modification
^.HOPE For Homeowners (H4H)
^.Countrywide Financial (Bank of America)
^.Citigroup, CitiMortgage
^.JP Morgan Chase & Co.
^.IndyMac Federal Bank, FDIC
^.Federal Government Loan Modification (Participants include: Fannie Mae, Freddie Mac, Federal Home Loan Banks, Hope Now participants, Department of the Treasury, Federal Housing Administration and the Federal Housing Finance Agency, and Wells Fargo.)

Mortgage loan modifications typically are handled on a case-by-case basis. Homeowners having difficulty meeting their mortgage obligation or interested in finding out more about a loan modification program should start by contacting their lender. Prior to calling a lender or loan servicer, homeowners should have the following information available:

^.Loan number

^.Income information and documentation

^.Most recent mortgage statement

^.Bank statements

^.Letter demonstrating financial hardship

REALTORS® who wish to assist their clients in seeking loan modifications should ensure they are in compliance with California law. For further information, please visit the California DRE Web site at http://www.dre.ca.gov/mlb_adv_fees.html . REALTORS® also may direct clients to work with a U.S. Dept. of Housing and Urban Development (HUD)-approved counselor. For a list of HUD-approved counselors in California, visit the HUD Web site at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=CA .

Understanding the Housing Stimulus Package

2009-03-11T21:37:00.001-07:00

Some helpful links:

Obama Housing Plan: What You Need to Know

Housing Stimulus Laws of 2009

Home Refinance and Loan Modification Plan

Ambitious Foreclosure Plan Revealed - How Will it Help?

Obama Plan Aims to Help "Responsible" Homeowners

Home Buyers in California Could Enjoy Up To $18,000 in Tax Credits

How to Help Homeowner's Understand Obama's Foreclosure Plan March 4, 2009

Courtesy of: Jake Baker, Pacific Mortgage Consultants, (415) 847-2670

Making Home Affordable Programs

Key Refinancing Qualification Guidelines:

This program is designed to enable the refinancing of homes that have lost value into today’s lower rates until June 2010
Across the board $729,750 1st mortgage maximum!
- It appears that restrictions by county were eliminated!
Homeowner must be able to qualify for and afford the new, lower payment
- Primary residence will be verified by tax return, credit report, & utility bills
- Income verified by one year tax returns & recent pay stubs
- No more that 30-days late on your mortgage payment in the last 12 months
  - In other words, no more than one 30-day late in the past year
Current 1st must be held or controlled by
- Fannie Mae: 1-800-7FANNIE (8am to 8pm EST)
- Freddie Mac: 1-800-FREDDIE (8am to 8pm EST)
Some details are not as clearly stated as loan mod details...
- For example, 105% LTV for the 1st mortgage was stated in last week's press release
  - In other words, if your mortgage happens to be at the new limit - $729,750; but your home value has fallen to $766,237 -- congratulations, you just made it!
  - However, I cannot find that same LTV cap in the official release today
  - For now, we can assume a 105% LTV is still in effect
- Nor is it perfectly clear how 2nd mortgage lenders will be dealt with
  - 2nd mortgage payments will still be in the back end debt ratios
  - Will they voluntarily subordinate to the new 1st?
  - There is a cash incentive to cooperate in the loan modification program that will be paid by the FED to the 2nd lien holders; perhaps this will be allowed in the refinance program, too

Key Loan Modification Details:

$75 billion to the 3-4 million who are now "Underwater" due to legitimate hardships goes to 2012
- How the FED will monitor on-going hardships still TBD
Only loans currently owned or controlled by Fannie Mae and Freddie Mac
Homeowners can go direct to their Lender -- no 3rd parties needed
Maximum $729,750 home value, and no LTV requirements
Homeowner DOES NOT have to be delinquent in order to qualify
Required Docs: most recent tax return; two pay stubs; hardship letter
Loans are 5-year fixed going for as low as 2%
Payments will be lowered to 31% of income
- Lenders must drop payment to 38%"
- FED will share the further drop down to 31%
  - Example: 1st Mortgage = $500k @6.25% = $3,078/month
  - Income = $4,000 per month X 31% = new payment of $1,240!
- Cash incentives will be paid to lenders to cooperate
- Cash incentives will be paid to borrowers, too!
  - As long as the borrower stays current on his or her payments, he or she can get up to $1,000 each year for five years paid towards loan principle

The Credit Crises Simplified

2009-02-25T17:09:00.001-08:00

Understanding the credit crises can be difficult. I stumbled across a very enlightening video that simply takes you through the credit market and what happened to lead to our current crises. It is amazing to think one of the strongest forces that led to where we are today is the terrorists attacks on 9/11. Watch the video below.

Burt

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

The Economic Stimulus Package and its Impact on the Commercial Real Estate Industry

2009-02-19T20:17:00.001-08:00

The CCIM and IREM Institute Legislative Staff released today their review of the economic stimulus package and its impact it will have on the commercial real estate industry.

Click below for a thorough and brief summary of the package:

What is DSCR (Debt Service Coverage Ratio)

2009-02-06T16:40:00.001-08:00

In commercial real estate lending the term DSCR is commonly used by lenders to determine if an investment property can service the loan.

This ratio should ideally be over 1 while most lenders require a DSCR of about 1.25. That would mean the property is generating enough income to pay its debt obligations plus other expenses.

In general, the DSCR is calculated as follows (annualized amounts):

DSCR = Net Operating Income/Total Debt Service

Investment Property Taxation

2009-02-06T16:18:00.001-08:00

In a nutshell, here is what you could expect to pay in taxes on the sale of an investment property. Please keep in mind that taxes could be delayed if a seller elected an 1031 tax-deferred exchange. Also, I am not a tax advisor nor claim to be one so please be sure to consult your tax advisor or CPA as each taxpayer's circumstances could be different.

Investment Property Held <1 Year

Interest is deducted as a business expense
Ordinary income tax is paid:

28% Federal
9% State

Self Employment Tax of 13% is paid for those who are "dealers", that is buying and selling on an on-going regular basis - somewhat vague in tax code.
Total taxation is 50%

Investment Property Held >1 Year

Interest is deducted as a business expense
Capital gains tax is paid:

15% Federal
9% State

No Self-Employment Tax imposed

How to Be Happy in 2009!

2009-01-04T14:57:00.001-08:00

Watch this video for seven sure fire steps to happiness.

Have a happy and prosperous New Year!

Burt

Refinancing and Recourse vs. Non-Recourse Loans

2009-01-01T14:16:00.001-08:00

My blog entry from September 5, 2008 on the differences between recourse and non-recourse loans generated lots of interest and questions. The most asked question on everyone’s mind is can a non-recourse loan become a recourse loan. In my research I have found the answer to be, yes.

Let me say that I am not an attorney or tax account and do not claim to be one. Nor am I an expert on the many types of financing instruments available. My original blog entry was provided by an attorney and my follow-up information below has not been reviewed by a “qualified” person.

Our discussion here pertains generally to loans used in the purchase of residential (single-family, owner-occupied) real estate. There are many different types of loan vehicles used in the commercial real estate arena, which could be either recourse or non-recourse. There really is no standard, but rather terms that are determined by the lender on a case-by-case basis.

A non-recourse loan is a loan where the lender can only look to the secured-interest of the real estate in satisfying a deficiency judgment. What this means is in a foreclosure a lender can only look to the property in satisfying any shortfall in the loan amount and the final auction or sales price. With a recourse loan, a lender could pursue a borrower’s personal assets in satisfying any shortfalls.

Typically, in California a loan that is made on a purchase where the funds come from a lender, go into an escrow and are distributed to the seller or seller’s lender are non-recourse. So, a purchase loan of 80% and a purchase money second of 20% would both be non-recourse because the funds would go to the seller either to pay-off their mortgage as part of the purchase or into their pocket.

If a borrower was to refinance the first mortgage of or refinance the second, if he or she had equity, and pulled the equity out of their home with a HELOC (Home Equity Line of Credit) then these funds would be recourse because they were either not used in the initial purchase or the funds were available directly to the borrower.

When in doubt review the deed of trust of your current loan and when refinancing or obtaining a HELOC ask the lender if your new loan will be recourse or non-recourse. I have not heard of a borrower requesting a recourse-refinance loan be changed to a non-recourse refinance loan. I am not saying a lender would or would not comply, I just never had requested it myself or had a client that did. However, I had clients in the commercial arena who requested a recourse purchase money loan on a commercial property be revised to a non-recourse type loan and was able to have their request satisfied because the lender felt the property was sufficient in satisfying any potential deficiency judgments in the future.

Burt

My Most Recent Ground Lease

2008-12-04T06:16:00.001-08:00

A recent negotiation with a client and land owner involved a ground lease or oftentimes called a land lease. I was reminded of the many different facets involved especially when development on the land was to take place. A tenant can quickly learn how many "partners" become involved in your business. I found an informative article on the the ground lease that I though I would share with you. You can download the complete article by selecting "A Ground Lease Primer.pdf" in the download dialogue box below.

Burt

A Ground Lease Primer: "Dealing" with the Intimidating Ground Lease by Pamela V. Rothenberg

Nearly all real estate developers would agree that ground leases are among the most intimidating transaction documents that they face in pursing land acquisition and development deals for their portfolios. Simply stated, a ground lease is a long-term lease of unimproved land. This risk of loss of the improvements goes to the heart of why ground lease transactions are so complex and why consideration of issues relating to the ability to finance the ground lease from a lender's perspective is so essential. The developer's ultimate goal should be ground lease terms that give the developer and its lender substantially similar rights and protections to those the developer and lender would have achieved had the developer owned the land outright.

First-Time Home Buyers Guide to Finance Programs

2008-12-02T07:54:00.001-08:00

On the residential front, the California Association of Realtors sent me a very helpful guide on financing programs for first-time home buyers. It is a great time to purchase – if you are looking to do so give ACRES a call and one of our residential agents can help you. Here is the link to the guide: http://www.car.org/3550/100782/204893/FINANCE_GUIDE.pdf

Burt

Have a Blessed Thanksgiving!

2008-11-26T13:35:00.000-08:00

From everyone at ACRES Real Estate Services we wish you a blessed Thanksgiving celebration for you and your family. We thank all of our clients for your loyalty and for allowing us to serve you. During this holiday season, we join together to give thanks for family, friends and associates.

God bless,

Burt

Professional/Medical Office for Lease - 150 Admiral Callaghan Lane, Vallejo, CA

2008-09-10T11:04:00.001-07:00

Professional/medical office building for lease, ready for occupancy. Private offices, bull-pen, reception, conference room and server room. Easy access to I-80 close to main post office, hotel, services and restaurants. $1.25 psf/month NNN. Zoned LO.

View more information on website.

Burt