Monday Morning Quarterback
(Monday, December 2, 2024)
I trust all of you had a happy thanksgiving and are looking forward to the holidays. We are all so fortunate. Meanwhile, for so many Angelenos, it’s a dream to own a single-family home and build wealth through equity. But having watched for years as housing costs?put ownership increasingly out of reach while the cost of rent keeps tenants struggling, advocates say it’s time to take a different approach to home ownership. They want working-class tenants to own their buildings, so that they have stability and are the ones making decisions about how they are run, what repairs are made, how much to pay in monthly costs, and anything else that comes up. But they also want to keep them permanently affordable, which means letting go of the possibility of making a massive profit in a sale. Up until now, efforts to get these ideas off the ground have been limited by money — buying one small building in L.A. can cost millions. But the city’s “mansion tax”?is changing that, bringing in hundreds of millions per year, about a third of which could be allocated to support “social housing.” Such projects require that tenants play a meaningful role in running their properties, encourage tenant ownership and include covenants that keep buildings permanently affordable. The initiative (drafted by renters’ rights groups, homeless service providers, affordable housing nonprofits and labor unions) is designed to bolster social housing across the city, allocating 22.5% of its funding to “alternative housing models” in which “residents shall have the ownership right to participate directly and meaningfully in decision-making concerning the operation and management of the project.” Another source of funding for such projects would be part of the law that supports tenant ownership for projects that buy and rehabilitate older buildings for affordable housing. The law allocates an additional 10% of funds to such efforts. Since it was implemented last year, the tax has raised nearly $440 million, according to city data. The amount is less than backers expected, and the law still faces challenges in court, but it has created a significant new funding pool for projects across the city that housing advocates hope to start tapping soon. In other real estate investor news, let’s run it up the flagpole…?
Data Centers Has Become a Billion-Dollar Real Estate Investment. The U.S. is home to the majority of the world’s data centers, with more than 2,800 operational (and more on the way). The closest nation after that is the United Kingdom, with less than 400, according to CNBC. So what’s a data center, you may be asking? Data centers are the physical vertebrae of internet infrastructure, supporting cloud computing capabilities and artificial intelligence. The value of the land where data centers are to be built is now soaring, 10 times the original price in one case from Vint Hill, Virginia. Pat Lynch, executive managing director for the digital infrastructure business at commercial real estate brokerage CBRE, told CNBC that demand was already strong, but has recently soared, thanks to increased digitalization and AI. Private equity has taken notice. “It’s interesting when we look at our global business today, not just within real estate, but across the entire firm, we see data centers as the most exciting asset class,” Nadeem Meghji, global co-head of Blackstone Real Estate, said on CNBC’s “Squawk on the Street” in May. Landowners are now seeing the value of their properties soar because of their relative location to power grid access points. “We see that land gets more value when it is on the appropriate power line for a data center need,” said Rachel Wacker, executive director of the Greater Dallas County Development Alliance. “My experience again working with data centers is they see value in sufficient powerlines that and they do come to the table aggressively, in order to obtain that land.”
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Do Real Estate Agents Have To Disclose If Someone Died In A House? California is unique in so many ways. Here’s another more dubious distinction. In California, a seller must disclose if someone died in the house within the last three years. Meanwhile, in Alaska, the listing agent must communicate if any known murders or suicides happened in the last year. South Dakota?requires sellers to disclose deaths within the last 12 months. In other words, it depends on the state where the house is located. But in most states, death doesn’t count as a material defect requiring disclosure. Some homes are considered “stigmatized properties,” or dwellings that have been “psychologically impacted by a past or suspected event on the property, but has no physical impact of any kind,” according to the National Association of Realtors. Stigmatizing events?include murder, suicide, alleged hauntings?or a notorious previous owner, NAR notes. Listing agents have different requirements state-by-state on what to disclose to a buyer. Most states don’t have any death disclosure requirements. Among those that do, rules can be straightforward and explicitly require prior death to be disclosed to homeowners. Even those rules may only apply to recent deaths or more stigmatizing events such as murder. Regulations will depend on the stigma in question. In New York, for example, a?seller doesn’t need to disclose if the house was the site of death or crime. But if a seller has made claims of paranormal activity?in the home, they have to inform the buyer of supposed ghosts in the property, experts say. Often, it falls on the homebuyers to directly ask the agent about the property’s history. States such as Georgia do not require?real estate agents or sellers to disclose upfront if the home was the site of a death. But they have to be truthful if a prospective buyer inquires.
Home Valuations Are Rising Faster Than Incomes. Record inflation may have people questioning whether homeownership is still a good investment. I say this because home prices have been rising faster than income, which can be a problem for homeowners because as the value of a home rises, so does the cost to maintain it. More than 1 in 4 homeowners with mortgages are considered “cost-burdened,” meaning they spend more than 30% of their income?on housing costs, according to a 2023 analysis of U.S. Census data by the Chamber of Commerce. “Unfortunately, a lot of people go into buying a home and they don’t understand that their monthly payment could change,” said Devon Viehman, regional vice president for the National Association of?Realtors. Changes in two expenses in particular tend to surprise people, experts say. “What many [homeowners] have failed to anticipate is the rise in both property taxes — and that’s correlated to the rise in the value of their home, something that at some level helps them — as well as the increased cost of paying for that insurance,” said Mark Hamrick, senior economic analyst at Bankrate. Single-family homeowners accumulate an average of $225,000 in wealth from their homes during a 10-year period, according to a 2022 report?from the National Association of Realtors. Home insurance?is the other major expense that can fluctuate after a home purchase.?For example, there has been a 20% increase?in average home insurance premiums between 2021 and 2023, according to insurance comparison company Insurify.com. Experts estimates rates will rise another 6% by the end of 2024. Florida, Louisiana, Texas and Colorado have seen the biggest spike in insurance rates over that period, influenced by extreme weather events.
Boxer Floyd Mayweather Jr. Steps Into The Real Estate Ring. Floyd Mayweather Jr., known for his unblemished boxing record and the nickname "Money," is proving that his drive extends beyond the ring. He is now proudly stepping into the real estate arena.?In a series of bold moves, the retired boxer has recently made headlines for his strategic property investments and high-profile sales. His story isn't just about personal success; it’s the latest example of an athlete transitioning from sports to real estate as a long-term wealth strategy. Mayweather’s recent ventures read like the résumé of a seasoned investor.?He sold his Miami Beach mansion for $22 million (earning a tidy profit from the $18 million he paid in 2021) and has shifted his focus to larger-scale commercial investments. Among these is his most significant deal yet: a stake in 601W Companies’ $10 billion portfolio of 18 office buildings spanning 10 million square feet. Mayweather is also under contract to buy a $402 million multi-family portfolio from Black Spruce Management that features more than 60 affordable housing buildings.?Mayweather joins a growing roster of retired athletes finding financial stability, and even greater fortunes, through real estate investing. Mayweather’s moves are also well diversified. From office buildings in Chicago and New York to the iconic former Versace Mansion in Miami Beach, he’s betting on established markets and bold comebacks. It’s unclear what’s next for the former champion prize fighter, but it wouldn’t be a surprise to see him making more deals, especially in New York. As Mayweather himself put it, “A wise person once told me if you buy real estate and you hold on to it over the years, you will always make money and win.”?Truer words have never been spoke.?
Real Estate Startups Aren’t Seeing Much Love These Days. The U.S. residential real estate industry is in a much different place compared to a few years ago. Both mortgage interest rates and property prices have risen sharply, making homeownership far less affordable. Cheap rental houses for investors are hard to find, unless they come with a money pit’s worth of repairs. In tandem, the share of renter households is on the rise, and the number of home sales on the decline. Existing homeowners are largely staying put, and would-be homebuyers are finding few desirable, non-exorbitant options. These market shifts mean more bad news for real estate unicorn startups funded during the boom cycle a few years ago. We’re seeing this play out with collapsing share prices of several that made it to the public market, such as Opendoor, Offerpad and Better. Startup investors have also cut back on new real estate-related financings. So far this year, U.S. companies in sectors tied to real estate?have raised $3.5 billion in investment across funding stages. That puts 2024 on track to deliver the lowest funding tally in years, as charted below. We’ve seen particular pullbacks around startups in the mortgage space. With rates higher, fewer homeowners are refinancing. In tandem, funding to companies with the term “mortgage” in their Crunchbase profile totaled less than $140 million in 2023 and 2024, down over 80% from the prior two years. Buying and holding vacant real estate has also become costlier. This apparently hasn’t helped Opendoor and Offerpad — two “iBuyer” businesses optimized for a low-interest rate environment that also have seen their shares crater. Last week, Opendoor laid off 300 employees amid mounting losses. All this is to say it’s not too surprising to see overall real estate-related venture investment is down. Nonetheless, economists still see pockets of active fundraising in areas including rental management, eco-friendly building materials, and tools to simplify construction.
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Luxury Sleeper Trains Set to Connect L.A. and S.F. Overnight. A Newport Beach startup is bringing new life to an old idea: overnight train service between L.A. and San Francisco. Dreamstar Lines announced last Tuesday it has partnered with Designworks (BMW Group's design subsidiary), to create luxury rail cars that will have Angelenos falling asleep at Union Station and waking up in the Bay Area by summer 2025. The collaboration will focus on developing first-class suites with private bedrooms and bathrooms, standard cars with both seating and sleeping accommodations and social spaces, including lounge cars with open seating and bars, KTLA reports. In their words, experience private first-class suites, social lounge cars, and a hotel-like ambiance for a relaxing alternative to crowded airports. Dreamstar CEO Joshua Dominic says Designworks was chosen for their ability to deliver on the company's vision of "high-end, luxurious and desirable" travel. The concept aims to revive a service not seen since Southern Pacific’s “Lark” route?ended its run in 1968. Unlike the state's ongoing high-speed rail project (if ever finished) or existing Amtrak services, Dreamstar's focus is on transforming overnight rail travel into a hotel-like experience, offering travelers a more relaxed alternative to crowded airports and long drives. Earlier this year, the company reached a memorandum of understanding with Union Pacific, which owns most of the Coast Line railroad right-of-way needed for the service. While formal agreements with Union Pacific and local rail operators Metrolink and Caltrain are still being negotiated, Dreamstar remains optimistic about launching by next summer. If successful in California, the company plans to expand the luxury sleeper service to other markets, positioning itself as an eco-friendly alternative to short-haul flights while avoiding what it calls the "challenges of traditional rail, airlines, automobiles and buses" including crowded hubs, stopovers, and minimal amenities.”
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Can New Yorkers Stop The Subway-Surfing Crisis? Six times this year, someone has climbed out on top of a moving subway train, fallen off, and died. That’s one more than in 2023; the stats underlying those totals signal a danger that is here to stay. Authorities have caught 180 kids “subway-surfing” so far this year. The average age is 14. Some are as young as 9. The numbers dropped in the summer but surged when school returned, and it’s most frequent after the last bell of the day rings. The crosstown No. 7 line is bearing the brunt of the crisis because it runs almost entirely above ground until it approaches the East River to enter Manhattan: The view of Long Island City and the skyline beyond makes for compelling, shareable videos. At a November 18 hearing, the MTA told City Council lawmakers that it’s asked social-media companies to pull down an estimated 10,000 videos. The NYPD has taken to sending up drones over elevated sections of track, trying to spot kids as they climb up onto trains. The injuries are awful. One of the worst photos in the New York Post?was of a shoe next to a bloodstained patch of asphalt beneath the elevated tracks at the Avenue N station on the F line in Brooklyn. A 14-year-old (the median subway surfer) had climbed on top of a train, then fell and was hit by another train that couldn’t stop in time. Certainly, getting the videos down is part of the solution to this deadly problem, but NYC has at its disposal another way to design their way out of the problem. All but a few of New York’s subway trains have self-enclosed cars, with (usually) unlocked doors on each end. Last year, the MTA began testing two ten-car trains with what are known as “open gangways,” in which the ten cars are accordioned together in groups of five, 300 feet long, open end-to-end like a long snaky hallway. You can’t slip out for an illicit smoke or a furtive pee or thrill-ride between cars, because there is no “between cars” anymore. This setup is already common in Toronto and many major European cities, like London and Paris, and it’s a more efficient design that can carry more passengers. It is also much easier for cops to patrol, and?straphangers have an easier time keeping an eye on their surroundings or getting away from a problem. And there is one other bonus that relates to the subway’s newest problem: Because you can’t step out between cars while the train is moving, it is damn near impossible to climb out and up.
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Bear That Damaged Luxury Cars Was Actually A Person In Costume. California has seen its share of bears breaking into cars. You see it all the time on the evening news. But bears caught on camera exclusively entering luxury cars tipped off insurers that something wasn’t quite right. In what it has dubbed “Operation Bear Claw,” the California Insurance Department said four Los Angeles residents were arrested last week, accused of defrauding three insurance companies out of nearly $142,000 by claiming a bear had caused damage to their vehicles. The group is accused of providing video footage from the San Bernardino Mountains in January of a bear moving inside a Rolls-Royce and two Mercedes to the insurance companies as part of their damage claims. Photos provided by the insurance department show what appeared to be scratches on the seats and doors. The insurance company viewing video of the Rolls-Royce suspected it was not a bear inside, but someone in a bear costume. Detectives found two additional claims and with two different insurance companies for the four with the same date of loss and at the same location. Similar video was provided of the “bear” inside the Mercedes vehicles. The department had a biologist from the California Department of Fish and Wildlife review the three videos, who concluded it was “clearly a human in a bear sui.” Sure enough, after executing a search warrant, detectives found the bear costume in the suspects’ home. Bear breaking into homes?or trash cans in search of food have become a problem in California from Lake Tahoe?in the Sierra down to the foothill suburbs of Los Angeles, where some have been known to raid refrigerators and take dips in backyard pools and hot tubs. But luxury cars, unlikely.?
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Private Mentoring Program.?For some of you, no matter how many books you read, online workshops you watch, and seminars you attend, it’s just not enough.?You haven’t bought any properties and you’re frustrated.?Sound familiar? Yes, you need special attention.?You need someone to help you get started, find houses to flip or rent, structure the deals, find and hire general contractors and sub-contractors, rehab the houses, and flip (or rent) them. Well, listen-up, I’ve got just the program for you. It’s my extra-special, super-duper, world-famous Private Mentoring Program. If you’re serious about real estate investing and know you need help getting over the hump of buying your first property, here is an incredible opportunity. My intensive Mentoring Program includes private in-person meetings, unlimited telephone calls, unlimited text messages, and unlimited emails.?Best of all, you can pay yearly or monthly.?We will have only one goal; for you to buy (or wholesale) at least one house (if not several) within the next 90-120 days!?If you’re serious about becoming a successful real estate investor and know you need a mentor, please contact call our office and ask for mentoring: 310-792-6404.
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Shark Tank. Thursday night, December 12th. Welcome to “Shark Tank” where lenders compete to fund your loans.?Yes, just like the TV show, you bring your projects, (purchase or refinance) and watch our four incredible mortgage brokers fight over who’s going to finance your deals. They won’t hold back - nor should you. This will be hand-to-hand combat! This could get bloody! See you on Thursday night, December 12, 2024, and enjoy the fireworks.?6:30 to 9:30 pm.?Free Admission.?Iman Cultural Center, 3376 Motor Avenue, Culver City. Please RSVP at: www.LaRealEstateInvestors.com.?
Vendors Expo Returns!?Our world-famous "Vendors Expo"?returns on Thursday night,?December 12, 2024. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA.?FREE Admission.?Please RSVP at www.LARealEstateInvestors.com.
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For further information, comments, and questions:
Lloyd Segal
President
Los Angeles County Real Estate Investors Association, LLC
310-792-6404
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