Denialism!

Denialism has become the middle name of real estate! Just my opinion.

In a "posh" Massachusetts, northern Middlesex County community, near the NH line, an older 2 family has been offered for sale now for 217 days or a little more than 7 months, In this time the "asking price" has dropped from $1,500,000 to it's present price of $995,000 or a reduction of about $500,000 or 33%.

A peek into the actual sales history throws an interesting light on the real estate. The property sold in Nov of 1998 for $350,000 and then was resold in March of 2000 for 650,000.

From the MLS photos of the property in 1998 to today obviously substantial money has been spent or invested in improving the property.

The assessed value of this 209 year old dwelling is $750,000
According to the Registry of Deeds the proeprty's mortgages amout to about $850,000..

The tragic part of this real estate item is that it is being repeatedly over and over in one community after another. This is not the exception to the rule; it has been made the very sad rule.

Many home buyers, investors, bankers, mortgage and real estate agents and brokers were told a fairy tale ( Real estate prices will always go up!) and they bought into that fairy tale "hook, line and sinker. "

Now these same folks have bought into a new fairy tale entitled: Denial.

And sadly Denialism has become the middle name of the real estate.


Bill McInerney

Small Investment Real Estate?

Real estate sales are slow to sluggish at best. Small multi real estate investment real estate sales are few and far between.

In one Massachusetts community, Lowell, with a population of 80,000 +/- this year saw a total of 94 multi-family sales occurred. Of these 68 sales were Two-Family dwelling; 13 were Three family dwelling, 8 were Four families and only 5 sales of 5 or more units were reported by MLS.

Of the 5 more more unit sales the numbers were reported as:

6 Family, $220,000 or 37,666 per unit and 58% of the assessed value. Under Agreement

12 Family $276,000, or 23,000 per unit and 59% of the assessed value. Sold

6 Family $138,000 or 23,000 per unit and 56% of assessed value. Sold

8 Family $132,000 or 16,500 per unit and 34% of assessed value. Sold

6 Family $439,000 or 73,316 per unit and 1.08x assessed value. Under Agreement

5 Family $195,000 or 39,000 per unit and .59% of assessed value. Sold.

Is this the right time to invest in small multi families in this community?

The answer will depend on many factors such as building condition, appeal, off street parking, actual and potential cash flow, and full compliance with zoning, public health, code, building and fire codes. It all comes down to research and due diligence before investing.

It will also greatly depend on the future strength of the overall rental market which has shown some signs of weakness because of population declines and the general economic conditions.

The major drawback is that bank and financial institution financing is very difficult to obtain for this class of real estate making "cash buyers" king or queen of this market.

While it's evident that these properties should be in a good position should the "residential condo" market return, this could take many, many years.

The assessment/sale ratio is a strong indicator and only one transaction was above .58% +/- of assessed value.

The key is to buy-invest at the "absolute bottom" and I think it's much to early to determine if these transactions have truly hit bedrock. Only time will tell.

P.S. This general type of real estate is always labor intensive and requires an owner-investor available for small repair woek and emergencies 24/7.

.

Bill McInerney

BUYING OR SELLING? CALL BiLL McInerney 617 816 3933

Compared to what?

Just where does the commercial real estate market stand?

What are the numbers?

Let's take just Middlesex County, Massachusetts. This county contains 54 cities and towns and has abut 1.3 million in population. It runs from urban and high-end Cambridge to rural and low-tide Ashby, to Lowell, Watham and Sommerville. Some of it's towns are Lincoln, Concord, Billerica and Framingham.

In the past 30 days, per MLS, there have been 28 Commercial real estate transactions.( 10 leases and 17 sales in all.) with total volumes of $6,005,788. But what does this compare to?

11-27-09 30 days commercial = 28 Transactions with a volume of 6,005,788
11-27-08 30 days commercial = 31 Transactions with a volume of 7,966,008
11-27-07 30 days commercial = 11 Transactions with a volume of 6,793,390
11-27-06 30 days commercial = 23 Transactions with a volume of 13,326,006
11-27-99 30 days commercial = 10 Transactions with a volume of 5,640,100
11=27-95 30 days commercial = 5 Transactions with a volume of 1,760,000.

We are almost down 44% in sales volume since the same period in 2006.
But we are doing much better than was done in 1995!

How des commercial square with residential sales same time period same county?
The top 5 residential real estate brokerage firms alone sold $ 128,246,000 for the same time period. Residential sales ( 1 family, condos, multi families out-sold commercial by a factor of 21.3
times!


Competition for these commercial transactions in 2009.

In Middlesex Country there are 54 cities and town, with a guess average of 5 brokerage firms per community equals 270 real estate firms ( a low, low number) If each firm has 6 agents ( another low guess Number) = 1,620 real estate agents chasing 28 transactions. Or there are 57.85 agents for every one commercial transaction.

These numbers reflect the MLS commercial activities and not the entire commercial market.

Bill McInerney

Going Foreward! A Tip to the Wise.

History is history even in the real estate business! We all know, or by now we ALL should know, where were are.

But where are we all going is the question.

In my perspective the residential world will face a major downsizing, in all areas of the business. It's going to be ugly and mean. Home-builders, sub-contractors, mortgage brokers, appraisers, property inspectors and yes even real estate brokers and agents face a world of fewer and fewer sales and deals.

The critical test will be just how many Realtors remain active as dues paying members in that organization on a local and national level. Same of the Home Builders Association.

Big-name national "Brands" ( Franchise operations ) will be hit hard as their massive insane and foolish debt and extra-fat unnecessary, lazy and incompetent management cost continues to soar out-of-control while revenues dwindle and dwindle.

For the residential real estate industry I see it returning to the 1940 and 1950 model......progress in retrograde.
(If you don't believe me just read some true, valid, uncensored real estate business history from local sources. I think we are already back-in time and 2010 will be similar to 1933!!)

Will MLS survive? Pocket and off-market listings are now again prevalent. Discount residential brokerage firms thrive from MLS and they now pose a major threat to some well entrenched firms. Look at the numbers. The discounters are successfully peddling a greater and greater number of properties.)

The commercial world isn't much better but some solid and seasoned firms will survive and thrive!

The ranks of local realtor based commercial brokers and agents will also be hit hard in all front. The "rent-an-initial"days of professionalism (?) are gone.

TIP:
For those left standing in 2010: if the following terms and concepts are not in your marketing plans and materials right now, just please get off the bus. And right now.
Urbany
(F)luxurary
MassMingling
Embetter Generosity
Proflie Myning
Maturatism.


While you were busy playing "copy-cat" real estate business 101, the world my dear, changed.

The day of the brand, the script, the template, the instant website, the pre-packaged company-store image, pre-packaged legal forms, the brand colors ( and silly blazers) the ever costly affiliation and paid association with national do-nothing associations, the agent and broker flip-machines, are over the hill.

Realtors are like the Elks, Lions Club, VFW, American Legion and other organizations that simply saw their day and died an inglorious demise.

Most residential real estate brokerage firms, as we know them today, in size and scope, are in the same boat as local newspapers. And sadly many of them don't even know it!

The best feature is that the day of the true independent real estate agent will once again reign supreme.

Bill McInerney

Happy Thanksgiving!

Long before high-rise flashy condo's, flips, and those insane no-doc-loans we use to celebrate Thanksgiving with dignity, simplicity and true meaning.

I know that this hasn't been a good year for most in the real estate business or industry.

But when we threw away the old fashion, hard-won, tried and true rule book and decided to "fly-by-greed" alone, the crash was all but inevitable.

The business as we came to see it and know it for the past few decades is over, done and cooked and forever gone.

The financial harm, economic pain and emotional headache created to countless millions is going to continue and linger for some time.

We can't simply market or talk our way out of this most serious real estate crisis.

The good news is that maybe it has given to the real estate industry and business something that has long been absent and that is: humility.

I, for one, see many changes coming down the pike. I see new massive rules and new regulations to replace our lost sense of collective ethics and self policing; I see the end of the film-flam "flipsters, not by desire, or ideals but by legal mandate.

I sense that the down payment requirements on all real estate will soar. Credit reporting will become tighter and tighter. Values will continue to erode and sink.

The yahoo-huckster, big-business "brand-machines" will continue to peddle false-hope and falser promises and they will begin to flop. The larger than life national organizations will lose massive membership and they too shall begin to fade into oblivion.

So the good news is that a new day will be coming for the real estate industry and business and for this we can be most thankful.

Even if it does take another five or six years we have a great deal to be thankful for and with diginity, simplicity and true meaning.



Bill McInerney

Where Are We Going?

For the past many weeks I've been in the field, on the streets, talking with property owners, tenants, investors, commercial brokers, appraisers, bankers,and everyone is waiting for the return of the good old days.

I've also been reading. Reading old newspaper articles, old real estate advertisements, and legal notices dating back to the 1930's.

Some interesting material from that "era" is on the Internet but it requires patience and a great deal of time to sort and shift though the various sites.

Some of the great libraries in this geographic area have a treasure trove of material.

And I have been keeping fairly current on what's happening media wise in various U.S. and wolrd markets.

I think a great many people are in for a big surprise. From my perspective we are in an economic downturn created by Wall Street, the outrageous lack of basic regulations and oversight, and media hype!

Real estate was turned into a just another Wall Street commodity. But this downturn, recession, simi-depression, has another twist or flavor.

We, as a society and culture, are also now just reacting to significant technological changes made and implemented over the past decade.

The Internet, the cell phone,the lap top, alone have altered many old businesses in a highly significant fashion and manner. Combined together they have significantly escalated changes in a broad spectrum of industries.

Add to this stew of recession-depression, technological changes with another powerful ingredient: the emergence of both new and old very powerful, savvy, mega-smart countries that are true competition.

Then sprinkle into the stew the reality of the "energy crisis" which is now on the back burner and just ready to boil over at a precipitous moment.

And like it or not but the entire international world is forcing new worldwide banking and financial rules and regulations to avert another potential global financial meltdown.

I, for one, do not see a return to the old days.

I see emerging an entirely different manner in which many industries and business will operate in the future.

The nature of business is changing; the very core of business is being altered in a major evolutionary manner.

Which leads me to believe that this is a golden time for new, creative ideas and concepts,( beyond tehcnology) which will not be anchored in the dusty past.

The change is just begining.

Bill McInerney

111 Times What The Property Previous Sold For!

Yes, a true story which just occurred.

A women investor purchased "property in 1986 and just sold it, in November 2009, for $43.8 million dollars.

Yes, it sold for 111 times the original purchase price and with no improvements!

Purchased in 1986 for $385,000 and sold for $44.8 million in 11/2009.

How's that for a "return on investment!"

The fact is that it wasn't real estate; it was a painting done by Andy Warhol.

It's title " 200 One Dollar Bills" a 7 foot wide silkscreen canvas comprised of repetitive images of one-dollar bills, reproduced in tones of black on grey with a blue Treasury seal."

However, the story behind the story is: Many ascribed the high selling rates ( of the Southey's auction) to " the lowering estimates on the lots. ( art works to be sold."

Right pricing today is everything.


This also illustrates the great divide between "investing" and "speculating."

The price of $385,000 in 1986 was for cash and the" property " in this case a painting, had no income cash flow. Zero.

Pure speculation by a trained and educated " London Art Dealer."


It's also good news to see that some "speculators" have this amount of capital to spend.

Bill McInerney

IMPERSPICUITY

Yes, "imperspicuity," will rule the commercial real estate market for many more months! It's meaning:" Want of perspicuity or clearness; ambiguity."

Confusion in the business has already set in and many commercial markets are totally paralyzed: no sales and almost no leasing activity. In this interim of market stagnation a new (but very old) commercial market is slowly emerging.

In my opinion, the emerging commercial real estate market will be unintelligible for most commercial real estate practitioners accustomed to the stilted financing methodologies used over the past two to three decades.

It's clear that now the greatly anticipated commercial meltdown has begun! In case you don't know, UCBH Holdings Inc's United Commercial Bank, a San Francisco-based lender with $11.2 Billion ( and deposits of $7.7 billion)in assets, was seized by federal regulators last Friday.

This seizure cost the federal government $1.5 billion FDIC deposit insurance fund.

According to Bloomberg.com, " Banks are buckling under the weight of souring real estate loans caused by the worse recession in 25 years."
"Commercial real estate loans have been the leading cause of bank failures in the past two years. The loans total $ 1.1 Trillion according to FDIC.

Add to this news from Philly, "It just a hint of the harrowing state of affairs in commercial real estate, where vacancies are on the rise across virtually all sectors, rents and property values are dropping, building owners are low on funds and financing options are drying up."

" There's a tremendous amount of pain coming", declared Sid Smith, managing partner of Newmark Knight a global real estate service firm,"

"Of the $3.5 trillion in outstanding commercial debt, an estimated $$535 billion will mature over the next two years according to Marcus & Millchap a national commercial real estate brokerage firm. Meaning $22.29 billion will be due for full payment, or refinancing, every month for the next 24 months.

The emerging commercial market will offer some great opportunities for those in-tune with the old fashion, tried and true, and highly sophisticated valuation tools and techniques of the past and those buyer-investors who are not blindsided by the glitter of tenant "brands."

The key now is one word: PATIENCE.


Bill McInerney, Commercial Realtor
Call: (617-816-3933)

BUYING OR SELLING?

Bill McInerney offers: Commercial & Investment Property Research, Acquistion and Consulting Services.

The Biggest Commercial Real Estate Problem

The biggest Commercial Real Estate problem facing the industry, in my opinion, is blatant denial.

Denial by property owners, investor-speculators, a great number of sadly mis-informed and unrealistic commercial agents, governmental officials and many in real estate media positions.

The former "normal market" isn't going to return! The former astronomically high sales and lease prices are not going to be seen for another generation or more.

Massive new financial banking regulations are being prepared as this blog is being published.

Also, in my opinion and based on my 40 years active experience in this field:
1. This is more than just a "recession - depression" caused by massive over-supply and under-demand demand!

2. This is the tip of the beginning of an entirely new way of how all facets of commercial real estate will function.

FACTS: FROM the Third Quarter Market Viewpoint by Colliers Meredith and Grew

In Massachusetts, along Route 495 the vacancy rate is now a whopping 25.5% and rising! ( One out of every 5 building are vacant!)

Along Route 128 the vacancy rate is 18.6% and rising!

Boston office market: Class A Space; 13.% vacancy; Class B, 15.5%
" Although the market appears to be bottoming out, continued contraction is likely over the next six to 12 months or until the labor and financial markers stabilize."

Rental Rates, " On average, rents have declined by approximately 20 to 25% over the past 12 to 18 months."
REAL NUMBERS:
MARKET SUPPLY
Boston 58,187,916 SF of space or 1,335 acres of space under roof)
Cambridge 20,064,264 or 560 acres of space under roof!

SUBURBS ( 128, Mass Pike, 495; 123,271,476 SF

TOTAL 201,523,656 square feet of space.

FACTS: Major real estate nationally known, long established commercial real estate brokerage firms are doing very badly as sales and leasing volumes drop in some instances by as much as 70%

MLS commercial sales and leasing activities are almost nonexistent in the Commonwealth ( Middlesex County: 54 cities and towns; 1,400,000 in population 12 Under agreement deals in 30 days is NOT a healthy, vibrant market.

Today, serious, active viable buyers and investors, of commercial real estate have no patience for the charade of silly, immature and unprofessional denial being maintained on false hopes and unrealistic expectations by many agents and owners.

I know that I'm not wasting my time on them!

Bill McInerney, Commercial Realtor
(617) 816 3933

PROPERTY WANTED!! ( How's that for a change!)

WANTED: An industrial or commercial building containing 8,000 to 12,000 +/- Square Feet in SOMERVILLE, MA.

Down and dirty is fine, nothing fancy, must be a well-maintained property. Viable long term client who has FINANCING in place. Will purchase or lease (Long term: 10 to 20 years+)

Want to move quickly on acquisition of this property: don't have time to dally with "short sales, " foreclosure" or "bankruptcies."

Will consider "larger industrial property" with some existing tenants ( leased or TAW's) but building must have 8,000 to 12,000+ SF vacant space NOW. Interest will depend on existing present use of other tenants. Will need Income and Expense statement, copes of existing leases up-front.( Will sign confidentially agreement)

Prefer property that is compliant and in conformity with existing zoning by-laws.
Call me anytime:

BillMcInerney. Commercial Realtor
617 816 3933







BUYING, SELLING or LEASing INDUSTRIAL OR COMMEERCIAL REAL ESTATE?
CALL BILL MCINERNEY 617 816 3933