Looks like I will be a landlord for another year, whether I like it or not!
We received the above mail via e-mail from the redevelopment committee - along with another letter from a second developer. They both read the same. They want to buy our condominium development and tear it down, but the market is starting to tank for real estate, interest rates are rising, banks are in trouble and less willing to lend, and inflation has driven up the cost of construction. It no longer looks as profitable as it once was, to redevelop, at least right away. And with banks having their own problems, it may not be possible in the near future.
Welcome to recession 2023.
What is interesting is that, while units are listed for sale there, it is hard to sell them. First off, since more than half are owned by investors, FHA financing (which is to say, 90% of the financing out there) is not available. That leaves cash buyers, VA loans, or maybe private financing (Hello, Taylor Burke?). So the units are hard to sell and in a way we are "stuck" with a condo that at best breaks even on the rent, and at worst costs us a couple of grand a year. Shoulda sold out ten years ago. Don't know why we didn't.
Actually, this could be an opportunity. Since it is so hard to get financing on these units, we could sell it for the $160,000 buyout price, and take back a note for $160,000, payable in monthly installments, which would generate a modest amount of income (not enough to screw up my taxes or Obamacare subsidy) and provide a buyer with an opportunity to purchase with a low down payment at a decent interest rate. Win-win!
After all, that is how I bought 917 Duke Street - and started my small Real Estate empire back in the 1990's.
But what struck home about this was how real the recession is. People I meet are still living in denial - because they haven't been laid off yet, and nothing has affected them financially - yet - other than increases in their credit card balances, which is masking the real increases in monthly spending. Their financial gauge set is trying to tell them something, but they won't listen until it says, "Terrain! Terrain! Pull Up! Pull Up!" but by then, it is too late - and of course, half of them won't even listen to the ground proximity warning ("must be broken!" is the last thing said on the cockpit voice recorder).
It is the exact same thing that happened in 2007 and it is happening again - this time with newer, younger players - although a few veterans of 2007 are back in play again, having learned nothing from the last recession. And sure enough, half of these players will cry "unfair" and become "tea partiers" and the other half will protest Wall Street - both halves convinced that all their financial woes are the result of larger forces at work - being forced to pay taxes, or pay interest. Like somehow the rest of us don't or something.
Weak thinkers are always with us. And sadly, in part, that is how this cycle of boom and bust occurs. The same people whining about how unfair life is (wait for it - any day now!) are the same ones calling the rest of us "idiots" for not investing in Bitcoin or Tesla or an overpriced mini-mansion. When their dreams of avarice come undone, surely the rest of us should bail them out, right?
And sadly, sometimes we do, to our regret.
