Monthly Archives: April 2013

Investors have swooped in — quickly

Many had little or no presence here before the bust. But they have quickly become some of Kern County’s biggest homeowners.

What distinguishes them now is how long they plan to keep their money here. While there is still plenty of rehab and “flipping” activity, some investors in the local home market have embraced their new role as landlords.

This view of Bakersfield’s latest housing investment boom, based on a Californian analysis of home sales data on the county’s top 20 homeowners, as well as interviews with investors, shows how appealing the local home market remained even during and after a devastating real estate crash.

And it has happened quickly.

Half of Kern’s 20 biggest single-family homeowners have at least tripled their inventory here since the end of 2006, which is generally acknowledged as the beginning of a bust that ultimately hit bottom in spring 2009.

Sixteen of the top 20 have each spent a total of more than $1 million on homes in the county since Dec. 31, 2006. Seven have invested more than $4 million since then, and one has invested $9.3 million.

A BIG FISH

That last one, Westlake Village-based Alta Community Investment, owns 100 single-family homes in Kern County; all but four of them are in Bakersfield. The county’s second-largest homeowner after a Bakersfield-based partnership, Alta bought all of these properties between March 16 of last year and Jan. 18, according to county home sales records.

The company’s chief executive is Todd Kaufman, a former Wall Street bond trader and mortgage broker with Washington Mutual, the Seattle-based home lender that collapsed in the 2008 financial crisis. With about 65 investors across the United States, he said, Alta owns homes throughout California and in other states, though Bakersfield is “among the larger” areas of investment.

Kaufman said Alta will probably buy more homes in Bakersfield before long.

“Were just refueling for more capital,” Kaufman said, adding that the company intends to keep its local properties for the long term.

A very different investment strategy applies at a group of funds managed by Bakersfield home flipper Miguel Soltero. Together, the various funds — backed by what he calls a “closely knit” group of friends, family and business acquaintances — owned about 60 Bakersfield properties as of March. That made them, as a group, one of Kern’s top 10 homeowners.

County home sales records show that Soltero’s group bought the majority of the properties since the fall of 2011, though some of those investments date back to 2002 and earlier.

Soltero said the group’s guiding strategy is not to rent out these properties but fix them up and sell them at a profit. It’s less capital-intensive than buying and holding, he said, and more profitable, too.

“We have enough rentals to know that, at the end of the day, it hasn’t been that lucrative for us,” said Soltero, a Los Angeles native who moved to Bakersfield at the height of the real estate bubble in about 2005. “We make more money buying, rehab’ing and selling.”

FLIP, OR BUY AND HOLD?

There seems to be little consensus on that conclusion. Indeed, county records show that almost all of Kern’s top 20 homeowners still own local homes they bought four or more years ago, even as much of their investment here has taken place more recently than that.

Becoming a landlord can make good financial sense for investors able to park their money in the real estate market, said Bakersfield Realtor and broker Frank St. Clair, who heads a diverse set of investment groups that together own more than 50 homes in the city.

The return on investment from a single-family home offered for rent averages between 5 percent and 7 percent a year, he said. That doesn’t include the property’s price appreciation, which in Bakersfield hovers around 20 percent per year lately.

St. Clair has made both kinds of investments — for his family trust as well as for his investor customers. Lately his focus has been on flipping homes, given that he and his family owned more than 1,000 local apartment units and rental homes. “We’re rentaled out,” he said.

Some of his customers are not. He said they send him a cashier’s check for the price of the home and he manages it for them as an income property.

“We know how to do it where it’ll make money,” he said.

One reason why Bakersfield makes an attractive place to buy income property, investors say, is the local economy.

Kaufman pointed to Bakersfield’s “well-balanced economy,” with its oil and ag strength complemented with manufacturing and financial services.

Soltero agreed but added that the city’s affordability has been a big factor in luring investment.

“It’s a cheap place to live,” he said. “Your dollar goes a long way.”

BAKERSFIELD FOCUS

To be sure, much of the county’s recent home-buying has been concentrated in Bakersfield.

Fifteen of Kern’s top 20 homeowners have chosen the city for at least 85 percent of their home purchases since the end of 2006. Nine bought homes nowhere else in the county during this period.

Their collective investments span the city, even as the majority of their holdings are located east of Highway 99. Also, different investment groups have focused their activity in certain geographic clusters.

County home sales records show that the ZIP code that has received the greatest investment is 93304, on the east side of the 99 near Stockdale Highway.

The second-biggest investment cluster is in the 93306 ZIP code, in northeast Bakersfield, followed by the 93307 ZIP code further south.

The clusters themselves reflect distinct investment strategies, as some neighborhoods command higher prices than others.

For his part, Kaufman said he’s bullish on the city’s lower-end homes. Accordingly, his company has invested mostly in Bakersfield’s eastern and southern areas.

“Everybody’s got their own opinion,” he said. “People don’t believe in the bottom end of the market. … (But) we believe in that space.”

BY JOHN COX Californian staff writer jcox@bakersfield.com

http://www.bakersfieldcalifornian.com/business/real-estate/x568089810/Investors-have-swooped-in-quickly

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Spring Home Improvements: Repair, Replace, Enjoy!

Spring Home Improvements: Repair, Replace, Enjoy!.

With memories of snow and cold fading, it’s time to remind home owners to take stock of important work to be done for themselves and potential buyers down the road. Keeping on track with seasonal maintenance will lower costs and raise value.

   April 2013 | By Barbara Ballinger

Besides cleaning closets and planting flowers and cool-weather vegetables, spring should involve scrutinizing the condition of a house following the rough winter. Repairs and replacements won’t just help owners enjoy their properties more; they’ll also keep energy costs down as hot weather rolls in and attract more buyers, many of whom have become meticulous about inspecting roofs, appliances, and HVAC bills.

While most home owners need to prioritize costs, these 10 improvements are at the top of many contractors’ lists. Some of them are even more affordable than ever before, thanks to rebates from local communities, utility companies, and the federal government.

1. Replace windows

If home owners’ houses felt drafty this past winter and they have single-pane windows, there’s a good chance those were one of the culprits. But replacing them all can be costly — $400 to $500 per window, plus $100 to $150 for installation, according to home improvement expert Tom Kraeutler of The Money Pit. Whether that’s the place to spend dollars should depend on how long home owners plan to stay put or what houses listed in their neighborhood offer if they’re selling. “If they’re the last ones with old, rotting-wood windows, that negative may affect buyer attention,” Kraeutler says. This year’s “Cost vs. Value” report from Remodeling magazine pegs the payback for vinyl windows at 71.2 percent and for wood windows at a similar 73.3 percent. A less costly alternative can be to add storms, caulk, weather strip, or rim joists in a basement. Contractor Paul Eric Morse of Morse Constructions Inc. in Somerville, Mass., suggests gradually replacing windows in any room that owners remodel to make the cost less prohibitive.

2. Install a new heating system and change filters If a seller’s furnace and boiler were on their last legs this past winter, it may be time to install a new one, or at least provide sellers with a credit toward new equipment. Any choice should carry an EnergyStar label for best results. Existing systems still in good condition should have filters checked monthly and replaced when dark and clogged, a DIY project. For great energy efficiency, Morse is installing more heat exchanges that provide both heat and air conditioning and can be less costly than a new central air system with new ducting and a new furnace.

3. Clean air conditioning units

Before summer temperatures rise and HVAC pros are swamped, advise home owners to clean coils and change filters so their system doesn’t have to work as hard. They should also have drain lines cleaned, so moisture is eliminated, says Douglas Tompkins, with Pro-Air Heating and Cooling in Newburgh, N.Y. If they haven’t had air conditioning, now’s the time to weigh choices of a central system, heat exchange, or room units.

4. Install more insulation

A home’s first line of defense to stop cold or hot air — depending on the season — should be the attic, according to most contractors. An energy audit can determine how much more is needed, if they already have some. Seattle-based contractor Ron Rice, of Your House Matters, suggests adding more than the minimum 8 inches required by most local codes — up to 16 inches. For cold climates, installing electric or hydronic radiant heat under bathroom and kitchen floors will provide comfort next season.

5. Switch out inefficient appliances

Sometimes appliances are no longer smart to repair. The determining factors for that should be their age and the cost of repair versus replacement. Here, too, top choices carry an EnergyStar label. If home owners need to replace most of their kitchen equipment and have a limited budget or plan to move, Rice suggests they prioritize and first switch out the range, followed by the refrigerator, dishwasher, and microwave — in that order.

6. Repair or replace roofs, gutters, and downspouts

Because of the tough hurricane season last fall and the winter blizzards, roofing contractors in many parts of the country have been busy. Morse recommends that those needing new roofs consider architectural asphalt shingles because of their long warranties (often 50 years), affordable prices, and attractive appearances that work with many house styles. In addition, many contractors have the equipment and experience to install roofs of this material, as opposed to metal. He also recommends that home owners have gutters and downspouts cleaned come spring so that water can flow through them; gutters should be angled away from a house to stop water pooling around a foundation and seeping into the basement. Gutter covers can be helpful but often don’t eliminate all debris.

7. Paint

Damage often shows up at this time of year, especially in climates where there’s been a lot of snow melting or winter rains, Morse says. Use the time to reassess your color choice for better curb appeal. Even changing the front door’s color can make a difference.

8. Prune trees

Cutting limbs that may have been damaged during winter and that might fall on a roof or allow squirrels to enter a house is smart, and it can be a cost savings later on. Called “thinning out,” this method gets excess foliage trimmed to allow more natural light into a house—and cut down on artificial illumination, says Sacramento, Calif.-based landscape designer Michael Glassman. “It opens the tree so you don’t have dead spots in the interior and lets the tree take advantage of air flow rather than chop off the top,” he says. A certified arborist will know the best ways to do this without removing too much of a canopy, which is useful for privacy and shade.

9. Mulch plantings

Along with fall, spring is a key mulch time. Mulch helps plants thrive by holding back weeds, retaining moisture so soil doesn’t dry out, and adding a tidy look, Glassman says. Use bark, shredded fir, leaves, straw, or grass clippings.

10. Replace lightbulbs

When it comes to artificial light, most contractors recommend switching burned-out bulbs to LEDs, which last longer than incandescents, consume less energy, and have come down in price — now often just $10. Quality has improved, too, and they’re dimmable and available in colors.

One more thing: Before you hire anybody to take on work, get a written estimate. Better to be safe than sorry.

 

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More demand, less supply pushes Bakersfield home prices up 3 percent

Lower supply and higher demand drove up Bakersfield home prices another 3 percent last month, according to the latest housing report from local appraiser Gary Crabtree.

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Active listings of single-family homes in the city declined by almost 12 percent to 432 between February and March, Crabtree reported in his closely watched housing market update. A year before, there were 738 listings in Bakersfield.

“The supply represents the lowest since I began tracking the market in January 1993,” he wrote in a note accompanying the report.
Meanwhile, home sale closings totaled 473 in March — an 11 percent jump from February, according to Crabtree’s preliminary forecast. This measure of market demand was significantly higher in March 2012, when 578 Bakersfield homes were sold.

The city’s median sale price increased in March to $175,000 from $169,945 the month before, Crabtree reported. That was nearly a third (32 percent) more than March 2012’s median price.
Given the acute supply shortage, Crabtree commented that Bakersfield’s home market has reached a “critical point” in its continuing recovery.
Using his own forecasting model, the Bakersfield home appraiser predicted that the city’s median sale price will rise 19 percent over the next 12 months.

BY JOHN COX Californian staff writer jcox@bakersfield.com

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