Affordability - that is if you have the cash

If I want to invest in Exxon or Microsoft (two of the most profitable, dominant cos. in the world with pristine balance sheets and Triple A debt-ratings), I need cash to buy their stock. But if I want to buy a condo in some busted association, or a three-unit in one of the most heavily foreclosed upon markets in Boston, I need cash for that too? The audacity of the banks is just incomprehensible...

Nice place overall, but Dot still has good pockets and bad pockets. And so few places to walk to - you almost need a car while still being so close to down down...

"Of course, at that point, the $50,000 unit will be back on the market for $150,000."

Unless Cash-4-Shacks (aka, the $8,000 helicopter drop for "first time home buyers") gets extended, does anyone really think that real estate is going to regain the stratospheric heights it had in 2005?

I knew these type of converted triple family condos were set up to fail from the moment I started seeing them go up for sale. These type of structures were not designed for a condo type set up. There are too many problems and issues to list here in detail, but the idea of these homes being divided up and owned by multiple owners is not a good idea to start with.

Anybody who thinks they're going to make money by rehabbing and flipping in the next 2-3 years is in for a very rude awakening.

With Cash for Clunkers expiring today and Cash for Appliances on the horizon, I suspect Cash for Shacks will get extended. Once the gov. sees that an $8,000 tax credit didn't quite do the trick, they'll try $12,000 and then $16,000, etc.

If we just throw enough money at the crisis, all our problems will be solved.

A condo association with only 3 members? What a nightmare.

why on earth would those units triple in a few years? Equally likely, they will be 50k in a few years.

Ask homeowners who bought in 2007 and 2008 how their bargains are doing...

Joe is also right about many of those "condos" structural issues. I'd never own one on those grounds alone

Joe, I'm curious about your reasons for being certain that converting triple-deckers into condos is inherently doomed to fail and these buildings cannot be set up for condos. I'll admit my bias upfront - I own a unit in a triple-decker building in Cambridge - but after seeing other condo arrangements, I actually felt that the situation I ended up in was preferable to the other options in my price range, particularly these buildings seem to have higher owner occupancy rates. Most of the street I live on is converted triple-deckers, and it seems to be working out fine, but I'm very interested in hearing your perspective.

I had a friend that lived in a 3 family condo building. The women on the top floor just refused to do any type of basic housekeeping maintenance of the common areas; disagreed on the need to spend money on upkeep; etc. I guess if you live in a building with 20 units, it's easier to just ignore the problem tenants, where with a 3 unit building, you've lost 1/3 of your association. Of course, getting 20 people to agree on something is no small task.

I don't know Joe's reasons, but I always think of those three-family condos as having all the disadvantage of being a landlord (responsibility for maintenance) with none of the benefits (rents, selecting your tenants). Most are too small to hire outside management, so someone gets stuck with the day to day maintenance chores. Also, like working for a small company, if someone is difficult or in a bad mood, or just disagreeable, life can be made miserable for everyone else. The finances can also be precarious. One cheap (or cash-strapped) person can hold up necessary repairs.

Of course it can work out just fine. But I think you have to be lucky in a lot of ways.

charles: I believe the speculation that those units will triple in value is based on the idea that banks will resume issuing mortgages on those properties in a couple of years. Which seems like a relatively reasonable hypothesis.

James - True. But I don't think mortgages are the problem. I bet most would have no trouble getting a mortgage for them.

The problem is income to support the mortgages. And the evidence that that will be any better in a few years is lacking. Unemployment is growing, and the economy, despite the brave words, is actually getting worse.

To add to 11, converted 3 deckers etc usually have systems and structure that aren't really set up for condos. So things get jury rigged in ways that aren't great for the person who eventually ends up with the bill.

It can be done right. It just often isn't.

clwho,
Sorry for the late response to your question. I posted a very detailed reply yesterday afternoon but for some reason when I continually checked back it never made it to the blog. Not sure if it was deliberate on the moderator's end or something I accidentally did on my part.

I have to admit that I have a bias when it comes to condos because I believe they are nothing more than glorified apartments. The units are owned by individuals but you are very constrained as far as what you can do to change the dwelling, yet you still pay a monthly condo fee (similar to renting but with more hassle).

The posts from Susan and Lou sum up nicely what I originally wrote. Besides the condo market heading for more declines, I have heard and read too many accounts of horror stories with these types of condo conversions. Like I said, these types of homes were not designed with the intent of being owned by separate folks, and many have/ found out the hard way.

charles: Isn't the central point of this blog entry that banks aren't issuing mortgages on these properties "in part because the condo associations are defunct, among any other problems." It doesn't take much income to pay a $50k mortgage (even for one person making minimum wage (well below the poverty line), PITI is below 1/3 of income). So if banks aren't issuing mortgages on these properties, it seems like a good bet that it's for some reason other than the borrower's lack of income.

James - yes, true of some. But not true in general. Its not like every condo association in Dorchester is defunct, though no doubt some are. Lets not lose track of what shape these apartments are likely in, either - with full foreclosure vacancy etc they may be selling for 50k with all the copper ripped out, and need 100k to sell for 150k.

I'm pretty sure I could get a loan to buy one of those condos instantly. I also don't want one. And that's more of the problem - they have to be priced for the target market, not me. And the target markets mortgage issues have more to do with income and current debt and jobs, not availability of places for sale.

charles: Ok, so you doubt the central "fact" of this blog (that condos are cheap, but only if you can pay cash). I'm just saying that if you believe the "fact" then "mortgages will come back, and prices will jump again" isn't a completely unreasonable conclusion.

james - yeah, reasonable way to put it - I don't buy that fact as representative, I think there is more to it. I've got a very cynical view when it comes to free money. Very few things in an efficient market are priced much lower than they are worth.

And that's what would be required to have a runup while the market goes flat, basically.