New Townhomes flooding Seattle Rental market

Comments

• Ben

  November 2008

  I could believe that the builder could pull this off if anybody could. Their costs on 500k would come out around 2.5k, and if they were selling the places for what you say then they probably built them for less.
  
  Whether this is a money making move for them is another matter. Somebody who owns something built 5 years earlier could undercut them a whole lot on rent - I doubt anybody would pay the rent that they want.
• WestSideBilly

  November 2008

  delusional landlord wrote:

  SEATTLE MAGAZINE(JULY ISSUE)-"DELRIDGE WAY IS THE 3RD BEST NEIGHBORHOOD IN SEATTLE"

  
  
• mukoh

  November 2008

  DJ,
  Can't rake everything in there with the same comb.
  There are builders who are waaaaay overstretched as their margin was 20%. Which was wiped out in a flash, and the bank is letting them reduce principal, take partials, and do anything to keep the bank from taking it back. Then there are builders/developers combo who have way higher margins of 50-60%, who don't care and can sit out with rentals for a long time.
  
  Then there are builders who basically assign rents to the bank in leu of going through a legal process to get themselves out. As soon as the rents are assigned the bank takes posession.
  
  Fun stuff. I see it a lot.
• deejayoh

  November 2008

  mukoh wrote:

  DJ,
  Can't rake everything in there with the same comb.
  There are builders who are waaaaay overstretched as their margin was 20%. Which was wiped out in a flash, and the bank is letting them reduce principal, take partials, and do anything to keep the bank from taking it back. Then there are builders/developers combo who have way higher margins of 50-60%, who don't care and can sit out with rentals for a long time.
  
  Then there are builders who basically assign rents to the bank in leu of going through a legal process to get themselves out. As soon as the rents are assigned the bank takes posession.
  
  Fun stuff. I see it a lot.

  
  If I am a builder who has a construction loan on a property, I can't just go and lease those units for a year, can I? Seems to me these guys are looking at refinancing/converting their financing in a pretty difficult market if they can't sell. They may have the margins, but I seriously doubt most of them have the cash to do this on their own. I'll bet that swap to being an unwilling landlord costs them a fair bit of their margins. The banks are not dumb
• tomtom

  November 2008

  deejayoh wrote:

  The banks are not dumb

  
  I haven't seen any evidence of this yet.
• deejayoh

  November 2008

  tomtom wrote:

  deejayoh wrote:

  The banks are not dumb

  
  I haven't seen any evidence of this yet.

  
  Well, that's a good point.
• Ubersalad

  November 2008

  deejayoh wrote:

  If I am a builder who has a construction loan on a property, I can't just go and lease those units for a year, can I? Seems to me these guys are looking at refinancing/converting their financing in a pretty difficult market if they can't sell. They may have the margins, but I seriously doubt most of them have the cash to do this on their own. I'll bet that swap to being an unwilling landlord costs them a fair bit of their margins. The banks are not dumb

  Most of these construction loans are turned into short-term ARM upon completion. I am sure there are stipulation on case by case scenarios, but these builders are no landlords and I am sure they want nothing to do with lease or rentals.
  
  Very interesting time, and unfortunately I am not as much on the sideline as I once was anymore.
• mukoh

  November 2008

  DJ, depending on the builder, history and future earning potential banks are taking loans off the books by converting the construction loan PU to regular investment loan. Some are as low as 2.5%.