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“The foreclosure crisis is increasingly claiming the homes of people who never made the mistake of taking out an unaffordable mortgage: renters. Hundreds of tenants in foreclosed buildings have been evicted or are facing eviction by mortgage companies that do not want to be landlords. Tomorrow, US Representative Barney Frank said he plans to introduce federal legislation on foreclosures that includes a provision that tenant leases remain in effect after foreclosure, and that tenants without leases must receive 90 days notice before eviction.”

“Banks will no longer be able to put their convenience ahead of people’s ability to live,” said Frank, who chairs the House Committee on Financial Services. “We have asked lenders, saying, ‘You really shouldn’t do this.’ Now the next step is to make it mandatory.” - Boston.com (Full Article)

In my “Real Talk” posting earlier this month, I talked about how the multi-family sector of real estate remains strong and how the slow residential market has created an influx of “Tenants,” thereby increasing the demand for rental housing and increasing the average rents.

Owners of multi-family properties are reaping the benefits of current market conditions. High prices and tight restrictions are forcing people to rent, while foreclosures and condo-conversions have displaced many occupants. The vacancy rate in Los Angeles is lower than ever and the cost to rent has continued to increase. Multi-family owners are in a great position.

This morning I came across an article in the Los Angeles Times, entitled “Rents on the Rise as Housing Prices Slip.” This article reinforces what I said in my posting “Real Talk.” If you can afford to purchase more multi-family units, do it! If you do not own multi-family units, you should!

“While homeowners were being stung by shrinking property values, renters across the state found themselves having to dig deeper into their pocketbooks in the third quarter, according to a report to be released today.”

“The average rent at larger apartment complexes in California increased 5.6% to $1,413 compared with a year earlier, according to a survey by Novato, Calif.-based research firm RealFacts. Los Angeles and Orange counties remained the state’s most expensive market for rentals, while the San Francisco Bay Area posted the highest rent increases — as high as 12.2% in Santa Clara County.” - Los Angeles Times. (Full Article)

Construction of single-family homes fell 1.7 percent to a 963,000 rate, today’s report showed. Work on multifamily homes slumped 34 percent. The National Association of Home Builders/Wells Fargo index of builder confidence plunged to a record low 18 in October, the Washington-based association said yesterday. Levels lower than 50 mean most respondents view conditions as poor. The index averaged 42 last year. This has been the lowest record since the monthly survey began some 23 years ago.

By Kevin Postema,
October 14, 2007

Question:
I live in Los Angeles, and I always have paid my rent on time. I just got a notice from my landlord that he had sent me a late rent notification last March for paying that month’s rent late. The notice said that I would be charged a late fee amounting to 5% of the March rent. He charged me the fee even though I don’t believe the rent was late. For the record, I have proof that my rent check cleared the bank on March 2.

I would like to know what a landlord is allowed to charge a tenant in late fees for a late rent check. Can he charge 5%? Is that 5% per day, which would be 60% of the rent if one was a month late in paying the rent?

Is there no grace period required by law for paying the rent a day or two late?

Answer:
A check cashed on the second is not necessarily received on the first. Your rent may have been received and cashed on the second. A landlord can charge a 5% late fee for a late rent payment if it is written into the lease.

Although the law does not specify precisely how much landlords can charge for late fees, 5% per day would be excessive. In our current economy, up to 6% per month is allowed by most courts. In the late ’70s, when we had double-digit inflation, most courts allowed late fees of up to 10%. Generally, late fees have to bear some rational relationship to the costs one incurs as a result of them.

There is nothing in the law requiring a grace period for late rent payments. They are strictly at the discretion of the owner. Many renters are confused about this because many landlords voluntarily give their tenants grace periods, even writing them into their leases or rental agreements.

Kevin Postema is the editor of Apartment Age magazine, a publication of the Apartment Assn. of Greater Los Angeles, an apartment owners’ service group. Send letters to aptlifeaagla@aol.com

By Kevin Postema,
October 14, 2007

Question:
We rent a single-family home in West Hills on a one-year lease that ends Nov. 14. The owner of the house is not renewing the lease, opting to let it automatically convert to a month-to-month rental agreement. He also is raising the rent at the expiration of the lease and has given notice of the raise, effective Dec. 14.

We have decided to move rather than pay the increase, and we will give him a 30-day notice to quit, effective Dec. 14, before the rent increase kicks in.

We’ve done many repairs over the years, and the place is now in better shape than it was when we moved in. We would like to get our $6,000 security deposit refunded as soon as possible. We’ve left the owner about 20 voice mails, but he is not returning our calls. Should we let the 30 days run out and wait for our security-deposit refund, or should we do something now?

Answer:
State law requires the owners of residential rental property to refund security deposits to renters within three weeks (21 days) after they move out of their rentals. There is no law requiring the owner to refund the security deposit before the renters move out or before the 21 days have elapsed.

You say in your letter that the house is now in better shape than when you moved in. If that’s true, and there are no cleaning fees, unpaid rent or damages that exceed “normal wear and tear,” you should get a full refund of your deposit by Jan. 4, within the legally required, three-week time frame. If you do not get the refund by Jan. 4 — or a partial refund and a written explanation of how some or all of it was used to pay for damages, cleaning or unpaid rent, the things for which the owner can deduct money from the deposit — you can send me a letter asking about the refund, or if you can afford it, have a lawyer send him a letter on his or her letterhead, which tends to be more effective.

If all else fails, as a last resort, you can sue the owner in Small Claims Court for up to $7,500.

Kevin Postema is the editor of Apartment Age magazine, a publication of the Apartment Assn. of Greater Los Angeles, an apartment owners’ service group. Send letters to aptlifeaagla@aol.com

Recently I came across a Blog on MoneyBlog.com that discussed how Real Estate Brokers/Agents have been using price ranges when marketing properties. They will actually give a price range that will state, “Property offered at $1.4mil - $1.6mil.”  The Blog went on to discuss the tactic of Overpricing properties out of the market and stated that what these individual were actually doing was pricing these properties to “Sit.”

“Priced to Sit,” is exactly what we have been explaining to clients for the past year now. My partner and I have lost business to the competition because some Brokerages believe in the tactic of OVERPRICING!

We met with a retired couple who were ready to cash out and sell their 10 unit apartment building in a prime area of North Hollywood. We expressed that we wanted to sell their property and not just added it to our List of properties for sale.  After our presentation, we informed the couple that we believed the property would sell for approximately $1.45mil and suggested a listing price that would allow for room to negotiate.

The competition came in with a listing price of $1.7mil…and to our surprise, WON the business. The property sat on the market for a few months. Unable to achieve the price they had suggested, the price was reduced!  After FIVE months of being on the market, an offer was finally generated and the property sold for $1.45mil! That is a difference of $315,000.00, talk about PRICE RANGE!    

It is extremely unfortunate that some individuals in this business do not have either the self-confidence or integrity to believe in their skills, that they do not believe they are the experts! It is disappointing to know some Brokers/Agents would lie to a client and promise an unrealistic price, rather then communicate the true value of the property! Their lack of confidence or ethic contributes to this craze of inflated values and misinformed property owners.

The reason why many owners are expecting to achieve these unreasonable prices is because of the countless Brokers/Agents that have been communicating inflated, unreasonable and unachievable value! We cannot be controlled by the fear of losing business because we are communicating the true value of a property. We do not determine prices, the market does!

Large transit-oriented development OKd for North Hollywood

The NoHo Art Wave will have a mix of housing, retail and office space.
By Rong-Gong Lin II and Sharon Bernstein, Los Angeles Times Staff Writers
September 28, 2007

Transportation officials on Thursday gave a green light to the largest “transit-oriented” development in L.A. County history, a $1.3-billion apartment, retail and high-rise office tower complex to be built at the terminus of the Red Line subway and Orange Line busway in North Hollywood.

The NoHo Art Wave, which will be built on mostly vacant land or parking lots, will eclipse even the Hollywood & Highland shopping complex and underscores the efforts of transit officials to turn the once-declining North Hollywood business district into a major transit hub.

The development will feature more than 1.7 million square feet of development on 15.6 acres, which would be the Metropolitan Transportation Authority’s largest transit-oriented development.

The MTA has made a priority of developing land the agency owns at its rail and bus stations.

Officials believe that locating shopping and housing next to bus and rail lines will encourage people to get out of their cars and use mass transit. But some critics have questioned whether such projects actually result in fewer car trips.

Similar developments — but on a smaller scale — have been rising at MTA subway stations along Wilshire Boulevard and Hollywood Boulevard as well. The MTA is continuing to look at developing land at other Red Line and Orange Line stations, as well as on the Gold Line extension now being built to East Los Angeles.

The North Hollywood project and others, however, have received mixed reactions from residents, some of whom worry about rising density of the neighborhood.

Ron Bitzer, who lives northwest of the Red Line train station in North Hollywood, said that even though his community of single-family homes is not directly affected by development at the station, an influx of people and the addition of tall buildings will affect all of the community, not just the streets adjacent to the Red Line.

Bitzer said that there is so much development going on in North Hollywood — including in his own neighborhood near Laurel Canyon and Victory boulevards — that officials should do more to reach out to residents throughout the area.

“I would have liked to have seen a little more discussion about this massive project,” Bitzer said. “It doesn’t sit well with me that they toss around this term ’smart growth’ and then suddenly approve a large development that will obviously change the character of that part of North Hollywood.”

More than 1 million square feet of office space will be built in three buildings between 12 and 20 stories tall. Other buildings on the drawing board will house nearly 160,000 square feet of retail and entertainment and about 560 apartment units. About 6,200 parking spaces will be built, with 1,500 reserved for MTA users, an increase from the current 1,000 spots.

Officials with the developer, Brentwood-based Lowe Enterprises, say they want to tap into North Hollywood’s arts and theater scene and provide space for groups to rehearse and perform, both outdoors and indoors. The company is also in talks to build a replacement for the YMCA located about five blocks away.

Senior Vice President Thomas Wulf said the project is being called the “NoHo Art Wave” because it’s being designed to be “a wave drawing pedestrians, office users and retail customers.”

“Our goal is to really build upon the resurgence that’s already taken place in North Hollywood, such as the resurgence of live theaters,” Wulf said.

Thursday’s action by the MTA board permits the agency’s staff to enter into negotiations with the developer, and it could take as long as a year to negotiate the terms, Wulf said.

The developer is using private investors to fund the $1.3-billion construction cost, Wulf said.

Roger Moliere, the MTA’s chief of real property management and development, said the MTA expects to retain ownership of the land and lease the property to the developer at $11 million per year.

Groundbreaking could begin in about two years, with various parts of the project being completed between 2010 and 2014, Wulf said. The L.A. Department of City Planning and Community Redevelopment Agency also will review the developer’s plans, Wulf said.

Transit-oriented developments have been embraced by city leaders as a way of dealing with traffic gridlock and providing needed new housing.

But the effectiveness of the projects in terms of getting people out of their cars remains in question.

Earlier this year, The Times examined driving habits at four apartment and condominium complexes at or near transit stations in South Pasadena, North Hollywood, Pasadena and Hollywood.

Reporters spent two months interviewing residents, counting cars going out of and into the buildings and counting pedestrians walking from the projects to the nearby train stations.

The reporting indicated that only a small fraction of residents shunned their cars during morning rush hour. Most people said that even though they lived close to transit stations, the trains weren’t convenient enough, taking too long to arrive at destinations and lacking stops near workplaces.

The MTA’s Moliere believes the North Hollywood site makes sense for transit-oriented development because it sits at a key crossroads for both the subway and popular busway.

(The MTA’s long-term plans — if money is available — call for eventually extending the Red Line north and building another transit line east into Burbank and Glendale.)

“It’s a perfect spot for development,” he said.

ron.lin@latimes.com

sharon.bernstein@latimes.com

Will slashing interest rates really stimulate the market? We have witnessed it devaluize our dollar, but not do much for the market. In fact, the week that rates were cut, lenders did not pass on those savings to consumers.

With creative loans a thing of the past i.e. tighter loan restrictions, the pool of qualified buyers has shrunk. Prices have yet been reduced to a point where the average person can afford to buy. Therefore, the only direction that makes sense is down!

The key word Bernanke used after cutting interest rates was, “price correction.” That is exactly what we are seeing, a price correction. The inflated values that were placed upon homes due to “no money down loans” and speculators, are now returning to a normal state. Until prices become more reasonable, I do not foresee the market picking up.

Nonetheless, in any market both Sellers and Buyers exist. It is those individuals that live within their means that are able to build wealth and own real estate. Those who attempt to take on too much and do not have the reserves to weather a storm, should one present itself, are the individuals who find themselves in difficult situations.

On the other specturm, owners of multi-family property are reaping the benefits of the current market. High prices and tight restrictions force people to rent, while foreclosesures and Condo-conversions have displaced occupants. The vacancy rate in Los Angeles is lower than ever and the cost to rent has continued to increase. Multi-family owners are in a great position.

Despite all this negative talk about the market, when put into perspective the market is not that gloom. Interest rates remain at a historic low, vacancy rates are at an all time low, and sellers are becoming more reasonable. If you can afford to get into the multi-family sector, NOW is the time. Multi-family is 5 units and above. It usually requires more money down than single-family (one to four units) approx. 35% down as an average, depending on how much income the building is producing.

For more information on Multi-Family investing, please contact us.