2015 Apr 10th

Hoboken Condo – Over 50% tenant occupied. Investors must have 30% down.

Here’s an interesting notation on the MLS listing for a property for sale at 920 Jefferson Street. Once a condo building has more than 50% investors, it no longer meets the Fannie Mae requirements. That means that the bank making the loan to the buyer can no longer sell the loan to Fannie. It severely limits a buyers options as to where to get a loan and it usually makes the interest rate the buyer must pay a bit higher. Allowing that many renters in a condo association therefore hurts the marketability and value of ALL the units in that condo association.

What can be done? Well, one building, the Constitution, amended its governing documents to prohibit sales of units to investors. If you buy at 2 Constitution, you better do so planning to live in your unit, at least initially. There is a possibility to rent after a set period of time, I believe two years, based on the number of rentals in the building at that time. They (smartly) just don’t want to go over that 50% limit. When I explain this to people who own in a condo building they sometimes say “you can’t do that”! Well, yes you can.

By it’s nature, condominium ownership means you are part of a group ownership situation.  The condo board is given the power to make rules which have an impact on all owners.  Changing the rules may require a vote by the board or it may require a vote by the unit owners, typically a majority of the unit owners.   Often restricting the number of rentals allowed at a given time may also requires an amendment to the Master Deed of the condominium. But in the long run limiting rentals helps maintain the value of the property.

A condo building full of renters often has more room-mate situations and the atmosphere more like a college dorm, especially in Hoboken.  It is never going to be the same as a building full of owner-occupiers. It’s just not their place and they are never going to care as much as the actual owners who live there would. Furthermore, when the market takes a downturn, investors will be much more likely to walk away from an underwater mortgage – after all, it’s not their home. Which is why banks don’t like too many renters in one building in the first place – increase risk of default. There are many, many condo buildings in Hoboken that are now on the cusp of the 50% limit. Pay attention people, too many renters in your building can haunt you down the line and come back to bite you in the wallet.

Posted by Lori Turoff | Currently 9 Comments »

2014 Nov 19th

The October Hoboken Condo Sales Results

Before we get to the October Hoboken Condo sales results, some news from Fannie Mae. They have just made it a little easier to buy a condo – good news for Hoboken. Under their new Selling Guide, there are some game changes as to how condo buyers receive financing:

  1. Allowable commercial space in a condo project is increased from 20% to 25%.   Think of all the buildings along Washington, Hudson and 14th Streets with stores in the lower level.  An exception is no longer required if commercial space is above 20% as long as it is less than 25%.
  2. For condo projects of five (5) to twenty (20) units a single entity can own up to 2 units in the project.  Borrowers no longer have to use a portfolio lender if one person or entity owns multiple units in Hoboken’s smaller condo buildings.
  3. The number of days for which 15% of the unit owners may be past due on HOA fees is now 60 days (increased from 30 days). This is only monitored when a full review is required. This is for investment property purchases or when a buyer is putting down less than 20%.
  4. Presale requirements for new condo projects have been decreased from 70% to 50%. Typically Fannie Mae allowed you to go down to 51% on an exception basis. Believe it or not the extra 1% will make a difference.
  5. If the mortgage only calls for a limited review to approve the condo project, Fannie Mae will no longer require review of fidelity/crime insurance. This was a hassle with projects over 20 units. However, if a full review is required, it will still be monitored.
  6. Income for the project that is non-incidental income is now allowed as long as it does not exceed 15% of the project’s budgeted income. Non-Incidental income can now be used if the association has an agreement with a cable, telephone or internet company. An example of this would be the existence of a cell phone tower on the building.

These changes are substantial and will help make our lives easier. There are now more options for financing on certain projects.  Great thanks to Ted Schirm of Mortgage Master for bringing these important changes to my attention.

We have results for October. Average sales were down a bit from September and slightly up over last October. It looks like there may have been more sales of smaller, lower-end units last month. The average price per square foot is still over $600. Median price per square foot is actually up over last month. Three-bedroom buyers, take note. The three-bedroom market continues to skyrocket with prices now just about at a million. That’s what happens when there is almost no new inventory of large apartments. Other points of note, the “discount off list” is down dramatically from last year. Inventory is still extremely tight. We are approaching the holiday season – traditionally the slowest time of year.

Posted by Lori Turoff | Currently No Comments »

2014 Jan 21st

Hoboken Tax Revaluation

I’m sure many of you have received a letter in the mail by now from Appraisal Systems, Inc. It gives you the new “fair market value” of your property. If you go to the website of Appraisal Systems, Inc., there is a handy excel worksheet you can use to calculate whether your Hoboken property taxes are likely to go up or down.  Click on the last item in the second section, entitled Hoboken Tax Worksheet (xls file).  Enter your old appraised value in yellow box A and your new value in yellow box B.  The worksheet will calculate the rest for you.  Assuming nothing else changes (like the budget or the tax rate) the answer is in the yellow box on line H.

Lots of people have been telling me they plan to appeal this valuation.  Understand something people.  In a rising market you are very unlikely to win a tax appeal.  You have to show comparable sales for LESS than your new market value.  That is next to impossible in today’s market and the City has a margin of error which they are allowed by statute.  So as my SuperBowl Field Team leader says – “embrace the suck”.

Posted by Lori Turoff | Currently 8 Comments »

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