New Tree REO

Posted by Dave Fratello on Monday, January 31st, 2011 at 8:58pm.

In our local market's go-go years, if you were an investor (or group), your dream was to grab a high-priced property in MB and let it go again shortly thereafter for a tidy profit.

That is what happened at one point to 1604 Poinsettia (5br/4ba, 3125 sq. ft.). Upon its completion in late 2004, investors paid $1.8m for the home, and soon had tenants moved in.

By July 2005, with a wondrous surge of real estate optimism all around, the owners were ready to cash in. (Even if it had been only 6 months.) The property came to market at $2.495m (+$695k/+39%).

That astonishing markup may look delusional now, but guess what they got for it?

In December 2005, a resale of the same property closed at $2.2m (+$400k/+22%). Even with 5% costs of sale deducted, that's still a clean $290k in gross profit over just less than a year.

Sounds like a keen business. You're welcome to try it any time, but it really works best during the inflation stage of a bubble – so find one of those.

For the 2005 buyers who may have figured something like, "sure, this is a stretch, but we can always resell it if we fall behind," the home-as-investment notion flopped.

In Feb. 2009, they listed 1604 Poinsettia for $2.099m, maybe hoping for just the most marginal loss as a cost of getting out.

Within 6 weeks, the price was down $200k to $1.899m, as they ran up a bit more than 200 DOM throughout 2009 in a failed listing. (MBC took note of it midstream, in June 2009, in "Failure to Unload.")

The NODs began in early 2010, with $1.89m listed as the amount due on the Trustee's Sale notice filed last July. The bank took it in late August last year.

Now 1604 Poinsettia is back on public offer as an REO at $1.632m. That's a drop of $168k (-9%) off the December 2004 price when the home was new, and $568k (-26%) off the late-2005 acquisition.

That's quite a drop by either measure, and another rewind into roughly 2003 prices on a property with distress issues. But it's also looking like one of the better deals overall in the Trees at the time of this writing. Let's check back in a couple of years on that notion, too.
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