The Heights Information & Developments

[TheNiche]

I don't know anything about these apartments, but...

I've always been curious as to how difficult is it to buy an apartment complex and tear it down when there are people who reside there. I imagine at least some of these people have contracts, and I would suppose one would have to wait until all the contracts are expired to kick people out. Might that mean that one would have to budget for up to a year-long waiting period before tearing the whole complex down, or can the new owner simply nullify the contracts somehow? And, can it be done in stages as long as some buildings become completely unoccupied sooner than others, or does that present a hazard to the other tenants?

The hard part is getting bank financing, variances, and approved plans for whatever will replace what is there. In some cities, zoning changes are also an issue. Once that's lined up, the property can be dirt in three months.

That's how it works in Houston, and in Dallas a developer might even be able to arrange for an incentive from the city to tear down something with poor people living in it. In San Antonio, you just want to be sure that none of the city councilmembers' kinfolk are being personally inconvenienced. And in Austin, they'll withold zoning changes from you until you come up with some politically saleable idea (like allocating a portion of the development for elderly housing) for which they can give you far more money in incentives than that idea costs to build; Austin is worse than Dallas because they will pay developers ridiculous sums of money to achieve the very same goals under a thinly-veiled facade of social justice...over numerous steak dinners, of course.

[innerlooper]

Thank you Niche for your analysis. You be the man. Though that 60% expense ratio seems a little high, for that place anyway. I guess my big gripe in general is with ad valorem property taxes, and how they skew (screw) the diligent middle class. Why am I penalized for wanting to live in an area where properties are cared for, where the neighbors are educated, and the nearby stores are nice? If my taxes are eight times what they would be in Acres Homes, do I get eight times the education and fire service and water pressure?

A friend tried to use a relatively nice 50 unit complex in Montrose to argue down an old 4 plex he owned nearby (they have him for 375K with almost half on improvements). They told him forget it. This 50 small units is on the rolls for 1.2 million. Mostly dirt value but $70,000 assigned to 20,000 square feet of improvement. Place is almost full most of the time. Even with that 60% expenses I think they are way undervalued. Last changed hands in 1989.

[TheNiche]

I guess my big gripe in general is with ad valorem property taxes, and how they skew (screw) the diligent middle class. Why am I penalized for wanting to live in an area where properties are cared for, where the neighbors are educated, and the nearby stores are nice? If my taxes are eight times what they would be in Acres Homes, do I get eight times the education and fire service and water pressure?

You not only get an education for your kid(s) that's better than what's given in Acres Homes, but you also get the benefit of having all those kids in Acres Homes educated. Otherwise, they might burglarize your home today or vote for [insert hated political party] in another 10 years.

A friend tried to use a relatively nice 50 unit complex in Montrose to argue down an old 4 plex he owned nearby (they have him for 375K with almost half on improvements). They told him forget it. This 50 small units is on the rolls for 1.2 million. Mostly dirt value but $70,000 assigned to 20,000 square feet of improvement. Place is almost full most of the time. Even with that 60% expenses I think they are way undervalued. Last changed hands in 1989.

Yeah, a 4-plex doesn't operate like a 50-unit complex. It's true. The buyer profiles are differently motivated and it is reflected in their financial performance. For instance, because it is a very small property, a management company would want a larger share of revenue to take it on. Thus, most 4-plex owners will manage the property themselves. But that makes their financial statements look fantastic because they don't account for all the sweat equity that they've put into it. A relationship directly between owners and renters often involves egoism and how the landlord feels about the way his tenants feel. Having a management company mitigates that, allowing the owner to focus on profit maximization rather than on balancing profit with the fulfillment of a need to be liked. It's worse if he lives on-site, as occurs somewhat frequently with 4-plexes.

When one unit in a 4-plex becomes vacant, it's a mad rush to fill it. Cleanup and repair to the vacant unit is effected immediately so that it can be marketed and occupied. The one unit is a 25% vacancy, so it is absolutely vital. On the financial statements, that can make a 4-plex appear to have lower vacancy on average but with the potential for numerous peaks and valleys on repair and maintenance, whether from month-to-month or even year-to-year depending on circumstances. In a 50-unit complex with 10% vacancy, there may be one unit that had a kitchen fire and another unit encrusted in pet feces and fleas that are left unrepaired until all other less damaged vacant units are leased and there aren't any more move-outs in the near future; there's no sense in spending all that money now if you can wait until later. (And you can imagine that the owner will be showing photos of those units to HCAD and the ARB year-in and year-out.)

Likewise, because there are fewer common areas and fewer amentities in a 4-plex, there are fewer expenses than there would be in a larger complex. That's less upkeep and fewer expenses. There are typically fewer people living in the same single structure in a 4-plex; that's fewer opportunities for a fire to occur and fewer units at risk if it does. Lower insurance.

You can see where this is going. They really can't be valued the same or compared for equity purposes. They don't operate in the same manner.

That said, HCAD almost always values 4-plexes and other small properties on the cost approach, which is insane. No general appraiser would do that on a decades-old property. They'd lose their license.

[SilverJK]

I would like to hear HCADs explanation on how the improvements on that property are valued at 40,000 less than my poorly maintained 1300 sq. ft. bungalow down the street.

[samagon]

in less than 4 years this will be 50 years old, does it become a contributing structure at that time (assuming it is in a historic district)?

[TheNiche]

Wow, I offer up some wisdom on the subject of real estate finance and appraisal, and WAZ goes off on me without saying a word. It should be surprising but it isn't.

[innerlooper]

Niche, to change the subject slightly, how many "missing" bathrooms are there in Harris Co.? Comparing listings on HAR with HCAD there seem to be quite a few, esp in older neighborhoods. What if HCAD offered a bounty of $10 for every extra toilet on HAR? Wouldn't be a living but not bad beer money.

[TheNiche]

Niche, to change the subject slightly, how many "missing" bathrooms are there in Harris Co.? Comparing listings on HAR with HCAD there seem to be quite a few, esp in older neighborhoods. What if HCAD offered a bounty of $10 for every extra toilet on HAR? Wouldn't be a living but not bad beer money.

I don't think that their cost model is sophisticated enough to take into account individual bathrooms in apartment properties. They're probably just starting from some baseline cost per square foot indicated by Marshall & Swift.

And no, just because they have fields to input new data does not mean that the data will necessarily hit their value.

[SilverJK]

So this was nearly 4 months ago I brought this up, looks like they painted one wall (terrible booger green) and replaced a few windows that were broken (there are still some held together with duct tape). So much for their "going under renovation over the next months" claim in the HAR listing.

[jgs1419]

Here we are three years later and the carport is still there. I guess that old saw about asking forgiveness instead of permission works well. Great planning department we have, huh?!

[toadfroggy]

Nevermind. I only just realized this issue is way old.

Edited June 4, 2012 by toadfroggy

[RedScare]

Good to see a jury that follows the law, instead of doing simply what the government tells them to do. To do so even when the defendant is a jerk, is doubly impressive.

Congrats.

[Tricky Matt]

That's the nicest house on 14th St., carport included.

It looks a 100 times better than the monstrosity they keep building up and ever up across the street.

[RedScare]

That's the nicest house on 14th St., carport included.

It looks a 100 times better than the monstrosity they keep building up and ever up across the street.

Or the monstrosity next door to it. Seriously, google streetview 1346 Harvard. Look at the carport that faces 14th Street. Then look at the 2 story garage attached to the house at 1342 Harvard. Tell me which is the eyesore.

[fwki]

tract house n. One of numerous houses of similar or complementary design constructed on a tract of land.

The futility of it all makes this a very entertaining architectural forum. In a 1920's "tract house" (used loosely) neighborhood that endured decades of ill-enforced deed restrictions, minimal zoning and vast swings in cultural and economic demographics, we now have lively discussions about what is appropriate and allowable for current owners. Twenty years ago I had a full-blown tile business being run out of the next-door garage, grinders and all. Now the current owners want to "save their bungalow", whatever that means, and they are still trying to figure out why nothing grows their backyard. Certain factions backed by radical preservationists want to rewrite this history and force reversion to the orignal real estate marketing concept of the initial developers, like those guys wrote the Constitution or something. Other factions want to maximize capital gains on their investment and others wear their homes as a badges of coolness. And yet others want to clear cut and start over with modern green concepts, sustainable living, convert the alleys into heron flyways.

Have you noticed that original Norhill developed by Varner Realty has these crazy-wide streets and River Oaks esplanades but relatively small 50-foot lots? Perhaps maybe they didn't see the Great Depression around the corner and had to change marketing plans just to move inventory. One generation from now it will all be different, again.

[RedScare]

You are absolutely correct. However, you will never inject reason into the debate. Why? Because the radical preservationists are not that. They are simply radical narcissists. They have arbitrarily picked a couple of decades of the Heights (or Norhill) history and proclaimed, "THIS is the history of the area!" Only 1900 to 1930 counts. There is 80 other years of history to the neighborhood, but you'll never convince them of that. Worse, only their opinion counts. Not only do they know better how to preserve my investment, and make it attractive, they believe that their opinion entitles them to move the government to outlaw my opinion. They are the absolute worst neighbors that one can have, HOA nazis in the middle of the city. Luckily, they are small in number (even though they have a friend in City Hall). Most of us do not have to live next door to them. We simply have to live with the havoc they wreak.

One of them will post here shortly. He will explain why his opinion is superior to ours. Then, once again, my point will be proven.

[s3mh]

Meanwhile, in the real Heights, everything is just fine. Builders are building and renovating, the residential real estate market is thriving, new restaurants are pouring into the Heights at a pace never imagined and every month a few dozen COAs sail through the HAHC. The predicted real estate armegeddon never happened. Opponents of the ordinance are back to floating rumors about what the HAHC might do, deluding themselves into thinking that there is overwhelming opposition to the ordinance and griping on message boards about imaginary preservationists who hold opinions and make arguments that no one has ever made.

[JJxvi]

There's no such thing as a Height's preservationist.

[RedScare]

Meanwhile, in the real Heights, everything is just fine. Builders are building and renovating, the residential real estate market is thriving, new restaurants are pouring into the Heights at a pace never imagined and every month a few dozen COAs sail through the HAHC. The predicted real estate armegeddon never happened. Opponents of the ordinance are back to floating rumors about what the HAHC might do, deluding themselves into thinking that there is overwhelming opposition to the ordinance and griping on message boards about imaginary preservationists who hold opinions and make arguments that no one has ever made.

Prove it.

[fwki]

One of them will post here shortly. He will explain why his opinion is superior to ours.

DING! DING! DING! And we have a winner in Today's Predict What Will Happen Shorty Contest! Your prize is an annotated History and Future of the Heights by Joseph Goebbels, abridged.

[SilverJK]

Meanwhile, in the real Heights, everything is just fine. Builders are building and renovating, the residential real estate market is thriving, new restaurants are pouring into the Heights at a pace never imagined

Especially in the areas outside of the Historic Districts. And guess what, we imagined it. This is why I bought in this neighhorhood, to reap the benefits of a rapidly growing/gentrifying neighborhood. I would appreciate it if you and your friends would get your hands out of my cookie jar and stop trying to slow things down.

[Marksmu]

The quantity of new construction in the areas outside the Historic District out paces anything I have seen since I moved in 2007. Driving the streets in the Historic District there is relatively little construction/improvement going on.....get even on block outside of the historic district....say on Waverly or Nicholson and you have more homes being built than ever....The ordinance killed new profitable investment, whether or not someone got a COA to change the siding on their well maintained shack or not....The areas outside the ordinance are booming....the people who can afford to eat in the new restaurants are generally purchasing new construction - not a fixed up well maintained 1920's shack.

The shacks are still selling just fine b/c there are still plenty of folks who want a smaller house closer in to the city and the Heights is all they can afford, but they are not appreciating & selling b/c of the ordinance...they are doing so in spite of the ordinance.

[jamesw]

Much to my surprise: some good news! Here is an actual relevant fact - My neighbor across the street just sold his 2-1 bungalow for $270 per square foot. This is in the Heights East district.

My biggest concern about the HD's was that people would not want to buy 2-1 bungalows because they will be forever stuck with a tiny house. This one was only listed for 3 days before it was under contract.

Give it's just one house - but a relevant data point.

Cheers

James

[barracuda]

Much to my surprise: some good news! Here is an actual relevant fact - My neighbor across the street just sold his 2-1 bungalow for $270 per square foot. This is in the Heights East district.

My biggest concern about the HD's was that people would not want to buy 2-1 bungalows because they will be forever stuck with a tiny house. This one was only listed for 3 days before it was under contract.

Give it's just one house - but a relevant data point.

Cheers

James

They aren't forever stuck with a tiny house. But they are limited in how they can expand the house (e.g. - awkward HAHC-approved camelbacks and rear additions). Also, some folks do actually prefer updating smaller homes and keeping a yard rather than building lot-hugging monster homes.

[SilverJK]

There is a good chance the buyer was probably also told how "easy" it is to get approval. I feel sorry for those that don't fully grasp what the Historic Districts mean that buy in them. (what do you mean i can't modify my house without approval, my next door neighbor has a brand new 3,000 sq. ft mcvictorian...)

[s3mh]

Prove it.

Already have in another thread. But it is fun to do it. So, here it goes again:

HAHC:

All the meeting minutes are on the web. Look it up and see for yourself.

Currently on the market:

1643 Arlington: 3800 sq ft renovation/addition

1644 Columbia: 3700 sq ft renovation/addition

1519 Arlington: 3400 sq ft new construction

1822 Cortlandt: 3600 sq ft renovation

1522 Columbia: 2900 sq ft renovation/addition

1537 Harvard: 3300 sq ft new construction

444 Harvard: 3600 sq ft new construction

529 Oxford: 3600 sq ft new construction

627 Harvard: 3200 sq ft new construction

604 Cortlandt St.: 3400 sq ft new construction

440 Harvard: 3400 sq ft new construction

602 Cortlandt St.: 3200 sq ft new construction

621 Arlington: 3300 renovation/addition

409 Cortlandt: 3000 sq ft new construction

1019 Arlington: 3200 renovation/addition

1235 Tulane: 2725 sq ft renovation/addition

(also saw Bungalow Revival starting work on Allston on what would have easily been a tear down w/o the ordinance)

All of the above are on the market for $600k and up.

So much for the Heights being reduced to a slum of neglected rental homes.

As Jamesw noted, the bungalows are selling well. I have not see very many move-in ready bungalows on the market for under 300k since the beginning of this year. Prices are back up to where they were before the market crash in 2008.

Sure, the areas outside the districts are getting plenty of new construction. But that new construction is a lot of cruddy patio homes, cheap faux-victorian/New Orleans boxes and the odd monster property line to property line "custom home" that looks like it was built in the wrong neighborhood. In the short run, these areas may see stronger growth (though given the fact that many of the districts are already more built up than the outlying areas, it very well may be that there is no difference in growth). In the long run the districts will have better property values and appreciation because there will be some integrity to the architecture of the neighborhood. Only on message boards do people claim to like the "architectural diversity" of having a spanish mission style house on the same street as 1920s bungalows, patio homes on 2-3000 sq ft lots and a 4400 sq ft monster custom victorian meets gothic meets Italianate thing.

[SilverJK]

Sure, the areas outside the districts are getting plenty of new construction. But that new construction is a lot of cruddy patio homes, cheap faux-victorian/New Orleans boxes and the odd monster property line to property line "custom home" that looks like it was built in the wrong neighborhood. In the short run, these areas may see stronger growth (though given the fact that many of the districts are already more built up than the outlying areas, it very well may be that there is no difference in growth). In the long run the districts will have better property values and appreciation because there will be some integrity to the architecture of the neighborhood. Only on message boards do people claim to like the "architectural diversity" of having a spanish mission style house on the same street as 1920s bungalows, patio homes on 2-3000 sq ft lots and a 4400 sq ft monster custom victorian meets gothic meets Italianate thing.

This is your opinion, based on no facts. What is factual is that these "cruddy patio homes, cheap faux-victorian/New Orleans boxes and the odd monster property line to property line "custom home" " are selling at a high price and if they are as bad as you say, that just proves that people are willing to pay for new construction.

All those 3,000+sq. ft homes you so proudly claim are the biggest joke in the entire neighborhood. Sure they are nice (some of them downright amazing and I would love to own) but they are so far from historic or any resemblence to it it is amusing. Essentially you are saying in order to actually get people to buy in the Historic Districts, you have to so dramatically change the house (in the cases you provided most likely tripling in size) just to get people to buy them. Preservation of what? Would have been a tear down??? If the old house accounts for ~33% (most likely much less) of the materials what is the difference?

Any home that is remodelled in a way that more than doubles it's sq. footage should no longer be considered a "contributing" property.

[Marksmu]

Silver - stop using logic to arrive at logical conclusions.....What S3MH fails to see is that all of those properties are "for sale" while all but one of the 13 properties that she calls McVics or cheap faux boxes are SOLD (all for between $599,000 and $620,000)....I know, I know, its a tiny distinction, but it is a distinction most builders do care about! I live in a brand new historic home just outside of the historic district. What makes my brand new home historic you say? I reused the survey stakes that were placed in the 20s! Yes - I retained 100% of the original survey stakes!

Every evening I can sit on my front porch and wave hi to my neighbors knowing that I have contributed to the history of the area by not removing or altering them....I mean, ya I did put new ones that do a better job in but I left the old ones there!

[RedScare]

"1643 Arlington: 3800 sq ft renovation/addition"

Did anyone go look at this one on HAR.com? $895,000, and apparently s3mh thinks this is a tasteful redo of a 1925 bungalow. At 3875 square feet, it is now triple the size of the original structure. None of the windows, walls, floor, roof, plumbing, or electrical, lights, front porch, or doors are original.

But, GUESS WHAT? They kept the original 117 siding! Well, kinda. The original 117 siding remains intact on the front of the house, and perhaps 12 down the sides. However, the brand new addition is clad in Hardie. Yes, that's right. s3mh is bragging about a hideous redo with two different kinds of siding on it. No wonder he thinks the HAHC does a good job.

I can't wait to see what his renovation looks like. Please post pice, s3mh. We'd love to see it.

[Pleak]

"1643 Arlington: 3800 sq ft renovation/addition"

Did anyone go look at this one on HAR.com? $895,000, and apparently s3mh thinks this is a tasteful redo of a 1925 bungalow. At 3875 square feet, it is now triple the size of the original structure. None of the windows, walls, floor, roof, plumbing, or electrical, lights, front porch, or doors are original.

But, GUESS WHAT? They kept the original 117 siding! Well, kinda. The original 117 siding remains intact on the front of the house, and perhaps 12 down the sides. However, the brand new addition is clad in Hardie. Yes, that's right. s3mh is bragging about a hideous redo with two different kinds of siding on it. No wonder he thinks the HAHC does a good job.

I can't wait to see what his renovation looks like. Please post pice, s3mh. We'd love to see it.

I like the heavily wooded lot! I bet some of those trees were planted back in 1925. Man that really does look like it's original in a historic neighborhood!