Melissa Savenko's Richmond Real Estate Review

Richmond Is #8! - For Real Estate Investing, That Is

Well, many of you may have already seen this report, from Inman News, which names little ole Richmond, Virginia as one of the Top 10 Markets in the country for real estate investing.  The folks at Inman are predicting a 47.8% increase in values over the next ten (10) years, with a 164.3% return on investment ("ROI").  Yup, you read that right.  164.3% ROI.  Show me a stock or other investment vehicle that's going to top that.

So, I'm feeling a bit vindicated in my long-standing recommendation in this down market, which is that folks with surplus cash should be buying investment real estate N-O-W NOW.  Don't know the first thing about real estate investing?  Give me a call.  I'd be happy to help.  I work with a lot of very successful investors, and there are plenty of deals out there.  And many more to come, as the rest of the distress sale inventory that's filling up the pipeline gets worked out.

Stop reading now if you want to avoid the shameless personal plug:  Here are my qualifications as a real estate agent working with investors.  I am a corporate lawyer with 7+ years of practice under my belt, most of it at a Top 20 Law Firm.  About 50% of my current business is with investors.  I really enjoy working with investors, and have developed broad experience in rehabbing historic homes, the Richmond tax abatement program, and various state and federal tax incentives.  I am a Richmond native, lived almost my whole life here, so I know the City like the back of my hand.  I can be reached at (804) 986-3993 or melissasavenko@gmail.com.  Don't miss the chance to get on this train.  In a year, this perfect storm of low interest rates, huge inventory, and falling prices may well be gone.

MORE Bad News - Really, Is This a Real Estate Apocalypse?

If the news in residential real estate isn't depressing enough already, here comes this N.Y. Times article about further price declines.  The Case-Schiller index, which tracks housing values in the Top 20 metropolitan areas, saw a SUBSTANTIAL decline in values from February to March.  Predicted to lose about 1+%, the index instead slumped 11.6%.  Ouch.

Is Richmond bucking the Case-Schiller trend?  Are there signs in the residential real estate market HERE to be hopeful about?  More on this later.  Right now I am going to have more coffee and try not to be TOO overwhelmingly depressed about my chosen profession.  Power of positive thinking and all that, you know.

 

Historic Preservation Tax Credits Are Endangered by Court Ruling

Here is a succinct article describing a pending court challenge to tax credit programs. The appeal is the result of an IRS tax challenge to the syndication of tax credits, and the IRS' recent victory on the point in the Fourth Circuit in front of a three judge panel.  The analysis is complicated and technical, dry reading that only a lawyer could love.  Short version:  The IRS argued successfully that the distribution of tax credits to the partner-investors in a limited partnership equals a disguised sale and should be taxable as ordinary income.  As the article points out, the historic tax credit program has been an economic boon to Richmond and other older cities throughout the Commonwealth, like Staunton, Roanoke and Lynchburg. 

For the average bear, here are the relevant facts.  Taxing the distribution of the credits as a sale will reduce the value of the credits to the developer.  This could make the rehabilitation of historic buildings non-economic.  Oftentimes the tax credits are the difference between a project being sufficiently profitable and not.  This means fewer historic renovations and adaptive reuse projects - the conversion of old apartment buildings and even hospitals to condominiums (cf. Windsor Court Condominiums, One Monument Place, Locke Lane, Ginter Place), the conversion of industrial and commercial spaces to apartments (cf. Tobacco Row, Carolina Consolidated, Lee Street School), the conversion of industrial spaces into commercial buildings (Glave & Holmes' office, the Edgeworth Building) - will be done.

That means:

• Less additional real estate tax revenue to the City, as buildings remain underutilized;
• Fewer construction jobs;
• Less spending on products related to construction;
• The need for more ground-up building; using more green space for building;
• Having to move further out of the urban core to find that green space, with all the ancillary environmental impacts. 

I don't think any of these are good things.  Hopefully, the full panel will revisit the ruling and consider the long-term policy impacts of these programs.