Comments on: Empty McMansion #3

By: Builder

Builder — Tue, 02 Sep 2008 02:19:06 +0000

Let me start by saying I have never built in Arcadia, do not build McMansions, and would not live in most parts of Arcadia because of the McMansions (looks a lot like Downey). However, as a developer who works hard for a living; works with his hands; puts his own money and reputation at risk; invests extensive time and energy researching cities, nieghborhoods, designs, codes and building methods, I do not understand why so many people are hoping these developers lose money.

I also enjoy watching idiot flippers lose money, however, these builders appear to be competent. Instead of hating the developers, I suggest you hate the city planning dept. who allow these monstrocities and the realtors who make ungodly commissions for little effort.

FYI – Most good developers (using their own money) expected and are enjoying this market downturn.

By: Empty McMansion #4 | Arcadia Housing Blog

Empty McMansion #4 | Arcadia Housing Blog — Mon, 03 Mar 2008 14:05:44 +0000

[...] listed at $1,999,000. Except for the architectural style of the house, it’s very similar to 415 W. Palm Drive with the exact same listing price and number of bedrooms and bathrooms. Both were purchased in [...]

By: SavedbyGrace

SavedbyGrace — Fri, 29 Feb 2008 23:22:42 +0000

I agree. All calculations posted have inherent assumptions and there’s only so much available information. I probably should have included at least the 5% CD opportunity cost for the construction loan.

Thanks for your input. Your point is well taken.

By: llking

llking — Fri, 29 Feb 2008 22:55:43 +0000

SBG,

The construction loan normally converts to a conventional loan upon completion. However, as you stated, they could have cash infusion from investors. If that’s the case, there’s an opportunity cost which amounts to at least 5% (CD rate).

This could be a group of investors pouring to a fund.

If they truly have the cash for the construction, then why would they even bother taken out the 1st loan? just food for thought.

Another big piece of cost that wasn’t accounted for was the teardown and hauling and dumping the debris. What I was told this could easily amount to $50K.

Then again, they can make up for the difference by having a lower construction cost ($225/sf) by using illegal labor or cash under the table.

By: SavedbyGrace

SavedbyGrace — Fri, 29 Feb 2008 22:27:28 +0000

llking – You don’t miss a thing do you? haha

I didn’t account for the construction loan because unlike the mortgage loan which is public information, I have no idea how the construction loan was financed. They could have had investors shell out cash for it, taken out another loan or some other option. Point being, I don’t have solid information on that part of the financials so I didn’t include it in the math above.

You make a good point and these guys are probably in the red if they took out a second loan from the bank, but I can’t say for sure. Either way, it doesn’t look good for them.

By: llking

llking — Fri, 29 Feb 2008 22:05:40 +0000

SBG,

I think you might have missed some math here. You stated the monthly carrying cost is $3400/month. That’s only for the first loan. There should be a separate carrying cost for the construction loan they took out as well.

This should put them in the negative territory already

By: TheArcadian

TheArcadian — Fri, 29 Feb 2008 19:53:59 +0000

$2 million – Tiny backyard, surrounded by power/cable lines and backed into your neighbor’s full size tennis court.

Where do I sign?