Dependable Erection

Sunday, May 24, 2009

Why we love landlords

In January, Mr. Jarvis began working as director of investor relations for Brewer Caldwell, a property management firm that had been approached by the CBI Group, a real estate fund based in Calgary, Alberta. In its first foray into the American market, CBI is buying 175 rental houses in Phoenix.

One of them belonged to Mary Lou and Jorge Aguilar, who purchased it new for $111,000 in 1999. Three years ago, after a series of financial difficulties, they refinanced for $185,000 for reasons they no longer understand. “Our lender talked a pretty picture,” Mrs. Aguilar said bitterly.

When the couple’s mortgage payment adjusted to $1,242 a month, they fell behind and ended up in foreclosure. They now pay $1,014 in rent, which they say is bearable.

Still, their feelings are mixed. “It’s not our house anymore; it’s someone else’s,” said Mrs. Aguilar, who works for the state welfare department.

For CBI, the deal is sweet. At that rent, it would recoup the $52,000 it paid for the house in about five years. “This type of deal is absolutely not available in Canada,” said Jarrett Zielinski, a CBI executive. “No city here has fallen by 50 percent, the way Phoenix has.”

So, the lender was unable to work out a deal with the owners that could have knocked the mortgage payments back down to the $1000 or so a month that these guys are now paying in rent, the house got sold at a $130K loss, and an out of country fund is siphoning the profits off to Canada. How in the world does this benefit the community?



  • How in the world does this benefit the community?1) The Aguilars don't have to move
    2) The house isn't sitting empty

    Not exactly the worst of all possible outcomes, you know...

    By Blogger Brian, at 2:10 PM  

  • To my mind, the real question is how the owners were unable to pay $1,242 a month for a mortgate but find $1,014 a month in rent acceptable. That's only $230/month difference.

    There's more to the story. Or the owners just aren't very good at making financial decisions, much to their detriment.

    By Blogger Jamie, at 11:06 PM  

  • Theoretically, the mortgage interest tax deduction should even make up for the $200/month difference in payments, so they were probably better off financially paying the higher mortgage.

    there's also the curious factor of the bank taking $50k or so selling the foreclosed property, when it had a $180k mortgage.

    so, agreed, there's more here than meets the eye.

    on the other hand, having large chunks of neighborhoods in a major American city suddenly owned by foreign investors doesn't strike me as healthy in the long term for the social fabric of the neighborhood. Probably better in the short term than abandoned houses and mosquito breeding swimming pools, seems to me that those weren't the only two options.

    By Blogger Barry, at 1:45 AM  

  • @Jamie
    I have to agree. It's sad that such a seemingly small sum can destroy people financially.

    By Blogger Alberta Oil Sands Investor Abroad, at 4:46 AM  

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