Real Estate Deal #2 – 2006 W. Magnolia Ave, San Antonio TX 78201
Ed Garza and Urban One 30 LLC partner Sam Wayne purchased 2006 W. Magnolia in March, 2008 for $150,000, with a $120,000 9 month interest-only construction loan from Sterling Bank. The 3-bedroom 1-bath house, built in 1928, boasts 1,386 square feet, with an attractive stone exterior.
Along with the 139 North Street property also purchased in March 2008, the economic downturn probably upturned their plan for a quick flip within the term of the 9-month loan.
In December 2009 Urban One 30 Group refinanced the full $120,000 loan for an additional 5-year term, again interest-only for 6 months, followed by a 4.5-year amortization.
A silent, well-connected, co-investor
In September 2010 the Express-News featured this property in an interview with Garza and partner Sam Wayne, as they got ready to list the house, following a renovation.
We learn from the article that then-State Representative, future Congressman, and most importantly First Twin of San Antonio, Joaquin Castro had co-invested in the property with Garza.
Castro mentions to the Express-News that he’s only seen the property once, had no input into the renovation, and following a sale will just keep his money with Garza.
As the Express-News quotes Garza: “I guess he’s a silent partner. He’s only been out to the house once. That’s the kind of investor we like.”
Um, yeah. I’d agree that’s the kind of investor Garza likes.
I mean, what could go wrong? You’ve got the Mayor’s brother and future Congressman’s money co-invested with you. And he’s never seen the property but once. And by his own admission Castro has no input into the situation.
It’s not a knock on Castro that he trusts Garza to make money for him in real estate. But it does seem to be the kind of relationship-based real estate investing that Garza would seek out, to his own personal advantage. At the very least, Garza has arranged a cozy financial relationship with the Mayor’s family.
But the story of this property gets better because, like I said, he’s incredible.
The Property Value
Figuring out the value for this property at 2006 W. Magnolia is really a puzzle.
Between the purchase in 2008 and the sale in 2010, the Bexar County tax assessed value of 2006 W. Magnolia dropped steadily from $130,230, to $121,960 in 2009, to settle at $111,320 in 2010, at the time of the sale.
And then following the sale, tax assessed value stayed steady, at $122,770, $114,620, and $116,070 in years 2011, 2012, and 2013. So we’ve got a range over the past 6 years between $114K and $130K.
It’s possible the Bexar County assessor does not know about the renovations, or has declined to update the values on the house.
What about other sources for figuring out value?
The online real estate value site Zillow charts 2006 W. Magnolia steadily in the $105K to $130K range over the past 5 years.
Except for one moment.
A massive ‘spike’ at the time of the sale of this house in November 2010.
Check it out. I’ve included a static picture of the Zillow page here, but I recommend you go on line to see this for yourself.
I’ve been using online real estate value estimator Zillow.com steadily since 2004, and I can’t recall an outlier value like the one that we see with 2006 W. Magnolia. The property sold for twice the value that would be expected using either Bexar County tax assessment or independent sales data for determining expected value in the neighborhood.
In the Zillow commentary on this property, you can read a real estate agent shilling for 2006 W Magnolia: “Urban One 30, Mayor Ed Garza and Sam Wayne did it again guys.”
Like I said, Garza is incredible at real estate. Castro’s faith in him was rewarded.
Who bought this for twice its expected value? How did he get a mortgage?
Another puzzle.
The individual purchaser bought 2006 W. Magnolia in November 2010, paying $230,348.68 – an outlier price, far above any indicated independent value for this property.
Stranger-still, the purchaser obtained a 30 year mortgage for $228,068.
For those of you doing the math at home, that not a 20%-down-payment mortgage, and that’s not a 5%-down-payment mortgage. That’s a 1%-down-payment mortgage.
The purchaser appears to work at a local coffee shop on North St. Mary Street.
What I find puzzling is the following items:
1. Like the purchaser of 2006 W. Magnolia, I got a mortgage in 2010 myself. I also obtained mortgages in 1999 and 2004. Compared to back then, I can attest that the 2010 mortgage environment was very tough.
2. Banks, since 2008, are reluctant to lend without a substantial down payment, a high property assessed value, reliable income, and great credit.
3. At the very least, on the assessed value and down payment side of things, this transaction is unusual. If the purchaser has anything less than high income and perfect credit, then this 1% mortgage is even odder.
When you can sell a property for $100,000 more than others think it’s worth, and your buyer can get a 1% money-down mortgage in the tough 2010 lending environment, I’d say you’ve got some real estate chops.
When you can sell like that and also generate some cash for the City’s First Twin and future Congressman, you’re really doing well.
Please see other related posts:
A review of SAISD President Garza’s real estate deals
Real Estate Deal #1 – 139 North Street, San Antonio 78201
Real Estate Deal #3 – 1919 W. Magnolia, SA TX 78201
and upcoming posts:
Further information on Ed Garza’s LLCs
Is there something odd about Zane Garway Consulting Group LLC’s business dealings?
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