Topic 4: Public Restrictions on Ownership

Public restrictions on ownership are government restrictions on what you may do with your real estate. Some of the common types of public restrictions on ownership are taxation, eminent domain, police power, and escheat. One thing we talked about in class was zoning. Zoning involves dividing an area into zones where each zone has a specified use. For example, you can't put a factory in the middle of a neighborhood. So it's interesting to hear that my hometown of Houston, TX does not have zoning. Dr. Peterson brought this up in class, so I decided to do a little bit of investigating.

Houston does not have official strict zoning laws. However, they do have quite a few rules about real estate. Below is a good article that sums of the Houston zoning myth. 

http://www.businessweek.com/the_thread/hotproperty/archives/2007/10/how_houston_gets_along_without_zoning.html 

The article basically says that without the zoning laws, Houston is still separated into sections...but these sections are driven by economic factors instead of actual strict laws. The developers in the area create very thorough deed restrictions as well and don't want to lose any potential profit in the future. So although there's not zoning in the traditional sense, there are plenty of rules that keep things organized in Houston. 

You would think that not having zoning would hurt property values, but in fact, the two small cities incorporated within Houston (Bellaire and West University) that actually have zoning have noticed that their property values do not climb as quickly as those in rest of Houston. If you'd like to read more on Bellaire and West University, I've pasted a link the article below. 

http://www.thefreemanonline.org/columns/houston-says-no-to-zoning/

Topic 3: Private Restrictions on Ownership

Deed Restrictions and HOAs

Restrictions on real estate ownership are limitations on what you can and cannot do on private property. There are two types of limitations: public and private. Private encumbrances are non-govermental restrictions. Some examples of these are covenants, conditions, and restrictions. Probably the most common example of private encumbrances are deed restrictions by a neighborhood's HOA (homeowner association).

Below is a link from Yahoo that talks about some of the pros/cons of living in a neighborhood with an HOA and deed restrictions:

http://voices.yahoo.com/advantages-disadvantages-buying-house-an-5251557.html

To sum up the article in short, there are some certain benefits to living in a deed restricted community. The most important benefit is probably the fact that having an HOA helps protect your property value and keeps everything in your neighborhood looking nice and neat. But on the same hand, nothing comes without a price. There are usually HOA dues to be paid and you are limited on what you can do with your property.

Personally, I prefer to have an HOA. I grew up in a neighborhood with an HOA and our property values have never dropped, there's no one causing trouble, and they are not overbearing or strict. I know that when I look at buying my first home I'll definitely check out an HOA and probably seek out a community that does have deed restrictions.

Topic 2: Property Rights and Legal Descriptions

Property Rights

Simply put, property rights are laws enacted by the government to control uses and benefits of someone's property. These laws are fundamentally important to how society as a whole functions. If someone had purchased property but there were not rules enforced on them, how would you prevent the mistreatment of someone's property? How would you deal with squatters? 

Associated with property rights are some rules that are enforced by the government over privately-owned land including: taxation, eminent domain, police power, and escheat. 

Today, we're going to talk about eminent domain and how it hit close to home for a native Houstonian like me. Simply stated, eminent domain is when the government takes away private property for public use after paying them a fair amount for it. Well, that is exactly what happened when Interstate 10 was expanded on the west side of Houston. This freeway expansion included roughly 20 miles and included condemnation (using eminent domain) to take over 400 pieces of property. 

Here is an article from The Houston Chronicle that explains the story in a little more detail: 

http://www.chron.com/neighborhood/memorial-news/article/Katy-Freeway-expansion-bad-for-businesses-1536972.php

The issue here is the matter of the government paying these property owners an appropriate wage. Sometimes folks get the short end of the stick on the deal. For example, the owner of Photo Lab was only offered $20,000 for his property and numerous other businesses had to close their doors. On the other hand, you had people who just got greedy like the owners of the restaurant who would have been better off having taken the original deal from the Texas Department of Transportation. 

Personally, I agree with eminent domain as it was used in this case. I live near I-10 about halfway in the middle of the project and traffic was absolutely horrible on that freeway, even when it wasn't rush hour. This project, although costly and perhaps a pain for some property/business owners, has paid off tenfold for the local Houstonians who use this freeway everyday. 

Topic 1: The Importance of Real Estate

The American Dream

When I think of the importance of real estate, the very first thing that comes to mind is the idea of "The American Dream". Over time we've all heard stories about our ancestors coming to this country for one reason or another, we've read about The American Dream in books such as The Great Gatsby, and we've seen movies that have made us proud to be Americans. I think one of the fundamentals of The American Dream is the idea of home ownership; which is why I included this picture below: 

Photo Credit: www.TheFourthEstate.net

To me, this picture symbolizes The American Dream of home ownership or in other words, residential real estate. One of the most important things a man can have is something that is his own. Sure, there are numerous uses of real estate for other gains, but in my eyes, the most important aspect of real estate is that of home ownership and being able to have something that is distinctly yours.

Welcome

My name is Nick Lykos and I'm creating this blog for my Finance 371: Real Estate Decision Making course. I was born and raised in Houston, TX and expect to graduate from Texas A&M with a BBA in Finance in May 2013.

I'm a total gearhead: cars, trucks, boats, you name it, if it has a motor I'm interested in it. 

My goal for FINC 371 is to gain an understanding of real estate and to learn how to use real estate to invest in the future.