The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it’s an almost certain sign that the path to a housing recovery is finally in sight.

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Two wildfires are burning in the Rincon Mountains about 12 miles east of Tucson, but fire officials are calling them both beneficial to the land.

Coronado National Forest spokesman Randall Smith says the 580-acre Cumero fire and the 160-acre Distillery fire are burning calmly and are acting like prescribed fires.

The lightning-caused blazes are not threatening any homes.

They’re burning between one and three miles apart from each other, but officials don’t expect them to merge because a major ridge separates them.

Smith said Monday that crews hope to fully contain the Cumero fire in the next couple of days, but will allow the Distillery fire to burn up to several thousand acres as it’s in very rugged terrain.

About 130 firefighters are on the two blazes.

Just a few pictures of the recent cactus in bloom around Tucson.

Photos by Scott Miller

It had to happen eventually. The Canadian dollar is near par and the U.S. real estate recession is in full swing. So it’s only natural that Canadians start asking themselves, “When is the time to buy property south of the border?”

The answer, according to some property veterans, is now. Yuin Kim, a Calgary developer behind Kimcorp. Inc. (http://www.kimcorpinc.com) with 15 years experience in Alberta and in Arizona, says he’s starting to see amazing bargains in Phoenix, where he has developed condos. Mr. Kim doesn’t claim to know whether or when U.S. property prices will bottom. But certain rental properties, he says, offer extraordinary value.

He tells of a 19-unit, single-storey building across the street from Arizona State University’s campus. Despite full occupancy, the panicking owner originally listed it for $1.6-million (U.S.). She finally agreed to Mr. Kim’s $1.2-million with a $900,000 vendor take-back mortgage (meaning she would only get $300,000 cash and the rest would be paid to her like a mortgage, over time with interest.)

At that price, the cap rate - industry jargon for the income the property produces divided by the price - was about 11 per cent, unheard of in Canada, where current cap rates are closer to 7 per cent. Not only that, but Mr. Kim was able to finance part of the equity down payment with a bank loan, meaning his investment was very small, the rest being borrowed. Borrowing magnifies your returns (if you’re right.)

The Globe and Mail

The building needed some work to get it to modern standards, but the developer saw that as an opportunity because the $180,000 in renovations would allow him to raise rents by $100 a suite per month. “That’s where the value is. Put in a nominal amount of work and your return is excellent if you know what you’re doing.”

With bank financing, the cash-on-cash return on the building would be about 30 per cent if it all worked out - which it has so far. But the real upside to the deal will come later as the land is zoned for multi-storey residential, meaning it can be upgraded.

It’s no coincidence that Mr. Kim highlights this deal because his latest project, University Land Limited Partnership, promises to allow investors to participate in a curious phenomenon: bargains on real estate near colleges and universities.

Mr. Kim’s research tells him that postsecondary enrolment goes up during a recession, such as the United States has entered. Rents in those neighbourhoods are fairly immune from a downturn. Yet there’s so much fear and loathing that even these property prices are being dragged down in panic selling (or to raise money to salvage other developments).

The partnership will run like a hedge fund, with a 2 and 20 fee and bonus structure (2 per cent of the management fee and 20 per cent of the profit). The 20 per cent only applies to realized capital gains, not rents, so investors will earn income. One nice feature, which you won’t find in a hedge fund, is that the distributions have to meet a threshold before the bonus kicks in, offering investors protection.

“Someone is going to make a lot of money down there,” Mr. Kim says. “My investors and I will be among them.”

There are other outfits offering investors a kick at U.S. real estate. One, Signature Capital (http://www.sci.ca) is promoting a U.S. Sunbelt Opportunity Fund that will invest in real estate generally, as opposed to Mr. Kim’s niche offering. The fund offers investors a debt/equity hybrid, with 6.25-per-cent interest and 60 per cent of the profits in the form of dividends. It’s not clear what the fees are and I wasn’t able to get a comment. Ask.

Another alternative is buying a property directly. Mr. Kim and others offer this service. That’s somewhat safer as you can get use out of it.

But to really profit from the recession in real estate, a fund is a better option if you’re bullish because, being diversified, a well-run fund can be more aggressive with debt while keeping risks down.

Credits: Fabrice Taylor

TUCSON, Ariz. (AP) — A neighborhood near the University of Arizona is becoming the first in the area to prepare a design manual to guide future development.

An ordinance approved recently by the Tucson City Council allows the creation of such guidelines for certain neighborhoods.

Feldman Neighborhood would like to limit the impact of student housing in the area. Neighbors say the challenges include developers who buy and demolish houses, then build outsized structures that are rented to groups of students.

The neighborhood now has motor courts and apartment buildings, but there are also streets of single-family homes, some dating to 1900, that are part of Tucson’s historic fabric.

Karolyn Kendrick, who moved to her brick Craftsman home in the Feldman Neighborhood in 1990, said neighbors hope the design manual that’s adopted will have some teeth.

“We want to protect this neighborhood,” she said. “It’s really on the bubble.”

The ordinance was approved as Tucson tries to juggle bringing denser housing close to the university area without ruining the flavor of streets lined with brick Craftsman bungalows and Spanish Revival adobe homes already recognized in a federal historic district.

The need for “densification” along transit corridors in the city was Mayor Bob Walkup’s concern when the City Council voted to allow neighborhoods, beginning with Feldman’s and Jefferson Park northeast of it, to create design manuals.

Walkup voted for the enabling ordinance only after Councilwoman Karin Uhlich offered a motion to begin the process of creating zones along transit corridors that would allow more density for students and others who want to live in walkable areas along transit routes.