Housing Bubble 2.0

By NuttBoxer   follow   Tue, 27 Nov 2012, 1:59am PST   ↑ Like (1)   ↓ Dislike   2,142 views   17 comments   Watch (3)   Share   Quote  

We've been looking to buy in the San Diego area lately, and I've noticed a disturbing trend.

Large investment firms/banks are buying up tons of housing as a "rental investment". Apart from the logistics nightmare of an investment company trying to schedule a repair man for the busted water heater in house #235 of their portfolio(yes, I suppose they could hire a property manager), this is what I see coming:

Banks buy tons of housing/land as "rental investment".
Banks lose big, fleecing their investors.
Banks are bailed out by the central government.
Central government now owns huge chunks of private land.

Welcome to the United States of Socialism Comrades!

#housing

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NuttBoxer   befriend (1)   ignore (2)   Tue, 27 Nov 2012, 2:08am PST   Like   Dislike     Share   Quote   Comment 1

I believe it's a vehicle to turn private land over to central government control, and fleece the masses, again. Otherwise I agree, what's the point?

Have seen several articles about investment firms backed by big banks from Blackstone, to JP Morgan engaged in this form of "investment".

Kevin   befriend (0)   ignore (3)   Tue, 27 Nov 2012, 2:11am PST   Like   Dislike     Share   Quote   Comment 2

The federal government already has more land than it wants.

Which firms are doing as you claim?

NuttBoxer   befriend (1)   ignore (2)   Tue, 27 Nov 2012, 2:18am PST   Like   Dislike     Share   Quote   Comment 3

http://www.nytimes.com/2012/04/03/business/investors-are-looking-to-buy-homes-by-the-thousands.html?pagewanted=all&_r=0

The one for Blackstone is on Patrick.net

Control of land is one of the oldest forms of power. What central government do you know that doesn't want more power?

iwog   befriend (49)   ignore (12)   Tue, 27 Nov 2012, 2:28am PST   Like   Dislike (1)     Share   Quote   Comment 4

Rents greatly exceed the mortgage payment in many areas of California. For cash buyers, rents can earn a 3-10% return on investment after expenses and the income can be written off against the property resulting in capital gains income instead of ordinary income.

How is any of this a mystery?? It's what some of us have been saying on this board since 2008. The real mystery is why it took so long for the big money to flood in.

NuttBoxer   befriend (1)   ignore (2)   Tue, 27 Nov 2012, 2:31am PST   Like   Dislike     Share   Quote   Comment 5

Referring again to banks/investment firms who are buying these properties by the hundreds, not individual or small business flippers.

FunTime   befriend (2)   ignore (1)   Tue, 27 Nov 2012, 10:41am PST   Like   Dislike     Share   Quote   Comment 6

When Warren Buffet publicly declared he wanted to buy thousands of houses, I just understood that it was impossible. I've since thought, "They've figured out how to do it."

I, of course, haven't figured it out. I don't get invited to those parties.

http://www.cnbc.com/id/46538421/Warren_Buffett_on_CNBC_I_d_Buy_Up_A_Couple_Hundred_Thousand_Single_Family_Homes_If_I_Could

Ceffer   befriend (0)   ignore (1)   Tue, 27 Nov 2012, 10:58am PST   Like   Dislike     Share   Quote   Comment 7

Probably more like the institutions identified a break even point. On the balance sheet, banks don't want their loan portfolios to reflect depreciated value, they would be on board. It would behoove to buy housing inventories en masse, rent them out, cause market prices to swell, and then try to sell as many as possible to ignorant rubes on an individual basis at the inflated values. Not much different from the Fed buying and selling bonds, or companies buying and selling their own stock.
That would be the incentive to become landlord for institutions that otherwise wouldn't do so, especially if the gov has given them some kind of assurance that they will get another bail if it doesn't work. As conspiracies go, pretty sweet waltzing between Wall Street and Washington.

ttsmyf   befriend (3)   ignore (4)   Wed, 28 Nov 2012, 1:32am PST   Like   Dislike     Share   Quote   Comment 8

Of course, this content is very INSTRUCTIVE:
http://patrick.net/?p=1219038
It's OUT OF SIGHT status is testimony to "The big con infests America.".
SO, beware the representations of others, DO YOUR OWN THINKING.

bmwman91   befriend (7)   ignore (1)   Wed, 28 Nov 2012, 2:52am PST   Like   Dislike     Share   Quote   Comment 9

Well shit, who knows. Maybe Blackstone will end up doing a good job of renting the houses out & treat renters decently.

For some reason I just can't see it happening, but you just never know.

BayArea   befriend (3)   ignore (0)   Wed, 28 Nov 2012, 3:17am PST   Like   Dislike     Share   Quote   Comment 10

Large investment firms/banks are buying up tons of housing as a "rental investment".

It's not just SD but all over the country. Anyone's who has attempted to buy middle to low end real estate in the past 24 months has more than likely felt the fierce competition. And it's no longer who has the highest offer but banks want to close quickly and cash is king (I've been beat out on more than one property over the past year despite having the highest offer). Given the surge we've seen in 2012, I've actually backed off and standing on the sidelines since it's just not as attractive anymore to me as it was 12-24 months ago.

It's pretty sad for the middle to lower class since they don't have a chance in hell. This is a problem that the higher class doesn't face since the rent to buy ratios are too low in high end areas to attract investors (unless those investors are banking on equity return and not rental return, which is rare)

When real estate is bringing bigger ROI than the stock market, CDs, commodity investment, etc, you will see the big bucks head in that direction.

Want to buy a sub $400K house in CA that isn't a complete dump with 20% down and perfect credit? Sorry, you probably can't, at least not today.

Also, I notice you are from Chula Vista. I bought a Cobra Mustang there a couple years back from a military family who was in the midst of foreclosure. The guy indicated to me that every third house in that neighborhood was foreclosed. Place looked like a ghost town.

Ironman   befriend (0)   ignore (11)   Wed, 28 Nov 2012, 3:29am PST   Like   Dislike (1)     Share   Quote   Comment 11

bmwman91 says

Well shit, who knows. Maybe Blackstone will end up doing a good job of renting the houses out & treat renters decently.

For some reason I just can't see it happening, but you just never know.

Sure, and I bet Blackstone will be upgrading all the fixtures, painting and making these places so nice for their tenants too.

My guess, these "investors" will do bare bones to the buildings and when they find out the "true" carrying costs of being a landlord, they will bail on these investments.

In the mean time, these rentals will help drag down property values in their respective neighborhoods and all home owners in the area will be affected by it.

blowmeironvagina   befriend (0)   ignore (3)   Fri, 22 Apr 2016, 1:38am PDT   Like (1)   Dislike     Share   Quote   Comment 12

NuttBoxer says

We've been looking to buy in the San Diego area lately, and I've noticed a disturbing trend.

Large investment firms/banks are buying up tons of housing as a "rental investment". Apart from the logistics nightmare of an investment company trying to schedule a repair man for the busted water heater in house #235 of their portfolio(yes, I suppose they could hire a property manager), this is what I see coming:

Banks buy tons of housing/land as "rental investment".

Banks lose big, fleecing their investors.

Banks are bailed out by the central government.

Central government now owns huge chunks of private land.

Welcome to the United States of Socialism Comrades!

well I guess your market analysis was about as full of shit as your legal analysis!

what has happened since you posted this?
1. prices up. a lot!
2. rents up. a lot1
3. your sub market rental? gone!

Honestly, maybe you should move to the midwest. with a family of 4, and broke economics, Indiana is calling. You can get a nice house, everything else is cheaper too, you won't have to live in Cholla vista.

don't let the "California Dreaming" nonsense hold you. Kid love playing in snow, trust me. The money you save will lead to less stress and more vacations, get a boat take up water skiing or something.

FP   befriend (0)   ignore (1)   Fri, 22 Apr 2016, 9:26am PDT   Like   Dislike     Share   Quote   Comment 13

iwog says

For cash buyers, rents can earn a 3-10% return on investment after expenses and the income can be written off against the property resulting in capital gains income instead of ordinary income.

Interesting. Where in (coastal) CA can a cash bayer earn near 10% return after expenses?

If these numbers are based on current rents vs 2011 house prices, then one should compare them to yield on cost from MUNI funds bought in 2011, or something similar.

iwog   befriend (49)   ignore (12)   Fri, 22 Apr 2016, 10:23am PDT   Like (1)   Dislike     Share   Quote   Comment 14

FP says

Interesting. Where in (coastal) CA can a cash bayer earn near 10% return after expenses?

Nowhere. I wrote that in 2012. I bought one house in 2012 in Concord, CA and it gets pretty close to 10% return after expenses. Paid $240,000 after improvements and the rent is $2400 per month. I'm not even including all the tax benefits. Today you're looking at 3-4% net returns if you're extremely lucky and have a large down payment or pay entirely in cash.

I was imploring anyone that would listen to buy California real estate from 2009 through 2012 and the author of this thread was considering whether or not to pull the trigger and buy a house. Had he listened to my advice, he would be bragging about 6-figure gains instead of complaining about being evicted and high rents.

The astonishing thing is that he's more convinced he was right than ever.

FP   befriend (0)   ignore (1)   Fri, 22 Apr 2016, 10:39am PDT   Like   Dislike     Share   Quote   Comment 15

iwog says

Nowhere. I wrote that in 2012. I bought one house in 2012 in Concord, CA and it gets pretty close to 10% return after expenses. Paid $240,000 after improvements and the rent is $2400 per month.

Ah, didn't notice it was from 2012. Apologies.

In my BA neighborhood 3/2 houses were selling in the ~700K range at the bottom. The asking rent that I see on such houses right now is ~3,500/mo. So this is about 4% yield after expenses based on 2011/2 prices, or below 3% on current.

Not everybody is willing to be a landlord. There were many good investment options 4-7 years ago.

FP   befriend (0)   ignore (1)   Fri, 22 Apr 2016, 10:41am PDT   Like (2)   Dislike     Share   Quote   Comment 16

iwog says

The astonishing thing is that he's more convinced he was right

Most people, once they make their mind about something, they don't change. That's why dying is so important :)

wut   befriend (0)   ignore (0)   Fri, 22 Apr 2016, 8:27pm PDT   Like   Dislike     Share   Quote   Comment 17

It's actually really amazing, iwog. If I were him, I'd simply be kicking myself. There's really no way to look back at that decision with the benefit of hindsight and view it as the right one. Completely illogical.

That's not to say we all make perfect decisions, but owning the bad ones we make is the only way to progress intellectually and become better decision makers.

The offer he discussed having on his present rental sounded fantastic - I'm shocked he didn't take it.

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