patrick.net

I just see buying SFHs to rent out as a great, great moral evil.

There's no actual wealth creation going on, it's pure skimmer activity, putting yourself in an unnecessary intermediary position between a person who needs the housing good and the already-built housing stock.

I have much less problem with people profiting from the construction and leasing of new rental stock, but there's also a moral problem there as land values rise and the economic rent of the property moves from the value of the fixed capital and onto the site value. The owners of the property did nothing to create this increased site value, yet they are profiting from it -- this is getting something for nothing and is therefore a moral problem and economic inefficiency.

This is why I favor a strong land-value tax regime to purge the system of the parasitical rentiers.

I pay taxes on my passive income

people paid taxes on their slaves. Just sayin'.

Again, if I had access to around $20M in capital there is nothing I would rather do than build a very nice 100 unit complex in the nice part of Fresno, like this property that's on the market for $2M.

Troy, you lost me there.
At this point in life, I'd only rent a SFH to live if I have to rent.
I got a family and pets and too many cars.
Muti-unit apartments can't cut it. I don't even want to live near one - I know, I used to have apartments as backyard neighbors. The police helicopters wakes me up too much.
So there is nothing wrong with providing something of value to others willing to pay a premium.
I frequently pay more for things just because I enjoy or need it, e.g. gym membership, rental cars...

kt says

So there is nothing wrong with providing something of value to others willing to pay a premium.

I agree, but a SFH income property is not providing something of value. Quite the opposite, it's withholding something of value until someone meets your price. IMHO this is not capitalism -- it's rentierism -- when the item in question was not created by you.

I also agree that my pipe dream of developing a high-end complex in Fresno is undoubtedly fraught with more "unknown unknowns" than I can shake a stick at. But I was thinking it would be cool making a livable complex for people without families or with young families. My current digs closely resemble this idea. Built in the late 80s, there's tons of space and the grounds are quite nice. Whoever built this complex done good in the Capitalist department -- creating wealth for the community. Current owners can suck me tho ; )

kt says

e.g. gym membership, rental cars

Also, the supply of gym memberships and rental cars can be increased to meet market demand. The supply of SFH in California, not so much. This is the core economics of the ongoing injustice of SFH income properties.

Back in the late 70s a nice doctor guy used his surplus income to buy a house that had come on the market a few doors down from him, and kindly allowed us use of this extra house of his for four years, for a fee, since we were perfectly willing to pay the premium to live in Salinas' best school district (Monterey Park) and there were no other SFHs available, and the multifamily stock in the area was horrendous.

I think this balance is f---ed up. We are plowing too much RE investment into raw land value and not enough into the actual housing stock. This can be fixed with different tax policy and zoning, but there's zero chance that we'll do this since we are a nation of disempowered idiots -- the people with money are of course perfectly happy with the status quo they've created over the past 100 years, and the people without money have the political policy footprint of monkeys in the zoo.

Patrick,

I went through a foreclosure in '08 and stopped paying the property taxes as well as the HOA's. Once the property is seized by the bank or you do as I did and go "cash for keys", ALL of the taxes owed and HOA's are the responsibility of the banks.

You will be 1099'd for the income you received on the cash for keys though.

I am currently being pursued by the 2nd on a HELOC I did for the refi. I was not one of those people who refi'd to go on a spending spree or payoff bills. I just simply wanted a lower rate. My ex (the whole reason we foreclosed in the first place) is currently in negotiations with them for a settlement. Meanwhile I have to hide all my cash reserves in a joint acct with my Dad so the bank doesn't seize them for the HELOC and put the rest into IRA's and 401k so they can't touch it

Troy says

kt says

Also, the supply of gym memberships and rental cars can be increased to meet market demand. The supply of SFH in California, not so much.

Maybe true in the BA and parts of SoCal. Not true in the Central Valley.
In the peak bubble years, it seems one cannot drive anywhere without seeing new tract homes springing up. My wife got tire of listening to me say, "Holy crap, who's going to buy these ugly houses?".
But land grabbing by the rich or powerful goes way back, like the oldest profession.
Communism was a failed experiment to fix that.

jrc.
(1) The lender did not "ding" your credit rating. You did that when you stopped making payments.
(2) I agree with whoever wrote that the modification process is a scam. The most they will do is lower your interest rate, but add back in all shortages plus extra penalties and interest. Your loan liability will go up. The lower payment is temporary. They will probably extend to 40 years. Do you really want to pay the outragous interest on a 40 year amortization, even at a low rate. Do the math, payments are impacted more by the amount borrowed and the length of loan than by the interest rate.
(3) At the amount you are underwater, you will never catch up and be able to sell for what you owe. If you are in a situation in 5 years where you MUST sell, you will still be underwater and the shortage will be subject to federal and state income tax.
(4) If you are willing to accept the personal, emotional and FICO consequences of foreclosure, it is the smart move. If that is your decision, try to stay there payment-free for as long as you can.

http://www.youwalkaway.com/output24/InterectiveFlashCalculator.html

calculator for walking away. a lot of people i know broke the strangle grip of an expensive loan and walked away, they felt so much better about their life after. its just too stressful and often financially difficult when once life is owned by a bank who can take a home at any point of default.

At my wifes company there is outsourcing starting, so family income may drop in half, my job isn't guaranteed either. the loving and caring bank isn't going to give me a second if i cant pay. My suggestion is that if it financially makes sense to walk away... stop paying rent and live there for a year until it forecloses. And don't buy another house until one income can comfortably afford it. In California you are not responsible for taxes for walking away, at least until 2012.

On another note our neighbor has not made a payment for 2 years on his now foreclosed house, almost saved his downpayment back by living in a foreclosed house.

I am 64 yrs old and bought condo in CA 3 yrs ago. Was told my lender not to worry about large mortage as the property would be worth more than the mortage owed when I retired. Now I'm over $100,00 upside down and will have to foreclose anyway when I retire. I want to stay in my place as long as possible. I quit making payments in May. Chase keeps calling from an 800 # but Im not answering. How long can I wait to request a loan modification? How long does it take to get one? If I don't take the mod if approved, how long before they foreclose. Bottom line, I'd like not to have the physical and mental stress of moving until I retire in 2 years.
Anybody got any ideas?? Thanks.

Chapter2008, How much is your HOA? They probably will not want to foreclose on you since they'd have to pay the HOA.

If you have the resources, tell the lender that you temporarily cannot afford payments, but will be able to in say... 8 months. There's a term for it but you can stall your payments, and "pay" them additional interest later on when you start making payments again.