patrick.net

One final thing, do not ever offer loans or do guarantees for anybody.

Absolutely.

I think the extent of assistance for an FB friend should be a sofa to sleep in and fridge access.

How about spiritual support?

Fridge access? Perhaps not. What if the fridge somehow contains tainted spinach and the friend gets sick? You can be sued.

Peter P,

Unless you were recklessly negligent (ie storing Draino in unmarked nalgene bottles -- don't do it!), I doubt any jury would award anything to that ungrateful friend. You have a different duty to your friend than a restaurants or a supermarkets have towards the same friend. You've made no warranty to your friend and will not be liable if the food just turns out to be bad.

I'd leave the clergy and the philosophers to provide any necessary spiritual support, though my mom says I'm actually pretty good at rationally talking people through their problems. But as I said before, too risky and too much chance of it backfiring. People do not like hearing bad news, even when offered in the most disinterested and well intentioned spirit.

I guess I've advocated for a pretty selfish set of behavior. I think fellow bubbleheads have earned their relatively better financial position and should work hard to keep what they have. Keep a low profile and keep a close eye on your savings. There may be very tough financial times ahead (no thanks to housing bubble) and you'll need all the good will and financial resources to help you weather it.

And no gloating, except in semi-anonymous blogs and amongst like minded folks.

goober Says:

September 23rd, 2006 at 5:56 am
NPR -> All Things Considered -> Friday’s Stories -> “My House, My Greed, A Market Fable:”

goober, here's the link:

http://www.npr.org/templates/story/story.php?storyId=6126082

People do not like hearing bad news, even when offered in the most disinterested and well intentioned spirit.

I think fellow bubbleheads have earned their relatively better financial position and should work hard to keep what they have. Keep a low profile and keep a close eye on your savings. There may be very tough financial times ahead (no thanks to housing bubble) and you’ll need all the good will and financial resources to help you weather it.

Good advice. No need to unwittingly invite violence/attacks against oneself from FBs due to one's prescience and rational grasp of the market. The tide is turning and FBs are going to irrationally lash out at anyone they perceive to be the "cause" of their pain & downfall: the media, realtors, unscrupulous mortgage brokers, foreclosing banks, lowball auction bidders --and, yes-- YOU the jealous, loudmouthed housing bear who "wanted" all this to happen. You must have "done something" to cause all of this, right?

The FBs by and large will not start with some honest soul-searching or looking in the mirror (or they wouldn't be FBs in the first place), they will start out by trying to find someone else to blame. They will also not hesitate to shoot the messenger. We are in for some interesting times.

While he characterized his goals in investment as buy-fix-sell, he said he doesn’t like to be called a “flipper.”

If it walks like a duck, quacks like a duck...

“I don’t like the word flipping because it makes it sound like you’re doing something illegal,” he said.

Um, sorry, dude. By lying on multiple mortgage applications you ARE breaking the law.

Looks like we have a new Poster Boy for the bubble --to join the LV grandma with 13 flip properties & "SDCIA Jeff".

I promised the Lord that if he ever let the White Sox win a pennant (let alone a WORLD SERIES) I would try to be a better person. For 46 years it worked like champ. Last August I began to sweat convulsively.

O.K, so I sort of re-neged on the "Big Guy"!

But, but bu..... DinOR what do you mean "sort of"?

Well, I truly have cut down on my unrelenting and downright scary attachment to profanity. I can now form and execute entire sentences without one single cuss word. (For me, a major accomplishment). Oh my drinking is about the same but I try to smile in public more, be more generous and try to occupy my mind with something other than trading from time to time.

But I WILL NOT, CAN NOT, SHALL NOT be nice to FB's! I've talked until I'm blue in the face only to be treated like a lunatic. I've had it. I will help you move out when the sheriff comes to change the locks but that's about it!

We've all heard the old saying "that dog won't hunt". Well once you let them inside and set by the fire who wants to trap and tree possum? FB's have scuh-rude the economy in ways we can't even imagine! Once they've had a taste of easy money re-fi bubble bucks who wants to assert themselves at work? I swear I can't hold anybody's attention long enough to get anything done. People smile, nod their head, be nice enough to you long enough to get you off the phone etc. and go RIGHT BACK to whatever it is they weren't doing! Next billing cycle? Same sh@t. Make note on calendar, call, schedule appt., bring medallion stamp guarantee copies, talk like dutch uncle. Next billing cycle? Same sh@t. And we're supposed to be nice? What are they doing? Hope we die? Or just go away?

In about 36 hours I'll be starting from "square one" all over again. And so will you.

"Inventory appreciation" seems to be picking up again.

DinOR,

That's a great point. The lure of easy money (first in the tech bubble and then in RE) have made unbearable jerks out of some people. Even now, I hear young fools who take every opportunity to exclaim that they just bought a house and now they're spending all their weekend doing house stuff. I look forward to the bubble burst shutting them up.

Ha Ha,

Now we know where this kid is gonna run to. LOL

Allah,

Closing out a losing position used to painful for me. It seems we never forget the first time we had to sell a stock position at a loss. Now? Pffft. I don't even break a sweat. It's called cutting off a finger to save the hand.

If we're professionals we'd do best to get this out of the way from the git go. If you take the pains to remind clients after we've taken a huge profit that it doesn't always work out this way so let's not take this for granted, they really appreciate it! We should be grateful.

Not housing bubble brat. These disgusting pukes were even whining when they were winning! Seriously. How many times have we had to listen to these pricks buy a home in 2003, sell it in 2005 pocket mega tax free dollars and say some BS like; "If I'd held out I'm sure I could have........"

Oh please, please stick it up your @$$ sideways. You ungrateful, snotty little buble brat. Real business people know (just ask Randal H. esq.) that victories are few and far between. You find yourself thinking "if only I can hang in there until........?" When your ship comes in, gloating is the furthest thing from your mind. Most of us are far too worried about revealing just how we pulled it off so you don't typically hear seasoned folks running off at the mouth about how they cut overhead etc. I don't care if your business is a pizza parlor!

We should be nice in public (but we can laugh at people that lose it all after multiple HELOC's here on line)...

FAB,

(from previous thread)

I DO appreciate your comments toward weaning young adults to take the utmost interest in their own financial affairs! I do. I'd like to think anyway, that as a fin. planner that my daughters have a better appreciation for these finer points than most. (I think they feel like it makes me feel involved?). Yo kids! I DO feel involved. This does not make me feel important or vital or anything other than annoyed.

I've also always stressed the importance of developing your own financial/business contacts. I could send them to "a buddy" but he's MY buddy! Go find your own buddy.

Didn't I bring this topic up a few threads ago; by the end of which you guys had me hanging from a rope?

My view, seriously abbreviated:

Take the high road.

Short logic:

When you mock, laugh, deride, rub their faces into their own bad choices, you do them a favor, not yourself (or people in your "camp"). That's because most people sympathize with the unfortunate. And most people have a short memory. And no one likes a know-it-all. Saying "I told you so" or "I tried to warn you" just simply won't work.

In the end, you'll only end up drumming up even more sympathy for their "plight" while getting yourself demonized.

I find it best to not worry about other people's punishment/karmic balance/whatever social justice-ism. I don't know if anything will ever be "sorted out"; but I really don't care. So long as I did well by my family and myself, I could really care less whether someone else "got away with something", "got off easy", or "SILSIH", to borrow a phrase.

DinOR Says:

> FAB, (from previous thread) I DO appreciate your
> comments toward weaning young adults to take the
> utmost interest in their own financial affairs!

I was just talking to a friend last night about how many kids our age (late 30’s early 40’s) follow in their parents footsteps. Most of the kids with financial stable parents are financially stable, and most of the kids with parents who were always in debt are usually even deeper in debt (it is also amazing how many of the kids that grew up in broken homes are divorced before 40 when it is very rare for the people who’s parents are still married to be divorced)…

> I do. I’d like to think anyway, that as a fin. planner that
> my daughters have a better appreciation for these finer
> points than most. (I think they feel like it makes me
> feel involved?). Yo kids! I DO feel involved. This does
> not make me feel important or vital or anything other
> than annoyed.

Another good tip if you have more than one kid is to show the oldest how to do something and make them teach the younger kids. Asian cultures have been doing this for years and is one of the reasons (along with genetic smarts and a strong work ethic) why Asian kids do so well in school. Anyone who can teach others will have a better understanding of a subject, and someone who just learned something is usually a better teacher than someone who learned something years ago (most martial arts have the students one level above teach the students below them).

> I’ve also always stressed the importance of developing
> your own financial/business contacts. I could send
> them to “a buddy” but he’s MY buddy! Go find your
> own buddy.

As a parent you should teach them “how” to develop financial/business contacts. As I have mentioned before my Dad is not much of a networker and I had to learn this on my own. You should introduce your kids to your contacts and give them the pros and cons of each one and encourage them to find more contacts since sometimes you want good, other times you want fast and sometimes you want cheap (I’ve got a great attorney in S. Cal who is super smart, but he is also slow and expensive, when I need something fast I have a friend from undergrad in the East Bay who seems to drop what he is doing for me and turns stuff around in less than 24 hours, for cheap I have a guy in the Central Valley who can turn out a opinion of counsel that makes a lender happy for less than a couple bottles of good wine)…

Didn’t I bring this topic up a few threads ago; by the end of which you guys had me hanging from a rope?

But this one has a green smiley...

blah

huh

Unfortunately, these guys would only allow comments which favor them or allow some pro-housing bubble comments which sound obviously ridiculous and hence lack credibility.

Not true. We welcome diverse opinions. We only delete comments that we do not like.

"I’m still a renter, stabilized, in a neighborhood (riverside dr/mid 80s) where most owners maintenance costs alone are higher than my rent."

Nice! I've been waiting for a story of rent going below landlord's non-mortgage costs. When the landlord subsidize their tenant (by collecting rent

Yes, I know what you guys dont like.

Do you really? Because I don't.

I am rather difficult to offend but other moderators may not like certain things.

But, just bear in mind that your blog is not going to change the world a bit. It cannot influence the market. Just bear that in mind.

Of course. We NEVER intended to change the market. This is absolutely impossible.

BTW, I do think that rent is going up. I would say about 20% - 30% over the next two years. If this happens, the landing will be softer. However, if the economy is hit hard, a crash may become likely.

Damn, got cut off, trying again.

“I’m still a renter, stabilized, in a neighborhood (riverside dr/mid 80s) where most owners maintenance costs alone are higher than my rent.”

Nice! I’ve been waiting for a story of rent going below landlord’s non-mortgage costs. When the landlord subsidize the tenant by covering a part of the maintenance cost and the RE market is flat or down, the property is less than worthless.

I know the situation won't last, but meanwhile, would someone tell me what's so great about owning less than worthless RE property?

Peter P,

I'd say erase this guy. If this guy is who I think he is, he is just stealth trolling.

Last time, he started by saying he agrees with the opinions of this board, then goes on to cite ridiculous and unverifable numbers and say that maybe he should've bought instead.

I welcome alternative views, but only when they're honestly presented.

if rents are going up significantly, what's the fallout? general inflation, wage inflation, industrial action? The ABC (national govt TV station, like PBS) recently had a 24 hour strike here, cos they had only offered workers a 3% annual raise, nowhere near enough to deal with inflation.

so specuvestors (and the Fed and the lenders behind them) are now triggering widespread industrial action and unrest as a consequence of their actions? not to mention widespread stress and misery.

and people will vote with their feet -- if house prices are too high, and rents are too high, they will just relocate somewhere cheaper, far far away. unless govt FINALLY intervenes responsibly to create a pool of affordable places or otherwise cool down the market.

I welcome alternative views, but only when they’re honestly presented.

But if he is respectful should we try to tolerate?

Last time, he started by saying he agrees with the opinions of this board, then goes on to cite ridiculous and unverifable numbers and say that maybe he should’ve bought instead.

IF I knew what I know now, I should have bought. ;) But I knew nothing. I think it is natural to think that way.

DS, rent may go up because people will be less inclined to buy homes. They have to live somewhere.

However, there is a good chance that a recession will hit the silly valley again.

Spike66,

I am interested to hear about your neck of the woods. I understand that there are many co-ops in Manhattan and nearby (Riverside is the nicest part of Bronx, right?) and have assume that co-ops will survive the bubble much better due to their stricter buyer screen process. Do you think that's a realistic expectation or do you think the NYC market will sink just like it did in 1990?

You talk as if your are the sole propreitor of honesty.

I recommend incorporating your honesty. ;)

Not business advice.

Peter P,

I'm not convinced that the 18 to 36 month forward scenario will necessarily be higher rents, even without population shifts out of BA. In economically hard times, people can create new rental supply simply by renting out rooms in their home or renting out their currently vacant investment homes. On the other end, economically pressed workers are more likely to seek roommates or cheaper housing to defray housing costs. I think the new rental stock creation can be quite substantial and counter the effect of additional demand.

Dishonesty can lead to piercing of the corporate veil.

Not legal or business advice.

i think rents are going up because so many specuvestors have to mitigate the hurt from the monthly shortfall somehow... and once 'market rates' are up, that's just an invitation for owners who bought 20 years ago to match those rates, now isn't it...

DS,

Specuvestors (and normal business people) are going to try to get top dollar for their goods and services, but the market determines whether or not they get away with it. Yeah, there are occasionally a couple oddball landlords who don't give a damn about maximizing their value, but they're very rare exceptions and they do not make the market. (and if they've been too lazy to up the rent thus far, why would a jump in rent suddenly change their mind?)

I don't know where you get this idea that small RE specuvestors are capable of pulling off price fixing and intentionally pushing prices up or down. Property rental is about the most free market there is, price fixing is virtually impossible.

These moderators are not going to delete the ones that are already posted, because many silent wathers of this blog have already read my comments and it wouldnt go well with them if my comments are erased.

We have deleted many comments that were read and replied to.

However, I do not know or remember what got you blocked.

Got a question and maybe I can get some input.

I found a house I like and am doing my homework. One item I am NOT happy with is Texas property taxes. The house is going to be around $300k w/annual taxes at about 8K.

Here's the deal:

TX assesses at FMV
I'll pay cash so no mortgage will be recorded

The county will send me a form to VOLUNTARILY complete and return

If I toss the form in the trash, the county will send someone out and guess at the MV. If it's too high, I can appeal. If it's low; I can keep my mouth shut.

In LA, it's a piece of cake.....with low housing prices and sky high homestead expemption, property taxes are a joke......but $8k is a chunck of change....

I won't break the law; that's wrong and pretty stupid but there's some wiggle room here. Any thoughs?

i think there is a lot of elasticity in fixing rents -- if a renter is paying 30% of their income into rent, and i decide to squeeze them a bit more, and they will bite the bullet and start paying 40%, then why not? that's the name of the game isn't it? or they will start sharing their place, or whatever. if my investment property is in the middle of a jobs centre, what choice does the poor old renter have? and it's almost a consensus of RE firms and landlords to push up prices to see what happens. once again, it's a question of how inflation is working also -- are people getting paid more to justify rent increases? i'd say, not particularly.

there's normally an equilibrium between apartment prices and rent setting, but we've seen that equilibrium destroyed in the last 2-5-10-15(?) years by wild speculative inflation in housing. if recent home buyers are hurting, then maybe tenants should be made to hurt too... this is the 'pincer movement' to ensure a softer landing for landlords -- rents go up to offset the hurt of paying too much for a property.

how is it going to play out?

Doug H,

I can't assure you of the legality or practicality of the toss in the trash option. That should be a 30 minute job for a reputable local RE attorney. There's a high probability that the county will look down on non-cooperation and simply assess an above market value as a matter of course. You could do some digging in the local newspaper's RE section to look for articles about how the local government assess property tax. Figure out the probabilities and then decide your course of action.

As for the ethical implication. I don't see any problems. It's a voluntary process and if you can game the system in your favor, good for you.

Not legal advice

DS,

My point was: if the landlord could squeeze harder, wouldn't they have done it already? If you're saying that landlords would take advantage of a tight rental market to jack up prices, I agree with you. I'm just not sure there will be a tight rental market in 2 year's time.

astrid Says:
My point was: if the landlord could squeeze harder, wouldn’t they have done it already?

i dunno. we're talking about a new wave of landlords here. we're talking about everyone who went to a seminar in the last 5 years and wanted to cash in on the boom. we're talking about 40% of new mortgages now being for investment for new landlords, a hitherto unheard of level... they've only been in this business for a short while... and they increaingly own and control all the rental stock, even if they've paid too much for it... and if they're hurting cos they didn't crunch the numbers, wouldn't the best financial advice for them be to try to jack up the rents to compensate? short of selling out of the market....

on the theme of niceness, remember that these are people operating in a completely atomised, individuated, selfish worldview, acting only for THEIR retirement and THEIR family and THEIR prosperity, at the expense of all else. the guru told them that buying property was the way to go. never mind the downside for others. never mind how it changes the economic landscape of the entire country, for good or for ill. never mind the flow-on effects. never mind that you are creating the same conditions that lead to the French Revolution. just look out for No 1...

Astrid,

Yeah....the WORST case would be for them to say "Show me your closing paperwork".

Talking to people on the street....business people in town.....to get a feel for how the game is played; most answer with a wink and a nod. County Tax Assessor is a locally elected office, so the assessor is in the position of having to keep the State off his ass.....and the voters in his ballot box. There's ALWAYS flexibility; I'm just trying to figure out how much. I'm thinking the BEST I could do is fly under the radar to the tune of 90%. Anything less and it's going to draw attention. These folks are good 'ol boys but they ain't dumb. In most of my dealings they just don't want anyone to try something stupid and draw attention to their office.

I've checked about a dozen houses in the market; closing/assessed value that's on the books now and it runs as much as 20% under FMV.

In the deal, my goal is to get a little from each line item and after hitting the total button; save around 5% off the negotiated purchase price. I've got a built in 3% so another 5 will add up.

DS,

You're hypothesizing a class of owners who would rather go vacant than rent at market prices, and assume a large enough group to influence the market.

I guess it could still happen. Though the evidence thus far seems to running strongly in the opposite direction. Those newly minted landlords have thus far charged rents below their carrying costs and flooding the market in a manner to depress rents in places like AZ, FL, and NV. It is in fact the experience landlords who are sold out in the housing bubble - those experienced landlords are the ones diligently chasing after every marginal dollar, not the newbie wannabe landlords. Furthermore, the newbie landlords are, as you mentioned, very stressed out. They can't afford to name their price and survive for very long.

Randy H has injected an alternative scenario that seems quite high probability. He notes that rises in foreclosure could lead to more bank repossessions that take out some of the rental/buying stocking. I concede that it's a logical possibility and I still owe Randy H a book report on the 1990's RTC on that front.

Doug H,

You're going into an area where your judgment will be paramount and I'm not in a position to comment. If you're relatively new to the area, do talk to some people on Ben Jones's blog. Some of the regulars are from that area and might give you additional suggestions about buying in the area.

In any case, good luck!

hmm, but rents ARE up. how do you explain this? and the new landlords aren't necessarily stupid or even particularly desperate. what's happening with supply/ demand right now? do rents experience the same stickiness as house prices? I have a couple ideas, but won't list them now due to pecking on the PDA at a caff... (with my antique mountainbike propped nearby, waiting for dad's trust cheque to clear...)

Peter P Says:

> BTW, I do think that rent is going up. I would say about
> 20% - 30% over the next two years. If this happens, the
> landing will be softer. However, if the economy is hit
> hard, a crash may become likely.

As an apartment owners in a family of apartment and rental home owners I would be happy as can be to see rents rise by 20% - 30% but I don’t think that it will happen (Other than the dot com bubble of 1999-2000 I have never seen rents move that much that fast in the 25 years that I have been actively tracking rents). Last time air came out of the real estate bubble in TX, AZ and CA (S. Cal more than N. Cal) rents dropped quite a bit…

Then Different Sean Says:

> I think there is a lot of elasticity in fixing rents —
> if a renter is paying 30% of their income into rent,
> and i decide to squeeze them a bit more, and they
> will bite the bullet and start paying 40%,

I wish this were the case, but in real life if you raise the rent by 10% the residents will probably move down the street and pay even less (and get a half month free and new carpet) and I’ll have to pay to turn over a unit and suck up the lost rent. It costs $2-5K every time a tenant moves out in lost rent and turn costs so despite all the talk about the evil landlord we really try hard to keep the tenants happy and keep them in the property…

> I dunno. we’re talking about a new wave of landlords here.
> we’re talking about everyone who went to a seminar in the
> last 5 years and wanted to cash in on the boom.

The landlords that wanted to “cash in on the boom should have sold” since most real estate in CA has not had positive cash flow without 50% down in years. Most of this “new wave of landlords” will lose even more money than the last “new wave of tech. investors”…

> hmm, but rents ARE up. how do you explain this?

Some rents are up by a little, but not much. I can explain it by lazy people doing rent surveys and just looking at quoted rents on line not getting data on actual leases. Overall in the Bay Area & Sacramento rents are up a little from 2004, but they are still lower now than they were in 2000 (actual rents for the properties my family owns and manages and all the properties of the people we know well and share signed lease data with). I’m up early to drive up to Sacramento to check on some work at an apartment (the glamorous life of the single successful apartment owner)…

P.S. I expect rents to drop quite a bit in Sacramento over the next couple years as properties go REO (and receivers cut the rents to fill the buildings). The brokerage firm Arroyo and Coates just sent me a great mailer showing that we are “over the top” with Sacramento price per unit falling and cap rates rising for the first time in 10 years…