patrick.net

WookieMan says

Bitcoin says

for any person leaving CA we see 2 foreigners in line to get in.

And this is good?

Nobody is saying anything about good or bad. We are simply saying that your CA exodus story is a fairytale. Just because people want it to happen since a decade doesnt mean thats reality. sry

personally, I would love a CA exodus. I dont want to pay full price or over asking price for my next rental investment.

Bitcoin says

Nobody is saying anything about good or bad. We are simply saying that your CA exodus story is a fairytale. Just because people want it to happen since a decade doesnt mean thats reality. sry

Not wishing a CA exodus. Just noting what is happening. Not sure how else to explain it.

I don't know who is leaving California, but I recently met a few of them.
They have a lot of fuckin money and don't like being screwed for the privilege of being in California.
Most recently I met at the Palm Beach Boat Show.
$28 plus 20 bucks to park kept out the riff raff.
I went to visit an old friend who builds custom yachts in Maine.
They knew him and stopped by too. One had a place in Catalina Island, wow. The other sold a place in Palo Alto.
Funny that rich geezers buy yachts, they haven't the energy to actually use them very much.
I think some people just hate getting screwed and prefer to visit from out of state.
I heard of a guy in San Diego who became a Texas resident, and donated the Diego house to his college. He made an agreement that he lives there rent free.
Another guy I met in Texas has a house in San Rafael but he is a Texas resident.

I believe that until the foreclosures begin again, now is a tough time to buy a place at least where I like.

I think houses are a questionable investment to rent out, but everyone has his preference.

WookieMan says

Not sure how else to explain it.

Its just your talk, not a reality.

clambo says

I think houses are a questionable investment to rent out, but everyone has his preference.

long term housing goes up. dips are buying opportunities. Say you buy a rental for 600k and pay 200k down. your 5-10% appreciation for your 600k house needs to be compared to investing 200k in the stock market. in my example i am assuming I am breaking even (PITI - rent - maintenance - taxes) the first few years. After that I am making money.
Obviously, lots of variables here (interest rates, macro economics, etc)

Long term houses rise, and so do stocks.
Discussions of putting $200k down are strange because it assumes someone has let their 200k sit in the bank to be liquid.
Or, he sold something to get the money.
Few people get paid the bucks to save 200k in cash, but some do of course (like my father).
Anyway, you can get income and appreciate capital in real estate or investments.
Investments are taxed favorably, are liquid, and the entry fee is low to get started.
The broke people I know all wish someone would lend them the down payment.
It lands on my deaf ears : "rotsa ruck."
addendum
I'm happy I don't worry about wear and tear on my mutual funds, rising property taxes and fees, and the inability to evict deadbeats because the government prevents me.
My friend is bummed out, he owns a building in Hayward full of deadbeats.

clambo says

Long term houses rise, and so do stocks.
Discussions of putting $200k down are strange because it assumes someone has let their 200k sit in the bank to be liquid.
Or, he sold something to get the money.
Few people get paid the bucks to save 200k in cash, but some do of course (like my father).
Anyway, you can get income and appreciate capital in real estate or investments.
Investments are taxed favorably, are liquid, and the entry fee is low to get started.
The broke people I know all wish someone would lend them the down payment.
It lands on my deaf ears : "rotsa ruck."
addendum
I'm happy I don't worry about wear and tear on my mutual funds, rising property taxes and fees, and the inability to evict deadbeats because the government prevents me.
My friend is bummed out, he owns a building in Hayward full of deadbeats.

Around your midlife you should have enough liquid investments such as stocks and funds so that selling 10%-40% of those will give you a 200k down-payment. So you can buy a house if you want and keep investing.

clambo says

I'm happy I don't worry about wear and tear on my mutual funds, rising property taxes and fees, and the inability to evict deadbeats because the government prevents me.
My friend is bummed out, he owns a building in Hayward full of deadbeats.

Great point. Everyone dips their toes in the water of all types of investment. Real estate is a pain in the ass if that's not your profession as an investment. And I know we'll get the people that say it's smooth sailing, they haven't had to do anything in 10 years. That's pure bull shit.

If you're going to work, a business can pay you back exponentially more than stocks or real estate. It's not for everyone for sure, especially if you don't have a specific skill or niche you're interested in. It's worked for my family and allows me to dick around here a bunch and not worry about money. Valuations don't matter until you sell, but we can live extremely comfortably if we could sell today and retire. I'm 37.

I've been hesitant to get back into the real estate market, but we're thinking of getting a vacation rental in St. Thomas. St. John would be better, but more money. We'll see what's on the market in October, but we might pull the trigger when we're down there.

It's a perfect non-passport tropical place to go. I unfortunately don't think pandemics (and other bull shit) are going away and it's US territory. Cruises are still done for a while. Without them, people are traveling differently and I'm not certain cruise lines get back to their former glory even as an NCL shareholder. So I'm not seeing the island being packed with 4-10 cruise ships.

Puerto Rico is another consideration, but beaches just aren't that great. Inland rain forest and hiking are fun, but that gets boring quick. Vieques is cool, but the ferry system is pure trash. I'd have to get a private pilots license for that to make sense as well since it's so far from SJU by car and then ferry. That's a full ass travel day.

mell says

Around your midlife you should have enough liquid investments such as stocks and funds so that selling 10%-40% of those will give you a 200k down-payment. So you can buy a house if you want and keep investing.

Should. Tell that to over half the population that can't reach into their bank account for a $400 emergency.

Onvacation says

mell says

Around your midlife you should have enough liquid investments such as stocks and funds so that selling 10%-40% of those will give you a 200k down-payment. So you can buy a house if you want and keep investing.

yep, 100% agree.

WookieMan says

Everyone dips their toes in the water of all types of investment. Real estate is a pain in the ass if that's not your profession as an investment.

Some people actually have fun doing it! AND make money. Do we work hard for it? Sure....and you have to have skills. (knowing how to repair/fix things helps and knowing how to talk to people is a big factor too). Be good to your tenants.....in most cases they are good to you too. I rather charge less rent and have them long term then charge premium and have high turnover (with vacancy periods). Vetting tenants upfront is crucial. There is a looong checklist to go through before you accept someone as a tenant.

Bitcoin says

You put 20-30% down on the house but gain 5% annually in appreciation on the entire house value.

Leverage works both ways.

Your downpayment can be wiped out by a couple of bad years. And it does happen.

And consider that that house is draining your money for property taxes, insurance, and maintenance literally forever.

WookieMan says

And this is good? They send the money back to the homeland. Extracting wealth from your state and the nation. You shouldn't want this regardless of home values.

Not really. Just a small amount. Mostly they pay their rent/mortgage with it.

Patrick says

Your downpayment can be wiped out by a couple of bad years. And it does happen.

And consider that that house is draining your money for property taxes, insurance, and maintenance literally forever.

yep, lets say we have a downturn. if you arent strapped, you take this as an opportunity and buy another property. Nobody can time it....so having cash available is key to success.

i am always thinking long term.

yes, taxes, insurance and maintenance. still cheaper in the long run then renting? If i need cash, i can refi and push my PITI down. My mortgage is always fixed or will get lower. Rents always go up longterm. And its much more fun to own. I love being a landlord and i hated being a renter. Luckily, renting was short term in my life....never again.

Onvacation says

mell says

Around your midlife you should have enough liquid investments such as stocks and funds so that selling 10%-40% of those will give you a 200k down-payment. So you can buy a house if you want and keep investing.

Should. Tell that to over half the population that can't reach into their bank account for a $400 emergency.

That's an American thing though, esp. womyn are chronically bankrupt, almost no matter how much they make. It's the constant keeping up with the Joneses and expecting to go on vacation 4 times a year and using the Uber and Uber eats for everything instead of doing it yourself. Sure it's tougher these days for the youth fighting inflation but that problem has been around long before. In other countries families go on a long vacation once or twice a year into a cheap summer/winter cabin more as a family retreat, not spa vacations and celebrity bullshit. The amount of time people eat out or go out, even if they have zero monies is mind boggling. Live frugal and invest, you can still travel and have lots of fun, just go off the beaten path. Back in the bachelor days men who should have been investing and saving used to flash their bling and fancy cars and whatnot to get a shot at fucking a hot girl and it was always a fun competition to see if you can get her instead by pure virtue of game and take her home into your studio with your old beat up car. Once you discover game and the forces of nature it works quite often. One should save and invest at the minimum deep into ones 30s.

WookieMan says

I've been hesitant to get back into the real estate market, but we're thinking of getting a vacation rental in St. Thomas. St. John would be better, but more money. We'll see what's on the market in October, but we might pull the trigger when we're down there.

I look these up on the Treasury website the first of each month, when the interest is accrued/posted.

The I-bonds I spent $15k to get in Q3-Q4 of yr-2000 are worth $48.9k today. All interest accrual tax deferred, and when redeemed, exempt from state income tax. And I got a lot of derision for getting those, when dot.com, SP500, and Real Estate were all so Hip and Cool.

I could get a whole lot of timeshare or whatever days or whatever with that.

Patrick, your house in the hills just sold. You could have lived in this for the price of your monthly rental (taking into account a refi at 2003 rates).
Berkeley home sells for $1 million over asking price
A Berkeley home just sold for double its asking price, an unusual feat even in an ultra-competitive market like the Bay Area.
The mid-century house sold for $1 million over its asking price at $2.3 million and received 29 offers in 11 days, as first reported by CBS San Francisco.

It's history is interesting.
2000 Sold $749,000
2011 Sold $847,000
2021 Sold $2,300,000

https://www.realtor.com/realestateandhomes-detail/6-Harvard-Cir_Berkeley_CA_94708_M11774-36395

There would be no way in hell I would sell 200K of an IRA account and pay taxes, penalties, to buy a house.
A Roth allows it of course.
So, how about I sell a non retirement mutual fund? I would owe 2 capital gains taxes if I were in California.
I just put the Vanguard app on my phone.
It has a “news feed”, it says my investment return since April 2020 was 57.8%

clambo says

There would be no way in hell I would sell 200K of an IRA account and pay taxes, penalties, to buy a house.
A Roth allows it of course.
So, how about I sell a non retirement mutual fund? I would owe 2 capital gains taxes if I were in California.
I just put the Vanguard app on my phone.
It has a “news feed”, it says my investment return since April 2020 was 57.8%

Yeah preferably not an IRA but a (day)trading or savings account, or mutual fund, Roth may work too. You can also take a loan against your 401k, those are usually either interest free (cares act) or the interest goes back into your 401k to you. Plenty of options to get 100k or 200k together.

Michael Cooke says

A rich neighborhood is simply paying more to live a local "brand name" neighborhood. You get the same identical Polo shirt without the label. I can see very little difference between middle or upper middle class neighborhoods and "rich" neighborhoods here.

I could be wrong on this pt; feel free to correct me if you know, but these neighborhoods aren't necessarily tied to a specific public school

Michael Cooke says

Here it's about $200 maybe $300 per month.

80-100k euros take home in Germany is a ton of money; a person making minimum wage who is single makes 1100 which is 250 euro more than the average monthly cost of living

https://www.learngermanonline.org/salaries-and-living-costs-in-germany/

Bitcoin says

taxes, insurance and maintenance. still cheaper in the long run then renting?

Yes, for me in Silicon Valley, it has clearly been better to rent and put my "principal" payments into the stock market. But I admit that this area is strange that way. Houses around here never "pencil out" as they say. That is, you can never cover a mortgage by buying a house and renting it out in Silicon Valley, or San Francisco.

Patrick says

Bitcoin says

taxes, insurance and maintenance. still cheaper in the long run then renting?

Yes, for me in Silicon Valley, it has clearly been better to rent and put my "principal" payments into the stock market. But I admit that this area is strange that way. Houses around here never "pencil out" as they say. That is, you can never cover a mortgage by buying a house and renting it out in Silicon Valley, or San Francisco.

I’m sure you are getting a solid rental deal in Menlo (affluent areas typically have terrible rent:price ratios)

But boy have you missed out on a lot of equity upside. I don’t have to tell you that though.

Assuming a 20% DP, that 5x lever in real estate is pretty attractive compared to the 1x you see in the stock market. My two cents...

If you don't meet the income requirements for Roth IRA,

makes sense if you plan to be worth more at 59.5 yrs of age than when you open it (assuming you do this early in career)

https://www.investopedia.com/how-to-set-up-a-backdoor-roth-ira-4584775

https://www.daveramsey.com/blog/backdoor-roth-ira


mell says

There would be no way in hell I would sell 200K of an IRA account and pay taxes, penalties, to buy a house.
A Roth allows it of course.

mell says

Uber and Uber eats for everything instead of doing it yourse

fees and tips are routinely 30%+ of the entire bill. Almost makes you want to at least do takeout. Womyn notoriously, on average, do not cook. reason: because men......

BayArea says

Assuming a 20% DP, that 5x lever in real estate is pretty attractive compared to the 1x you see in the stock market. My two cents...

Bingo!

mell says

on vacation 4 times a year a

Ultra common in Manhattan. Its just difficult to live there and I'm sure people post their awesomeness on social media but they also usually are doing it to get a respite from living in high density quarters and always having people on your ass everywhere you go. Most single people making 150K or more are taking more than 2 vacations per year. 4 is a very popular number, a neat quarterly respite.

MMR says

usually are doing it to get a respite from living in high density quarters and always having people on your ass everywhere you go

exactly. If you live in a nice area with great weather you are less likely to feel the need to always go away. Kind of sad to think about living in a shitty place and always wanting to escape....problem is, you have always have to come back to your shitty place. I rather pay the sunshine tax and enjoy every day. I would even pay more for what I am getting here. Still fun to travel and you are thankful to be coming home.....

BayArea says

Assuming a 20% DP, that 5x lever in real estate is pretty attractive compared to the 1x you see in the stock market. My two cents...

It's a sunk cost until you sell. Then you won't have a place to live any more. And in the meanwhile, "house poor" because of too much going to the mortgage and property taxes.

WookieMan says

say it's smooth sailing, they haven't had to do anything in 10 years.

Its not smooth sailing, claiming RE professional status takes leg work, but most of the work can be done remotely. the hardest part is building up an investment, renovation, property management, banking and general contractor and having a strong relationship.

It is smoother sailing than being a developer per se, but it is more involved than buying a building or two and having a property manager.

Ideally a person should be married filing jointly and either you or your spouse does the real estate stuff. minimum 750 hrs per year with greater than 50% of working hours spent on real estate. Can't be working 2000 hrs per year and then another 2000 as a RE professional without being audited.

its the best tax shelter I've seen for doctors/salaried professionals whose effective returns murder( correction: absolutely obliterate)index funds like no tomorrow though. People who say that the returns from real estate don't match the stock market aren't claiming REPS. If it were easy and straightforward, everyone would be doing it. Its easier to get a consistent 25% effective return (without taking appreciation into consideration) on investment using tax laws than being prone to market forces.

Patrick says

Your downpayment can be wiped out by a couple of bad years. And it does happ

This is why using the loan (particularly if single) for. a multifamily makes sense, Conventional can be used for upto 4 units. If its a fixer upper, forced equity add followed by renting out the units, re-appraised and cash out refinance. Again, its not for everyone because it requires one to carry debt. But it's not the same type of debt as HELOC and taking a vacation, living high on the hog. It allows you to pull out your downpayment pretty quickly and apply to another property or put it into the market or some alternative investment.

Bitcoin says

I rather charge less rent and have them long term then charge premium

margins are low in California, but the investments are stable in the sense of it is easier to rent out than in other markets where there is a shortage of 6 figure earners. Coastal California, for its part, does not have this problem, regardless of exodus. the issue is the cost of entry and the generally business unfriendly environment.

HunterTits says

Indians & Chinese with lots of cash will flood CA housing markets.

as of now, there have been capital controls in place due to the top 0.1% of China, or the top 1.3 million people pulling money out of the country and investing abroad. Now that Biden is in office, china is now talking about easing capital controls

https://www.bloombergquint.com/markets/china-mulls-easing-capital-controls-on-offshore-investments

MMR says

Bitcoin says

I rather charge less rent and have them long term then charge premium

margins are low in California, but the investments are stable in the sense of it is easier to rent out than in other markets where there is a shortage of 6 figure earners. Coastal California, for its part, does not have this problem, regardless of exodus. the issue is the cost of entry and the generally business unfriendly environment.

Great comments MMR. Totally agree with what you say.

B.A.C.A.H. says

BayArea says

Assuming a 20% DP, that 5x lever in real estate is pretty attractive compared to the 1x you see in the stock market. My two cents...

It's a sunk cost until you sell. Then you won't have a place to live any more. And in the meanwhile, "house poor" because of too much going to the mortgage and property taxes.

Cash out refi sir

BayArea says

But boy have you missed out on a lot of equity upside.

I think people who put their money into houses lost out on massive stock market upside.

I’m with Patrick,
I had a stock market equity “upside”=increase since April 2020 which is the price of a house in Santa Cruz or Aptos.
Edit: I just realized that it is a large increase partly because of the previous large decrease from the panic from the Wuhan pandemic, my error.

I used annuity calculators and would plug in the numbers of guys in Santa Cruz who bragged how much money they “made” with their house. I did it out of curiosity, what was the rate of return?

It never was as good as stock investments.

Will be interesting to see what happens when the lumber / building materials shortage is over and people start moving back to cities (at least some of them will).

Patrick says

BayArea says

But boy have you missed out on a lot of equity upside.

I think people who put their money into houses lost out on massive stock market upside.

If you strategically invested, made the right selections, and had some luck on your side, you may be right.

If you invested in the market and got market level gains, you absolutely did not beat the 5x leveraged gains available with Bay Area housing during this bull run.