patrick.net

Eman says

If anyone has to buy now, I recommend getting a 10/1 ARM, IO (interest only), or not. Your mortgage will be fixed for the next 10 years. If history is any indication, you should have a chance to refinance and lock in a 30-year mortgage in the 2%ish within the 10-year time frame.

Good luck

Any suggestion on best HELOC rates?

FarmersWon says

Any suggestion on best HELOC rates?

Meriwest Credit Union offers 2.99% for the first 18 months. After that, it will be prime rate, or 3.5%. Please note that HELOC rate is adjustable for the term of the loan.

Shop around. There were times where Bank of America or Chase offered 1.99%.

FarmersWon says

Do You also do commercial property?
It is not easy to get loans.

This is a fallacy. People, who are clueless, keep repeating what they don’t know. Once you’ve dealt with commercial loans, you don’t want to go back to residential loans. Too much hassle. Don’t listen to people who say it takes 45-60 days to close commercial loans. I’ve closed a bunch of them in less than 30 days. In fact, I’ve closed a commercial loan in 18 days.

I only have small apartments, 5-12 units, and a handful SFHs and condos. 5-12 units are considered commercial properties. I don’t have any retail and office buildings kind of commercial property.

FarmersWon says

I think hate towards realtors is not right. Only a handful make money , rest are just putting food on table.

99% wrong on most levels. There are some good Realtors out there, but it's a 1% thing. Almost all of them will do anything to get a check and it's generally not in your best interest. 15 years managing a real estate office and watching the antics and many times illegal activities. And yes, I watched it and didn't do anything, but I personally never participated in shady shit. It's why I left once my wife's career boomed. Wasn't worth the risk to me or my family what I witnessed.

The average person will only do one transaction maybe two with the same agent. And you don't know what goes down. The biggest issue is lying about negotiation. Most of the time it's on the phone and you're not there. It's not like TV shows where you're sitting there with your agent on speaker phone hearing the negotiations. ALL of them will lie to you about communication with other agents, lawyers, lenders and inspectors. This is not a joke. 100% on this. And those people will lie back to you as well to keep a deal or make one.

Thing is this happenes in EVERY industry in some way shape or form. Realtors just get picked on more because it's a huge purchase. The disdain in valid, but not equally applied across all service industries where there is as much or more lying and cheating.

Eman says

I only have small apartments, 5-12 units, and a handful SFHs and condos. 5-12 units are considered commercial properties. I don’t have any retail and office buildings kind of commercial property.

Learning curve and huge potential for long term vacancies, but look into small industrial and warehouse type commercial property. Your tenants are companies and you can ask for basically anything when vetting them. Leases are long. With everyone working from home and e-commerce businesses needing space to store stuff, store fronts are a dying bread of property so I'd stay away from that.

Or just stick to what you know. I'm a believer in specializing and focusing on one niche. Yours seems to be residential. I did it and hated it. My uncle made a lot of money as a general contractor. But he needed space to store his equipment. He built a small industrial park. Maybe 100k SF between all the buildings and units. He nets $100k per month after tax now that it's paid off. He then bought a few other industrial/warehouse type properties. One is a bus lot and building for a school district. Another $20k/mo there. NEVER has to deal with tenant issues outside of them moving, which of course is a big risk if you have to float taxes and expenses for 1-2 years potentially.

It's nice when it's a business transaction and not a personal one like having a roof over your head with residential. Less emotion and stress in my opinion. Just my 2¢ on other avenues for wealth growth. I'd probably go out of CA though unless you really have an understanding for a local market. You obviously know what you're doing with residential, but just throwing out the idea.

WookieMan says

but look into small industrial and warehouse type commercial property. Your tenants are companies and you can ask for basically anything when vetting them. Leases are long. With everyone working from home and e-commerce businesses needing space to store stuff, store fronts are a dying bread of property so I'd stay away from that.

I was helping someone and the banks refuse to loan to someone who is new to game in spite of 40% down.
The only easy way to get was commercial loan for something already rented to NNN type corporate.. Those properties had inflated prices.

WookieMan says

99% wrong on most levels. There are some good Realtors out there, but it's a 1% thing. Almost all of them will do anything to get a check and it's generally not in your best interest. 15 years managing a real estate office and watching the antics and many times illegal activities. And yes, I watched it and didn't do anything, but I personally never participated in shady shit. It's why I left once my wife's career boomed. Wasn't worth the risk to me or my family what I witnessed.

It is not uncommon for any kind of sales people.
I guess exaggerating is part of jobs, You have seen nothing unless you have dealth with or worked with technology sales.. The marketing is few years ahead of actual product always.

FarmersWon says

I was helping someone and the banks refuse to loan to someone who is new to game in spite of 40% down.
The only easy way to get was commercial loan for something already rented to NNN type corporate.. Those properties had inflated prices.

It’s a catch 22. Banks don’t want to lend to people without experience, but people can’t get experience without diving into it first. All in all, experience is the best teacher. I started small (single units/residential) and scaled up into small apartments. From here, I can do 20-40 unit deals and so on.

Value-add is in underperforming assets. Most NNN assets sell based on the market cap rate so all the meat has been stripped. It’s just a yield, hope-and-pray, play at this point. It’s equivalent to giving someone your money, and they’ll give it back to you at 5% increments over the next 20 years. Screw that 💩!

As you and your client found out first hand, banks only cared more about getting their capital back plus interest. They don’t care about the collateral/asset. For people to say banks like to foreclose and take people’s homes and assets is so clueless.

All in all, reputation goes a long time way in this biz. Protect your reputation at all costs. Then you can go a long way in this, or any, biz.

WookieMan says

Yours seems to be residential. I did it and hated it.

Just like any biz, it’s not for everyone. When I had 18 units, I enjoyed being a landlord as all of my units have been completely rehabbed. Once I scaled up, I turned things over to a very reputable property management company. God bless for their existence. 😂 I learned that being an investor is a great way not to get burned out vs. being a landlord.

I don’t have experience with the industrial space. Everything is money out here when it comes to land, and an industrial building tends to sit on a big chunk of land so I stick with what I know until I have more resources to look at different asset class.

Eman says

WookieMan says

Yours seems to be residential. I did it and hated it.

Just like any biz, it’s not for everyone. When I had 18 units, I enjoyed being a landlord as all of my units have been completely rehabbed. Once I scaled up, I turned things over to a very reputable property management company. God bless for their existence. 😂 I learned that being an investor is a great way not to get burned out vs. being a landlord.

I don’t have experience with the industrial space. Everything is money out here when it comes to land, and an industrial building tends to sit on a big chunk of land so I stick with what I know until I have more resources to look at different asset class.

Eman how did you get to 18 units? flip lots of houses to make cash, then bought multiunit rentals with 20% down and rent positive cashflow?
everyone has an interesting story of how they accomplished what they did.

Fortwaynemobile says

Eman how did you get to 18 units? flip lots of houses to make cash, then bought multiunit rentals with 20% down and rent positive cashflow?

I started out flipping and almost immediately realized too much risk, expenses and taxes to make money this way so I switched to buy-and-hold and play monopoly. Buy assets at 75% LTV, refinance and get my equity out. Rinse and repeat.

Wife and I had 8 properties under our name. We had 4 financed under siblings’ names, and 6 under pkennedy’s name. I was only able to do 1 cash-out refinance with pkennedy before I left for Brazil to retire. He couldn’t take his job any longer.

I ended up “selling and giving” one condo to wife’s brother, and one to my little sister.

His, I bought for $230k. Cashed out $390k (tax-free) when the value was $520k in 2015 (75% LTV). I told him it’s his. Thanks for helping us with the financing. It’s worth over $800k now.

Bought for $137k at the courthouse steps. Little sister helped to cash out $350k (tax-free). Value was $530k in 2018. I told her it’s hers. Thanks for helping. Value is around $630-$650k now.

In late 2012, I was introduced to a very wealthy guy by a real estate acquaintance. Pkennedy met with him and I for lunch a couple times. Pkennedy told me not to partner with him. He’s too smart. He’ll steal everything from me. I have to admit. He’s really smart. My siblings and friends who met him all said the same thing.

In 2013, he asked me to partner with him after Pkennedy departed for Brazil to retire so I said why not. Let’s give it a try. We started our venture and now we co-own 10 small apartment buildings together. Along the way, I sold the smaller assets I co-owned with Pkennedy and a few of my own to help scale up buying these buildings. He loves me like his little brother now. His goal to own 1,000 units by the time he’s 60 while I’m not sure if I want to work that hard.

Eman says

FarmersWon says

Do You also do commercial property?
It is not easy to get loans.

This is a fallacy. People, who are clueless, keep repeating what they don’t know. Once you’ve dealt with commercial loans, you don’t want to go back to residential loans. Too much hassle. Don’t listen to people who say it takes 45-60 days to close commercial loans. I’ve closed a bunch of them in less than 30 days. In fact, I’ve closed a commercial loan in 18 days.

I only have small apartments, 5-12 units, and a handful SFHs and condos. 5-12 units are considered commercial properties. I don’t have any retail and office buildings kind of commercial property.

Where do you see real estate headed in 22 and 23?

Eman says

Fortwaynemobile says

Eman how did you get to 18 units? flip lots of houses to make cash, then bought multiunit rentals with 20% down and rent positive cashflow?

I started out flipping and almost immediately realized too much risk, expenses and taxes to make money this way so I switched to buy-and-hold and play monopoly. Buy assets at 75% LTV, refinance and get my equity out. Rinse and repeat.

Wife and I had 8 properties under our name. We had 4 financed under siblings’ names, and 6 under pkennedy’s name. I was only able to do 1 cash-out refinance with pkennedy before I left for Brazil to retire. He couldn’t take his job any longer.

I ended up “selling and giving” one condo to wife’s brother, and one to my little sister.

His, I bought for $230k. Cashed out $390k (tax-free) when the value was $520k in 2015 (75% LTV). I told him it’s his. Thanks for helping us with the finan...

thats an awesome story, thanks for sharing. very clever. im in a similar boat, just much further behind. i see CA as a place where rents will always be high, so thinking of using our old property as rental since itll be mostly profit even after expenses. and use that as income to get loans on other properties.

tanked says

amazing how this housing site evolved into even heavier topics

I wonder how many oldtimers are still on the Blog? I remember meeting with Patrick and other locals at a coffee shop in Palo Alto. I no longer work in the Bay Area.

gabbar says

Where do you see real estate headed in 22 and 23?

@gabbar, if history is any indication, 2022 would be like 2005-2006 time frame. The housing market will continue to go up at a decelerating rate especially in the 2nd half of this year due to higher mortgage rates. If the Fed raises rates aggressively this year, the housing market will likely peak next year. If not, it will likely peak in 2024. Valuation is very stretch, and rent/own ratio makes no freaking sense for SFH’s in the Bay Area. Just my 2 cents.

Eman says

The housing market will continue to go up

What kinds of people are the buyers?

B.A.C.A.H. says

Eman says

The housing market will continue to go up

What kinds of people are the buyers?

I don’t know what kinds of people are the buyers, and I don’t really care. I’m looking at history and data for guidance. I don’t spend time worrying about stuff beyond my control.

As Warren Buffett said “The only thing we can control is the purchase price.” I’ll continue to make bets on stuff I can control.

With how sharply mortgage rates are climbing and how freakishly low they have been, I wonder if the peak and decline will happen faster than in 2006-2007

What if the national price of gas becomes north of $6?

porkchopexpress says

With how sharply mortgage rates are climbing and how freakishly low they have been, I wonder if the peak and decline will happen faster than in 2006-2007

Interest rates weren't the issue in 2007, fraudulent loans were at the core. As long as people can service their mortgages interest rates only matter in terms of demand, i.e. how many can afford to buy. Since inventory has been very low this may stall the sharp rise but not cause a crash. You'd have to see layoffs and higher unemployment (not people quitting the workforce intentionally).

Eman says

I’m looking at history and data for guidance

You might want to consider who the buyers are.

Just looking at lines on graphs to make predictions about the future led some folks to ruin in the late 1920's, the late 1990's (dot.com), and the Real Estate Bubble that burst in 2006-2008.

Folks just looked at data on graphs and whatnot and assumed they had a handle on things.

If there will continue to be low inventory = No Crash.

I came from leftist paradise with private loans of 24% interest rares were common back then. The rates in shop vary any time of the day. Buyer has to ask at counter since there were no price tags on any goods. It doesn't meany anything even if you find one. Some customers get discount based on many factors like frequent customer, skin color, hair style, footwear, odor etc. Now things changed a bit with departmental stores after economic reforms where the price stickers can be found at least for some items. No slave complained. I still remember my dad complained that during Indira Khan (a far left commie dictator) the income tax rates were 97.5% during 1970s.

Hoping this inflation may not go out of control to get into hyper inflation to create something similar to the above.

mell says

porkchopexpress says

You'd have to see layoffs and higher unemployment (not people quitting the workforce intentionally).

Give it a few months

mell says

Interest rates weren't the issue in 2007, fraudulent loans were at the core. As long as people can service their mortgages interest rates only matter in terms of demand, i.e. how many can afford to buy. Since inventory has been very low this may stall the sharp rise but not cause a crash. You'd have to see layoffs and higher unemployment (not people quitting the workforce intentionally).

Good observation mell. In 2006-2007, we had fraudulent loans and the inventory kept building up. This time around, a combination of the low inventory, low interest rates, and some newly minted millionaires, thanks to all the IPO’s after the pandemic, which drove prices to the stratosphere.

In my immediate circle, I know 3 persons whose net worth went up $80-$250MM thanks to HCP, SNOW and Nuvia. A tennis friend did real well with TSLA stocks, and bought a $3.3M house in the midst of the pandemic.

At this point, it seems likes a bunch of the recent purchases are out of panic. Buy now or be priced out forever kind of thing.

B.A.C.A.H. says

Just looking at lines on graphs to make predictions about the future led some folks to ruin in the late 1920's, the late 1990's (dot.com), and the Real Estate Bubble that burst in 2006-2008.

Can you share your experience and some history of what happened? I’m sure the readers would appreciate it.

Yugoslavia experienced massive inflation during the Balkan wars.

I spoke to a Yugoslavian man who said the best time to buy is at the beginning of the inflation cycle. He said inflation will wipe out your mortgage debt. You will literally own the house free and clear within 5 years. All contracts are denominated in your nations currency. Not gold and silver as they once were. The bank cannot refuse a wheelbarrow full of worthless cash, so to speak.

The trick is knowing when that will occur.

Eman says

"In my immediate circle, I know 3 persons whose net worth went up $80-$250MM thanks to HCP, SNOW and Nuvia. A tennis friend did real well with TSLA stocks, and bought a $3.3M house in the midst of the pandemic"


I'm someone who believes there are too many rich people in America who need to get wiped out in order for the system to be healthy. There is too much weight at the top. Too many consumers. Not enough workers. A USD crash will help solve this.

gabbar says

What if the national price of gas becomes north of $6?

Many people need gasoline to drive to their jobs. (Not everyone's working from home).

Paying for gasoline, whatever the cost, is imperative to keeping their jobs. They will spend less on something else, like every kind of discretionary travel (can you say, "airline flights"?), restaurants, new clothes, entertainment, food, and housing (housing being the last thing to cut because it's difficult to cut housing cost). Fancy upgrades to the house, and home maintenance, will be deferred.

Last time gasoline spike so much so fast, in the summer of 2008, when folks ran out of spending to cut (and credit cards to run up the balances on), they quit paying mortgages. We know what happened next.

Eman says

Can you share your experience and some history of what happened? I’m sure the readers would appreciate it.

Sorry I wasn't around in 1929, but I read a lot of history.

I know so many folks who lost a bunch when dot.com collapsed. A former colleague of mine told me recently that his portfolio is still less than it was in 1999. So many folks. Because they connected the dots about the past to predict the future. They were wrong.

And I know so many folks in the Bay Area and Central Valley who lost homes in the Real Estate Bubble. They lost their residence homes, and their investment homes acquired on house- of-cards financing collapsed. Some of them, before they lost those investment properties, were cock-sure of what they were doing, based on "history". Some relatives mocked me a bit when I didn't want to partner with them. Because it was all on debt.

My coworker lost her home in Gilroy early in the crisis. She gave me her cat because they couldn't take him where they fled to. I had the cat for 13 years before he passed away.

B.A.C.A.H. says

What kinds of people are the buyers?

Eman says

I don’t know what kinds of people are the buyers, and I don’t really care.

Eman says

At this point, it seems likes a bunch of the recent purchases are out of panic. Buy now or be priced out forever kind of thing.

Looks like you answered my question about the buyers.

Looking at this chart, it’s freaking nuts. In 2013, I predicted that the HPI for the Bay Area would peak around 230-235. Justme “saved my post for posterity”. It’s at 349 now. 🤯

B.A.C.A.H. says

A former colleague of mine told me recently that his portfolio is still less than it was in 1999.

How is this even possible?

WineHorror1 says

If there will continue to be low inventory = No Crash.

Although it’s been happening more, I still can’t fathom why some people won’t cash in their Los Angeles area lotto ticket. We’re talking 1500 sq ft 3bd/2ba post ww2 cracker boxes selling at $800k min up to about 1.6 million depending on location and condition. 2,000 sq ft homes it’s more like $1 million up to 2 million.

Crime is without a doubt the worst it’s been in 20 years, despite what the liars and deceivers are the LA Slimes say. It there any doubt why those evildoers moved their headquarters from downtown LA to El Segundo? Filthy horrible people work for that company…the absolute worst of educated humanity. The crime has spread to the suburbs too. The modest city I live in is trying nobly to stave off the crime, but I see it. They had to take extraordinary unconstitutional measures to keep the riots and associated crime out, but they are losing the battle. Already there’s been an influx of drug addicts and smash and grabs and I’m guessing it will get worse unless the City of LA actually starts enforcing the law and corrupt George Gascon gets recalled.

The streets and homeless everywhere in LA area remains a filthy public health mess.

And oh, state taxes and sales, gas, etc. higher than elsewhere. And the public schools are garbage, even the highly rated ones. I’ve never seen so many people moving to a home school situation.

And let’s not forget the recent state law passed forcing all cities to rezone, opening the door for multiplexes and apartment buildings in current sfr suburbs.

I remain in astonishment at people not taking their cash and going and living a life of luxury in a better part of the country. I can retire in less than a decade and can’t see anyway Id stay. If I had that same lotto ticket, I’d already be gone.

Booger says

B.A.C.A.H. says

A former colleague of mine told me recently that his portfolio is still less than it was in 1999.

How is this even possible?

Because here in Silicon Valley, folks were just as cock-sure about their "recent history" gains in their dot.com stocks as some Real Estate cheerleaders are about Bay Area house prices.

The same inlaws who mocked and belittled me for not joining their Casey Serin-ish real estate stuff had mocked me years earlier for not buying in to their stock investing club.

Tech stocks like world.com and JSDU and so many others collapsed to a fraction of their values, taking down the NASDAQ with them. Folks like the former colleague I mentioned panicked and sold at the bottom, locking in their losses. They were battle scarred and shied away from stocks after that.

Blue says

I came from leftist paradise with private loans of 24% interest rares were common back then. The rates in shop vary any time of the day. Buyer has to ask at counter since there were no price tags on any goods. It doesn't meany anything even if you find one. Some customers get discount based on many factors like frequent customer, skin color, hair style, footwear, odor etc. Now things changed a bit with departmental stores after economic reforms where the price stickers can be found at least for some items. No slave complained. I still remember my dad complained that during Indira Khan (a far left commie dictator) the income tax rates were 97.5% during 1970s.

Hoping this inflation may not go out of control to get into hyper inflation to create something similar to the above.

Hindoos are funny slave creatures.
They were all in the ass of India Bitch when she was killing Sikhs asking for federal structure and rule of law.
Now these same Hindooo slaves are in Modi's ass who is transferring all the wealth to western globalist thugs.

Wait few year, Hindooo slaves will be saying same things about Modi and his pretend Hindooo ilk.
1400 years of slavery is hard to shake off!

B.A.C.A.H. says

Eman says

Can you share your experience and some history of what happened? I’m sure the readers would appreciate it.

Sorry I wasn't around in 1929, but I read a lot of history.

I know so many folks who lost a bunch when dot.com collapsed. A former colleague of mine told me recently that his portfolio is still less than it was in 1999. So many folks. Because they connected the dots about the past to predict the future. They were wrong.

And I know so many folks in the Bay Area and Central Valley who lost homes in the Real Estate Bubble. They lost their residence homes, and their investment homes acquired on house- of-cards financing collapsed. Some of them, before they lost those investment properties, were cock-sure of what they were doing, based on "history". Some relatives mocked me a bit when I didn't want to partner with them. Because it was all on debt.

My coworke...

Sounds like your colleagues and coworkers bought based on speculation rather than fundamentals.

The buyers this time around couldn’t get fraudulent loans like they did during the housing bubble years. Regardless, an economic downturn will result in lay-offs, which would cause the next housing correction. I’m not smart enough to know how deep the next correction will be, but I’ll be ready to buy more assets when the numbers pencil out. The Bay Area has always bounced back after an economic downturn. There’s no reason to believe it wouldn’t after the upcoming downturn.

FuckTheMainstreamMedia says

Although it’s been happening more, I still can’t fathom why some people won’t cash in their Los Angeles area lotto ticket. We’re talking 1500 sq ft 3bd/2ba post ww2 cracker boxes selling at $800k min up to about 1.6 million depending on location and condition. 2,000 sq ft homes it’s more like $1 million up to 2 million.

This is cheap compared to Bay Area prices. 😂😂😂

For us, we won’t sell and move because of family.

Eman says

gabbar says

Where do you see real estate headed in 22 and 23?

@gabbar, if history is any indication, 2022 would be like 2005-2006 time frame. The housing market will continue to go up at a decelerating rate especially in the 2nd half of this year due to higher mortgage rates. If the Fed raises rates aggressively this year, the housing market will likely peak next year. If not, it will likely peak in 2024. Valuation is very stretch, and rent/own ratio makes no freaking sense for SFH’s in the Bay Area. Just my 2 cents.

Rent/price never made sense for nicer SFH in bay area.
There is no real space left in bay area to build. The farmers who still have some land and already mega wealthy and will only sell when builders pay top dollars at peak.
The only decline can be in small congested houses unless lot of people leave bay area.
I know more people moving in than leaving.
... Even more who are stuck in apartments and waiting for chance to buy SFH.... Add that to corporate/foreign buyers, It is huge supply problem and it is the case for last 7-8 years.

FuckTheMainstreamMedia says

the public schools are garbage, even the highly rated ones.

FTMM, have you spent time in LA area public classrooms recently? How many different schools? Which grades? What did you see?