patrick.net

Commercial loan mortgage rates were kind of high in 2018. We borrowed at 4.6% and 4.4% on the 2 buildings. Rates dropped in 2019. We asked our lender if they could do something for us. The modified our loans and lowered our rates to 4.25% and 4%, respectively. We had to pay $1k or so for the fees and recording new loan docs.

In 2021, rates dropped even lower. We refinanced both buildings to 3.5% on another 5/1 ARM so they’re good till 2026. Both buildings have been performing exceptionally well since. Hopefully, we’ll be alright when it’s time to refinance in 2026.🤞

Higher mortgage rates have reduced home inventory

That's just lazy. Mortgage rates are historically normal to low :

https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart


The inventory problem is a demographic problem. There are more millennials, and right on the heels of that more Z'er's, than boomers.

https://www.statista.com/statistics/797321/us-population-by-generation/

I highly recommend going to housingwire.com and listening to any and all podcasts with analyst Logan Mitsubishi (not even attempting to spell his name right). : https://www.housingwire.com/shows/housingwire-daily/ Agree or disagree, he's been proven right over time.

stfu says

That's just lazy. Mortgage rates are historically normal to low :

https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart

That's lying by omission because if peak prices were set around a locked-in 30 year mortgage rate of 4% and if the rate increases to 6%, then it would be harder to sell a home without dropping it every 10% for a 1% increase in the rate.

Remember what Patrick said that you are buying a monthly home payment not a home, unless you are buying with cash and are presumably Eman-like.

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Rubicon says

Rates fuel the market or put pressure on prices but the notion that higher rates mean lower prices have been proven wrong for decades.

We haven't had high rates for decades so how can you say that? But yes, home prices are set by more than 1 factor.

Logan was on Patnet for a while. He used to argue with iwog. Funny guy.

I was skeptical with some of his predictions, but have to give credit to him for being right. Did he say when this housing cycle would peak? around 2026?

GNL says

Rubicon says

Rates fuel the market or put pressure on prices but the notion that higher rates mean lower prices have been proven wrong for decades.

We haven't had high rates for decades so how can you say that? But yes, home prices are set by more than 1 factor.

I’m not sure the definition of high rates. The last time we saw rates this high was in 2007. My in-law bought their house in 1999 at 8% for a 30-year fixed mortgage. Their house has appreciated more than 4x since.

Rubicon says

And currently, inventory is historically low.

I personally do not think this will change. We are at the point where % of owners vs renters is going to go down down down.

Rubicon says

Do you know what happened to rents and house prices during the 70’s? I’ll let you google that yourself.

You said decades. You're referencing half a century ago.

Rubicon says

wouldn’t be surprised if in a few decades law changes and you can’t do it that easily anymore because it will be dominated by corporate America.

And what will be your opinion then...whatever? Was America always destined for feudalism? I'm scratching my head not knowing why people don't have a problem with this. Corporations as our masters? This sucks for everyone.

Unless there's something attractive about patnet to RE Rubicon is someone who has been here before, but doesn't want to use his old monikor. Maybe because he's on the ignore list a bit too much to get any attention?

I don't live in philosophy man, I live in reality. And reality for me, living in SoCal for 20+ years has been no housing shortage. I've moved whenever I wanted, wherever I wanted, lived almost exclusively in houses, and never paid the rent everyone else has. And unlike you, I've never had to pay a cent for maintenance. Boiler blows up, not my problem. Roof leaks, not my problem. Pipes are bad, not-my-problem. I bought in '06 and now loan is worth more than the house it's attached to, never happened to me. I bought in Yuma recently and can't rent or sell my house for enough to cover my mortgage, NOPE - not me.

Oh yeah, and I've done all this on one income. My wife never had to work, was able to be fully dedicated to raising our kids. Your outlook is unrealistic, narrow, and biased. Mine is based on not wanting to buy something without seeing it first, and without paying a reasonable price. When those factors are true in a market we're willing to buy in, that's when we'll buy something.

Rubicon says

Exactly. A nation of renters and some that own an empire of rental units

depends as Patrick can attest to this...if one can save (and effectively invest ) money renting compare to owning, then it may not be problematic as far as renting ...

..

I've always owned the home that I live in but I do sometimes envy renters. I tell my kids all the time to rent forever. I know, "math" says to buy but I have never seen a calculation that includes the true cost of home ownership. I'm talking about :

NuttBoxer says

Boiler blows up, not my problem. Roof leaks, not my problem.

There is SO much truth to this. I will also add painting, staining, or power washing (brick) every 10 - 12 years. Trim work. Landscaping. It never ends. If you're married, you are probably looking at a remodel project every 5 years. If you do the work yourself you can save a bundle but you'd probably make more on an hourly basis behind a fast food counter. Eventually, we all get to the point were we physically just can't keep up with the maintenance.

I'm hoping I'm on my last house. It's too big and it's too old and it's not even a question of 'what needs to be done' but of 'where do I stop?'. My plan (unbeknownst to my wife) is to finish this project, sell it for three times what we paid, and pay someone rent until I die.

Just got this in my inbox. Lenders will find creative ways to lend to qualified borrowers. They don’t sit around and do nothing. Like everyone else, they have to put food on the table for their family too.

This is the beauty of commercial real estate. Its qualification is based on the asset. Strong borrowers help too. Having high income helps even more.

Rubicon says

He said they are trying to re-zone parts of the island to prevent short term rentals.

This is true, even mine might be affected and it's been zone for nearly 50 years. People who live there hate the traffic, tourists and are too lazy to try to make money to afford the ever increasing cost of housing. University of Hawaii is available to them but they just bitch instead.

just_passing_through says

Rubicon says

He said they are trying to re-zone parts of the island to prevent short term rentals.

This is true, even mine might be affected and it's been zone for nearly 50 years. People who live there hate the traffic, tourists and are too lazy to try to make money to afford the ever increasing cost of housing. University of Hawaii is available to them but they just bitch instead.

This is why immigrants thrive in this country. We’re willing to work hard. We see the rewards unlike the folks who are born here and speak the language. They have it good without realizing it.

Renting is a temporary thing for us immigrants. We want to own our house. We want to control our destiny. No one can tell us to move with a 30-day notice. We want to own multiple homes and keep them for the next generation if we can afford to do that.

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

Eman says

This is why immigrants thrive in this country.

True and admirable but I wasn't entirely clear: I was mainly speaking of the natives however there are a lot of losers from all over that have shipwrecked in Hawaii.

Eman says

Lenders will find creative ways to lend to qualified borrowers.

For me I have a lot saved but limited income counted toward a VA mortgage. They don't count short term capital gains such as from options trading. They will count dividends as income.

So I have the cash to pay for discount points for a mortgage.

I would hope if the 30 year mortgage is 6% that I could spend 10% of the mortgage to pay down the rate from 6% to 3.5%.

This is based on 1% discount point for every 0.25% decrease in the 30 year mortgage rate.

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just_passing_through says

Eman says

This is why immigrants thrive in this country.

True and admirable but I wasn't entirely clear: I was mainly speaking of the natives however there are a lot of losers from all over that have shipwrecked in Hawaii.

I hear you. There are immigrant losers too, but they are the minority in comparison.

Based on my experience dealing with people in the Bay Area and people I encountered on Biggerpockets, folks, who are born here, have a different mindset and work ethics compared to immigrants. The same with my circle of friends, immigrants simply do better and hustle more.

ad says

Eman says

Lenders will find creative ways to lend to qualified borrowers.

For me I have a lot saved but limited income counted toward a VA mortgage. They don't count short term capital gains such as from options trading. They will count dividends as income.

So I have the cash to pay for discount points for a mortgage.

I would hope if the 30 year mortgage is 6% that I could spend 10% of the mortgage to pay down the rate from 6% to 3.5%.

This is based on 1% discount point for every 0.25% decrease in the 30 year mortgage rate.

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At the risk of sounding arrogant, I believe I have a solution for you if I know your financial situation.

To share a couple of examples: 1) I helped my cousin bought a $600k house with a $417k 30-year fixed conventional mortgage on a $38k salary at 4.75% mortgage rate. Just think about it for a moment. It was done by one of my favorite and creative loan officers, 2) I loaded my wife with debt during the last downturn to the tune of 15:1 debt to income ratio. How was it even possible during one of the most stringent loan underwriting of our time after the Global Financial Crisis? I don’t know if you remember “pkennedy” on this site. @EBGuy probably remembers. We bought 6 properties together, and I loaded him up with 7:1 debt to income ratio. 😅

As Henry Ford once said “If you think it’s possible, or impossible, you’re both right.” When I shared what I did during the downturn to buy and finance real estate, my Bay Area real estate friends/investors, who I met through Biggerpockets and local meetups, said they wish they had met me earlier. It’s not what we think. It’s how we think. Be a problem solver. That’s how we get paid in real estate.

Rubicon says

Builders, as we can see, are savvy in building enough to sell quickly but cautious enough to prevent overbuilding. They are smart enough to not fuck themselves.

Bingo. A lot learned the hard way during the housing bust. So they build cautiously now. That and quality trades are hard to come by. During the end of the boom builders around here were still buying 80 acre parcels and dropping 200 homes on them with no buyers. 1/4 lots and you could pee on your neighbors house out the window. Sure they sold 20-30, but then the inventory skyrocketed because they overbuilt. Not remotely seeing that here in IL. It's contract and then build.

Eman says

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

I don't like this practice. I have wealthy friends that do this. I get wanting to do what is best for your kids, but I'm paying nothing for college, not buying houses. They need to figure it out on their own.

I also don't believe that college is for everyone. Go be an airplane mechanic or something weird like that. Those jobs will always be in demand. You need annual inspections and overhauls after so many hours. Not a pretty job, but everyone needs plumbing and electric. Do 2 years of business study at a CC and start your own company. Learn accounting. IF you go to college make sure it STEM. Everything else is pretty much stupid.

Eman says

I helped my cousin bought a $600k house with a $417k 30-year fixed conventional mortgage on a $38k salary at 4.75% mortgage rate.

.



,

Your cousin's monthly gross income is $3167 yet he is paying $2175 for just a monthly mortgage (not including property taxes, insurance and hoa fee).

So he has unreported income to help pay for food and other expenses ? Or is he going to rent out a couple of rooms as part of being a boarding house ?

I assume this is his primary home. How do I get a deal like this ?

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Eman says

I helped my cousin bought a $600k house with a $417k 30-year fixed conventional mortgage on a $38k salary at 4.75% mortgage rate. Just think about it for a moment.

Ok, I've thought about it for a moment. How does he pay the debt with that income? How did he qualify?

Good point. 417000 * 0.0475 = 19807.50 per year in interest alone. That's half of his $38k salary.

I suppose one could eat ramen all the time.

Patrick says

Good point. 417000 * 0.0475 = 19807.50 per year in interest alone. That's half of his $38k salary.

I suppose one could eat ramen all the time.

With PMI (although I don't
think PMI is required in this scenario) and taxes, insurance, principal it eats up more than the after tax 38k.

GNL says

Ok, I've thought about it for a moment. How does he pay the debt with that income? How did he qualify?

You don't need to be qualified to get home loans. That's a false narrative when they claim It's different this time!

The dude put down over 30% of the purchase price. I am guessing that even though he may have meager income, he has substantial assets. A lender that would see several millions of dollars of assets would have no problem loaning the guy the coin. Plus the loan is protected by the down payment.

The dude flashed a sheet ton of bitcorn at the lender?

https://finance.yahoo.com/news/house-flippers-triggered-us-housing-175705459.html

House flippers triggered the US housing market crash, not poor subprime borrowers

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Houston’s flooding shows what happens when you ignore science and let developers run rampant

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

zzyzzx says

House flippers triggered the US housing market crash, not poor subprime borrowers

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Houston’s flooding shows what happens when you ignore science and let developers run rampant

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

Of course, bankers, national association of realtors, home inspectors, media, uniparty, federal reserve...had no role in this, only the flippers did.

housing inflation in Florida ....someone on Long Island, New York will sell their $875,000 bungalow and turn around and buy a brand new $450,000 house (of much larger size) in Florida ....
.

https://www.cbsnews.com/miami/news/florida-is-now-americas-inflation-hotspot/

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That's smart. Don't live somewhere way overpriced when you can live somewhere cheaper and spend more of your life on what you want to do, not just paying bills. Renting, buying, no one should pay more than something is worth.

Rubicon says

There are personal loan/hard money loans options with higher interest rates. That it?

Margin loans on stocks. How we bought our current primary home. We could have just kept the margin loan forever and paid interest only and our PITI would have been $600. Well technically ITI. And banked the other $600 as we eventually did refi and close out that account with my MIL. With appreciation and compounding dividends on other investments that are passive, we could have made $200-300k over that span of time and still had $200k in appreciation. Kind of fucked up now that I'm thinking about it. I'm actually kind of pissed. I dropped the ball. Lol. That was a $300-400k mistake.... fuck.

Misc says

The dude put down over 30% of the purchase price. I am guessing that even though he may have meager income, he has substantial assets. A lender that would see several millions of dollars of assets would have no problem loaning the guy the coin. Plus the loan is protected by the down payment.

Ok but, the scenario led with the fact the loan was difficult because he only made 38k. Plus, that's all we were told so that's all we can go by.

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

WookieMan says

Eman says

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

I don't like this practice. I have wealthy friends that do this. I get wanting to do what is best for your kids, but I'm paying nothing for college, not buying houses. They need to figure it out on their own.

I also don't believe that college is for everyone. Go be an airplane mechanic or something weird like that. Those jobs will always be in demand. You need annual inspections and overhauls after so many hours. Not a pretty job, but everyone needs plumbing and electric. Do 2 years of business study at a CC and start your own company. Learn accounting. IF you go to college make sure it STEM. Everything else is pretty much stupid.

I find myself often thinking about how much I should be sacrificing for my kids. At this point we're going to be leaving them each at least a paid off house. Not sure if its a mid life crisis but I feel the itch for a 911. Always been a big car guy but have been driving toyotas for 20 years. I've told the wife I don't want to be that old guy with cataracts driving a sports car 55mph down the highway.

Eman says

You guys are overthinking it. He bought it as an investment property. From a math point of view, he had a small negative cash flow. His salary was more than enough to cover it. After renting it out for a year, he could do anything he wanted to do with it.

Ok, so you were able to apply the rental income to the loan qualifications(?)?

Why does he have to wait a year before he can do whatever he wants with it?

If a person has $200 to apply to negative cash flow, can he qualify for 2 loans that each cash flow negative $100 each?

WookieMan says

Eman says

My neighbors are immigrants from South Africa. They own 2 SFH rentals nearby. They bought them decades ago, one for each kids.

I don't like this practice. I have wealthy friends that do this. I get wanting to do what is best for your kids, but I'm paying nothing for college, not buying houses. They need to figure it out on their own.

I also don't believe that college is for everyone. Go be an airplane mechanic or something weird like that. Those jobs will always be in demand. You need annual inspections and overhauls after so many hours. Not a pretty job, but everyone needs plumbing and electric. Do 2 years of business study at a CC and start your own company. Learn accounting. IF you go to college make sure it STEM. Everything else is pretty much stupid.

What you and I like, or dislike, is irrelevant. This is the thinking of immigrants, who came to this country with nothing. They work hard. They make the kids help along the way so they try to give their kids a head start where possible.

Funny enough, they used to own a 6-unit apartment building. They made the kids help out on the weekends and with the turnovers. The kids hated it. to They hated it too. After a few years of dealing with it, they sold it for a small loss. That building is worth so much now, but they were so happy to get rid of it. We had this talk and laughed about it. They were landlords. They self-managed and got burned out. I have my handyman help with fixing stuff whenever they need help with their house.