patrick.net

Eman says

Keep marching forward.

Eman, at any average time, how many homes you own as a landlord and what is the average market price and average equity ?

I'll just multiply number of homes by average equity to figure the net worth or book value.

Are all your residential properties in California ?

Eman, have you considered opening your own residential REIT ? you would get private investors and pension fund managers interested in this

ad says

Eman, have you considered opening your own residential REIT ? you would get private investors and pension fund managers interested in this

I looked into it about 10 years ago. While you can do it, it's an accounting nightmare if you're not careful. Stupid regulations and a lot of paperwork. Easier to get a group of buddies and just create a company. Add shareholders if you need them.

The benefit of REITs is the tax advantage on dividends. But if you're actively investing with people you already know, it's not worth the hassle to start one up, especially with long term gains.

Fact is you're going to pay the IRS in real estate if you're good at it or kick the tax man down the road with 1031's. At some point paying the tax attorney or accountant $40k/yr (part time) eats away any tax savings. Eman would need 100 people if I recall correctly to fund one. That's a big task for most people and then you have to deal with 100 people questioning acquisitions and profits. I agree with Eman that it's better to have a tight knit group of investors. Pull the trigger when you want and find a good deal. Not have pissed off people that aren't getting "expected" returns.

ad says

Eman, have you considered opening your own residential REIT ? you would get private investors and pension fund managers interested in this

I thought about this 1.5 decades ago. Gave it a try on the first deal with 14 investors. One of them was a nightmare to deal with. We sold the building 1 year 1 day later for 40% gain. In hindsight, it was a blessing in disguise. She’s still a good friend and asks for inputs whenever she needed. She owns a handful of rentals now. One of them is her former house. Smart move that she kept it when she upgraded to her current house.

On the 2nd deal, we cut it down to 5 fantastic investors. They gave us the money, and we never heard from them again. Once we stabilized the asset, we asked if they wanted to list and sell it, or we could buy everyone out less 5% commission. They agreed to the latter.

We still have one deal where we have 7 investors at $200k each. All other buildings are owned by my partner and I 50/50. We’ll be talking to an attorney this year on how to split them up without getting certain taxes triggered. Already got a couple referrals from our agents/lenders.

Call me naive, but my experience has been somewhat different with others on here. We’ve run across “honest” and crooked agents/brokers. We know which ones are crooks so we stopped dealing with them after one transaction. The ones, who we believe, are honest, we have done multiple transactions with them. We give everyone a fair chance until it’s proven otherwise.

GNL says

This is why I don’t invest in San Francisco and Berkeley. They’re BS land. I invest in Santa Clara County where the law is being interpreted for what it is. You don’t pay rent, you get evicted.

Yup. San Fran and Berkeley are financially dangerous places to be landlords. Nothing will set you back like a squatter missing six months of rent, harassing neighbors, and trashing the area. Next up: Somewhere over in the East Bay there's a newly proposed law that prospective landlords aren't allowed to do criminal background checks. Of course, landlords can still be sued for a criminally misbehaving tenant. Go figure.

SunnyvaleCA says

Next up: Somewhere over in the East Bay there's a newly proposed law that prospective landlords aren't allowed to do criminal background checks. Of course, landlords can still be sued for a criminally misbehaving tenant. Go figure.

Is anyone really surprised by this? As income/wealth inequality increases, more of this type of stuff will come about.

Eman says

Twice a year, I send donations to charities in America. I’m willing to bet I donate more than 99% of Americans in this country.

I’m an immigrant who love America. I’m not American. I’m proud of what I do. No sugarcoating and no jealousy of others. I love my friends and am willing to support them to succeed.

Eman, you're a good egg, with lots of useful info.

Appreciate it.

SunnyvaleCA says

GNL says

This is why I don’t invest in San Francisco and Berkeley. They’re BS land. I invest in Santa Clara County where the law is being interpreted for what it is. You don’t pay rent, you get evicted.

Yup. San Fran and Berkeley are financially dangerous places to be landlords. Nothing will set you back like a squatter missing six months of rent, harassing neighbors, and trashing the area. Next up: Somewhere over in the East Bay there's a newly proposed law that prospective landlords aren't allowed to do criminal background checks. Of course, landlords can still be sued for a criminally misbehaving tenant. Go figure.

The catch is these judges don’t follow the law. In Santa Clara County, you don’t pay rent, you get evicted. There’s no such thing as relocation fee and 3 extra months of free rent while the tenant is finding a new place.

Our property manager (PM) just told us a story about his latest eviction. The tenant basically told the judge her place is a 💩 hole with cockroaches, rodents, etc…. The judge replied “if it’s such a 💩 hole, why do you still want to live there?” Then asked if she will pay rent. She said no. The judge gave the writ of possession to the PM. Tenant has 5 calendar days to vacate, or the sheriff will remove her. Next!

AmericanKulak says

Eman says

Twice a year, I send donations to charities in America. I’m willing to bet I donate more than 99% of Americans in this country.

I’m an immigrant who love America. I’m not American. I’m proud of what I do. No sugarcoating and no jealousy of others. I love my friends and am willing to support them to succeed.

Eman, you're a good egg, with lots of useful info.

Appreciate it.

Thanks man. I do what others don’t, and I mean it. Giving back is the greatest gift of all. Seeing folks in my sphere dropping dead in their 40’s and 50’s in the recent years have made me realized that’s tomorrow is not promised. We all can drop dead at anytime.

I have a “death file” on my laptop. I also have a print out. I told my wife if I drop dead, the usernames, passwords, assets, liabilities, life insurance, etc… are all on there. This way, she knows where to pick up the pieces and run with it. It’s been 7 years so I need to update the family trust.

Just helped out a friend this week when he reached out. He promised to pay back by July. One thing I’ve learned is that consider the money is gone if I lend to family or friends. If it comes back, it’s a blessing. Let’s see how it goes.

He’s young in his early 30’s. Mistakes will be made. If he gets out of this pickle, which I believe he will, he’ll be fine riding out this down cycle. Not too shabby for a kid to own 11 rentals in the Bay Area in his 30’s.

This is the lesson I learned from Sam Zell. He was in a pickle in the early 90’s during the S&L Savings Crisis. He needed someone to bail him out. Jay Pritzker gave him $50M. Sam learned a valuable lesson of being over-leveraged. He went on to become a billionaire with plenty of liquidity.

My money is liquid. I let it flow and help family and friends if ever needed. I value relationship more than money.

I helped another kid about a decade ago when he and his wife was living inside a shed behind a mobile home. He’s making so much money now. He made $4M in 2022, and $2M in 2023. He said he owes me his life. 🤷‍♂️

https://nakedemperor.substack.com/p/this-weeks-must-reads-15-21-january

Wow, that is one scary chart. I wonder what 2024 has in store. I've gone on record a couple times now and I'm going to do it again...I believe the homeownership rate will fall for a long time.

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Hopefully the 30 year mortgage rate will settle no higher than 5.5% this year. It would only be about 1.5% higher than the rate when prices peaked in early 2022.

And consider that income has gone up +3.5% annually since early 2022 as far as income catching up with housing costs.

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https://wolfstreet.com/2024/01/21/status-of-the-housing-bust-in-san-francisco-lowest-price-for-any-december-since-2017-2019-silicon-valley-and-the-bay-area/

ad says

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Hopefully the 30 year mortgage rate will settle no higher than 5.5% this year. It would only be about 1.5% higher than the rate when prices peaked in early 2022.

And consider that income has gone up +3.5% annually since early 2022 as far as income catching up with housing costs.

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At this point, it looks like a good probability it will happen by end of year. People didn’t think it was possible while you did. Great prediction. 👏

Patrick says

https://nakedemperor.substack.com/p/this-weeks-must-reads-15-21-january

Last cycle peak sales in 2006 before the drop. This cycle peak sales 2021. The difference is that inventory was building up and most people were on ARMs leading up and into it in 2006 cycle vs people are on 30-year fixed mortgages for this cycle coupled with low inventory.

If the current trajectory plays out, there’s some money to be made in the interest rate and cap rate arbitrage between now and 2025-2026. Whoever has the balls to buy investment assets now will get rewarded in the coming years.

Housing Market To Suffer 'Aggregate Price Decline'

The spring selling season may finally bring true price discovery to the market

ADAM TAGGART
JAN 22, 2024

The US real estate market remains frozen.

Transactions are at multi-decade lows, mortgage rates remain painfully high and home prices are at near record-levels of unaffordability.

As we enter 2024, should we expect things to get better for housing, or worse?

For answers, we turn to mortgage lending expert & housing analyst Melody Wright, who has been busy visiting many of America's most popular housing markets to develop a true boots-on-the-ground understanding of where the trends are headed.

Melody expects the spring selling season to finally start unlocking "true price discovery" for the US housing market, and predicts a national aggregate price decline as the year progresses.

https://youtu.be/WL2ZRP84T7Y

Eman says

Patrick says

https://nakedemperor.substack.com/p/this-weeks-must-reads-15-21-january

Last cycle peak sales in 2006 before the drop. This cycle peak sales 2021. The difference is that inventory was building up and most people were on ARMs leading up and into it in 2006 cycle vs people are on 30-year fixed mortgages for this cycle coupled with low inventory.

If the current trajectory plays out, there’s some money to be made in the interest rate and cap rate arbitrage between now and 2025-2026. Whoever has the balls to buy investment assets now will get rewarded in the coming years.

I would like to understand here, do you think interest will go back to 3% in 2025?

No one knows if or when mortgage rate will go back to 3%. However, the Fed dot plot suggests it’s a no by 2025.

The talkng heads believe a 5% mortgage rate will be the magic number that enables current mortgage holding owners to sell, i.e., that breaks the logjam.

But keep in mind that real estate prices continued to fall after the financial fraud crisis, in spite of decreasing mortgage rates.

This is beyond fucked up. We do not have a free market. Manipulation of interest rates is criminality.

@indc,

Based on history and Piper Sandler’s prediction of the economic cycle, I believe there’s a high probability we’ll see 3% 30-year fixed mortgage rate again after 2030.

Eman says

indc,

Based on history and Piper Sandler’s prediction of the economic cycle, I believe there’s a high probability we’ll see 3% 30-year fixed mortgage rate again after 2030.

~10 year cycle ?

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GNL says

This is beyond fucked up. We do not have a free market. Manipulation of interest rates is criminality.

There is free market, in theory. Manipulation of interest rates is an implicit government function.

The madness in the Bay Area continues…high interest rate or not.



https://www.reddit.com/r/BayAreaRealEstate/comments/19d7fcu/60_offers_within_a_few_days_on_this_fixer_insane/?share_id=n2J7x3bRyLmi96ZC4CLgh&utm_name=ioscss&utm_term=1&rdt=65430

AD says

Eman says

indc,

Based on history and Piper Sandler’s prediction of the economic cycle, I believe there’s a high probability we’ll see 3% 30-year fixed mortgage rate again after 2030.

~10 year cycle ?

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18-year business cycle which started in 2012-2013. You don’t want to hear the prediction for the next downturn.

Al_Sharpton_for_President says

The talkng heads believe a 5% mortgage rate will be the magic number that enables current mortgage holding owners to sell, i.e., that breaks the logjam.

But keep in mind that real estate prices continued to fall after the financial fraud crisis, in spite of decreasing mortgage rates.

I figure we won't at least have a collapse of prices.

Maybe a 20% drop at most from the peak price set in early 2022 no later then October 2025 which will bring median house prices close to 2020 price levels.

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Will the rent drop help to drive down inflation to 2%? It’s 41% of the CPI. 2% CPI = the Fed will be more aggressive with the rate cuts.



https://x.com/ryandetrick/status/1749247574244991262?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

gabbar says

GNL says

This is beyond fucked up. We do not have a free market. Manipulation of interest rates is criminality.

There is free market, in theory. Manipulation of interest rates is an implicit government function.

That is THE control mechanism for the economy. It can, and I am more than sure it is, be/being used to favor certain groups, no? This bouncing up and down, up and down. Down for too long etc etc. And used to protect people/companies/government etc. And if that doesn't work, bailouts. I don't believe there is a free market.

GNL says

There is free market, in theory. Manipulation of interest rates is an implicit government function.

This statement is an oxymoron.

GNL says

I don't believe there is a free market.

There never was a free market, there won't be one in the future. Everything is rigged and manipulated.

https://www.marketwatch.com/story/d-r-hortons-stock-dives-as-lower-prices-for-new-homes-hurt-profits-48596483

D.R. Horton’s stock dives as lower prices for new homes hurt profits

The stock DHI, -9.09% tumbled 9.6% toward a six-week low in midday trading, which puts it on track to suffer the biggest one-day drop since the record 20.2% plunge on March 16, 2020. The selloff comes a day after the stock had closed at a record $157.70.

35:31: “…21% of the mortgage market (being delinquent) is way over the delinquency we were in late 2006.”

Well worth a listen in its entirety.

https://www.youtube.com/watch?v=WL2ZRP84T7Y&%3B%3Bt=3725s

zzyzzx says

D.R. Horton’s stock dives as lower prices for new homes hurt profits

good tell tale as far as economy

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gabbar says

There never was a free market, there won't be one in the future. Everything is rigged and manipulated.

See around 1800-1810 for a good example of a free market. USA of course

zzyzzx says

Thank god I’m not an agent, and I don’t have rent to pay. Thank god for my wife who has been taking care of me all these years. 😅