patrick.net

–Maintain a strong payments system
No argument here –creditors/lenders of all kinds have enjoyed limitless cash-flow under the Fed. Debtors on the other hand…

That's not what I think they meant (although I agree with the connotation). The payments system is the Automated Clearinghouse System (ACH origination and inter-bank check clearing). That, actually, is one of the reasons that you don't have to take your check to another bank for cashing and deposit into your bank. This is also the basis for much of the online banking in the US since ACH originations go over the US clearinghouse overseen by the Federal Reserve Bank.

$200k in credit card debt

Huh? Did you mean 20K?

Thanks SQT.

No Peter, it really is $200k.

200K? 8O

Bottom line is they owe $600k against the house and have $200k in credit card debt.

OMFG :shock:

It was appraised in 2001 for $1million, but since the property needs some repairs

There may be a silver lining here. If it was appraised at that much way back in 2001 (the very earliest phase of the HB), then it must be valued at WAY more than that now. Appreciation for the Sacramento area since 2001 is something like 150-200% on average, right? Even assuming the place needs a ton of big repairs (new roof, plumbing, electrical), I can't imagine that would amount to more than $100-200K in buyer credits. This, plus the $600K mortgage(s) plus $200K CC should still leave them with a couple of million dollars free & clear (assuming they sell fast).

But it might not be enough to cover the debt and put money down on a new place.

Commision to sell + closing costs for the new place may amount to more than 70K - 80K.

Can they try to sub-divide and sell part of the land away? 1/2 acre of prime raw land should worth something.

That full-acre lot is where most of the "house" value is, not the structure itself. You may be (pleasantly) surprised at what it appraises for today, especially if local zoning allows it to be sub-divided into multiple SFH lots.

Even if it's not worth $3 million, you must impress upon them that the high-interest CC debt alone will eat them alive if they don't act quickly. And the longer they wait in a falling market, the worse their prospects will be (as in BK).

Funny, Peter P & I said almost the exact same thing.

I do not know if sub-dividing triggers a Prop 13 reset though.

>>The land isn’t divided up in a way that would make that possible.

Well, how much would the land be worth if the house was knocked down?

SQT,

Oh, thank you for the e-mail exchange! Just another plus for Patrick regulars.

I am curious though as to why folks in that age group never seem to be able to confide in their children (or anyone for that matter) until it's too late or certainly in the 11th hour?

I've always been SO candid with my daughters about money matters. During the 90's (when they took karate lessons and everything under the sun) Mrs. DinOR and I took care to explain that things may not always be like this. We further explained that neither of their parents are anticipating any kind of an inheritance so we're pretty much it. (There really isn't a DinOR family fortune). When it came time for college the expectations (particularly after a long and difficult bear market) were pretty realistic.

It certainly didn't seem to suprise you all that much but I can't help but feel that there was much consolation in being that right either. I'm sure they'll be fine but it looks like their "expectations" will have to come around as well?

DinOR says:
Myself and others have been most vocal regarding “dis-enrollment” for 401K participants! Meaning you’re new on board, we automatically enroll you into the plan and if you really, really want out you have to jump through hoops.

it's compulsory for nearly all workers here - including a mandatory employer's contribution of 8% of earnings. plus a voluntary employee's contribution. all with tax advantages, of course.

Are we having fun yet?

Here's my situation. Moved to a rental in June. Sold my house in October. Investor owner of the house we're in let us know they were selling (I don't blame them--smart). Finding another rental was horrible--three kids, big dog, cat. Tons of houses for sale, hardly anything for rent.

Finally found something. Now trying to move my stuff with little kids on summer break. Have to pick up a few appliances. Have to change mail, bank accounts, brokerage accounts, garbage, cable, phone, electric water, etc.

Good lord.

Moving into a nice 4-bedroom place. I talked with the neighbor there. I asked about the owner of the place I'm going into. He says they are waiting for the top of the market to sell. I only hope they wait until the one-year lease is over before they decide to sell. If they break the lease, sure, I get to pocket a little money, but then it's back to trying to find another rental in the same school district again.

"Why don't you just buy?" everyone asks.

SQT,

Kick-ass mom.

DS,

Good on ya mate! Perhaps there is a thing or two we can learn from the Aussies! It's so crazy it just might work! With our Pension Benefit Gaurantee Corp. about 28 bil. under funded (steel and airline bailouts) maybe they can assert pressure in the right places? That or keep the canned "roo" meat coming.

SQT,

Well that is an alarming situation. Can keeping up appearances be THAT important to Dad? I've got to be honest, after surviving a 3 yr. bear market I'm a little beyond caring about what other people think.

At least the cat is out of the bag. Your Dad hates the exposure, no doubt, but at least he doesn't have to hide things anymore. Hard to sleep with secrets.

Any good way to reduce food expenses?

>>Any good way to reduce food expenses?

http://eatyourpantry.blogspot.com/

Cultivate lobsters in the swimming pool.

We do not have a swimming pool. Only two tubs. I do not want to bathe with clawed creatures.

>>I do not want to bathe with clawed creatures.

Wear a cup.

>>One thing we like to do that is less wasteful is shop twice a week. We don’t do it as much right now, but it helps because only 3-4 days are planned at a time.

That's interesting. Seems counter-intuitive. I'd think that by buying large amounts in bulk, you'd save. I presume your take is that if you shop twice a week, nothing has a chance to go bad?

RE: downsizing to a small condo

How much stuff do they have? We are only 29 and we are already unable to go below a 2/2 apartment and 500 cubic ft of storage.

Tons! They have a fully furnished 5 bedroom home with a very large pool table and two pinball machines.

They will be selling a lot of stuff!

It is not going to be easy.

>>I am not a big fan if bulk food, often Sam’s Club and Costco may save money, but then there is twice as much cardboard and packaging.

Now wait a minute. Wouldn't the volume of the food increase faster than the surface area of the packaging?

Anyway, I suppose you could have the best of both worlds. Keep the bulk purchases to non-perishables, then pick up perishables twice a week.

It’s so crazy it just might work!

oh yes, things are good here. nobody ever wants to leave.

That or keep the canned “roo” meat coming.

i'll see what i can do to help. you can have it all, in fact.

SQT,

at least your parents have you to take care of things, call them lucky. Sounds like your mom has no illusion about the market or the state of financial affairs, as long as she knows her situation well, things will work out.

OT:

I went to US bank today to take care of some errands. It is amazing to see that this bank is still touting NO-DOC, NO-VERIFICATION, ARM-INTEREST ONLY loans of 1-5 year durations all over the place. It is a cheap bank and that's why I use it for no-fee checking, but at this stage of the game, I am actually shocked to see a major bank still giving out flyers, pamphlets full of toxic loans. Are they really that confident that they can unload this s*** once they finish the initiation? What if they have nobody else to hand the bag over and end up having to hold the bag themselves?

>>Are they really that confident that they can unload this s*** once they finish the initiation? What if they have nobody else to hand the bag over and end up having to hold the bag themselves?

My friends and I have been talking about that. Ever since the revolution in securitizing mortgages, the local guys don't have to worry about the long term viability of the borrower. Just do the deals, package them into risk bundles, and then have some sellers on the phone with some buyers.

So far, there's always been someone willing to chomp at these loans. If that ever stops, all these local lenders are going to be dazed and confused.

i'm going over to kick some ass on www.sdcia.com. this has gone on long enough...

This is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable,” David Lereah, chief economist for the National Association of Realtors, said in early June

I seriously would give my left fucking nut to have 15 fucking minutes alone with that fucking asshole. Really, if any one knows Fucknob Lereah and needs a left testicle, perhaps we can get together.

This is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable,” David Lereah, chief economist for the National Association of Realtors, said in early June

The market is now aware of inflation. If the Fed pauses now, long-term bond rate may shoot up due to higher inflation expectations, causing 30 year mortgage rate to increase. No matter what the Fed does, some interest rates will be going up and some housing markets will be harmed.

OK. Who is that a photo of at the head of this thread? Is it the surgeon from Scrubs?

>>i’m going over to kick some ass on www.sdcia.com. this has gone on long enough…

I assume you are referring to that poor poster boy for the bubble, Mr. Tucson.

Are there any other threads over on those boards worth reading?

OK. Who is that a photo of at the head of this thread? Is it the surgeon from Scrubs?

Have you watched Office Space?

Mr Tucson is still very interested in property investing, will just be more careful next time...

Are there any other threads over on those boards worth reading?

the blog there is advising people capital gains have topped out, the only way to make money now is buy a 2 br condo and wall in the living room to make it a 3...

'worth reading' to see the perspectives of evil deluded people who believe they are 'good' people, and all their deals are 'win/win'...

A friend of mine who is trying to buy into Peninsula told me that he is loving this bubble, it is becoming the renter's heaven. He is not sure if he still wants to buy a home.

Just about 2-3 months ago, there is a glut of homes, all nicely remodeled, coming onto the market for rent (you can find quite a few of them listed on MLS for sale as well). Contrary to before, home renters usually have to put up with torn carpets, dirty kitchen, leaking toilets etc., now increasing number of inventory is made up of updated homes that are meant to be flipped - except that nobody wants them. So instead of leaving the houses vacant, the flippers plow back the nicely updated houses into the rental market, so yes, rent has increased, but the quality of inventory has improved much more than the increased rent. He was about to sign a contract paying 300 more a month in a larger, and entirely updated house in a good location compared to the current rental.

So this may be the story behind the "increased rent" One needs to compare apples to apples. Seriously, 300 is not much compared to the property tax, PITI payments, maintenance, etc. Rent is most definitely a steal considering the choices of rental houses available.

Flippers are after all a good and noble force in the economy, they are sacrificing their money to provide for a better quality of life for renters, what else can you ask for?

Flippers are after all a good and noble force in the economy, they are sacrificing their money to provide for a better quality of life for renters, what else can you ask for?

A 5gallon water jug shoved up their asses, beaten senseless, the death of 1000 cuts, soaking up to their necks in a pit of excrement? Just a start.

http://sfbay.craigslist.org/sby/apa/176028147.html

this one is classic. A few months back, a troll came here claiming that he bought a new SFH in South San Jose for 950K. And I happened to drive through that area (Basking Ridge South SJ), 5 feet away from the junction of 85/101 on the east side, with a major major power station squarely in sight, situated right on top a pile of dirt with zero vegetation whatsoever. Just imagine the ugliest hill on East Bay and you get what I am talking about, oh did I mention the power lines right over the development? Before I forget, the SFHs are 3 levels because the lot size is sub-1000 sft.

So now this "investor" after paying 950K intends to lease out his brand new POS at 2500 rent. The ads is actually not misleading, it is *close to 85/101*, it is so close that you can literally walk to the middle of 101. The development also looks over a lake - only that you need to look over a major power station before you see the lake.

Even if he is able to get an idiot paying him 2500 rent, the gross return is a handsome 3.1% (wow!), is this even enough to cover the interest on mortgage?

>>The ads is actually not misleading, it is *close to 85/101*, it is so close that you can literally walk to the middle of 101.

Do you think the troll saw what he was buying? Or maybe it was a deal done over the phone?