patrick.net

freak80 says

That's why businesses are moving there, to escape the social parasites on the "top" (the landed elite) and the "bottom" (the deadbeats living off the gummint).

Sounds like Santa Clara County, CA... before the boom!

"A fool and his money are soon parted"

thomaswong.1986 says

I guess if your a BULL! this is all the goods news your going to get.. for the moment!

I don't consider myself a bear or a bull. Just a realist and someone who looks at trends and numbers to guide my way. I try not to allow either extreme to sway my viewpoint if I cannot support them with facts.

Some have pointed out, correctly mind you, that this is not a y over y observation but rather m over m x2, and thus is not a solid trend. I agree. I do however see the probability of prices increasing > decreasing (in areas such as SF where the economy is decent) mainly because the intersection of current prices with historical linear increases mainly tied to the average inflation rate has been reached.

In 2010 the banks were ramping up foreclosures. Inventory was never higher. Then something happened. Robo-signing was exposed. The foreclosures were then frozen for two years. We just had a settlement and part of that was for the banks to try and refi or do short sales. Foreclosures are still mostly frozen. The low inventory we have now is all due to stalling, not because of some organic growth or market recovery. Sure, flippers who are fast can take advantage of the manipulation. But those who are chasing the market higher because they think this is the bottom, they will get hurt. The shadow inventory is not the homes the banks have already foreclosed on. It is the homes they refused to foreclose on the last few years. The people living in those homes without paying their prop taxes, mortgage, hoa and insurance will be kicked out one day. They have been living free for years, but if the banks really think the bottom has been reached they will stop stalling and foreclose, taking their new profits....

Bulls, Bears, and Ducks.

Goran_K says

you probably would lie about your personal stories as well

What took you so long to come that conclusion?

http://blog.cleveland.com/metro/2009/07/bank_walkaways_from_foreclosed.html

Call it Crazy says

Interesting article...

I gotta confess, I sometimes think things are a lot worse than anyone really wants to admit. It reminds me of that point in the grief cycle in end-of-life situations where the soon-to-be-bereft experience something like denial mixed with optimism. "He could still pull through!"

JodyChunder says

http://blog.cleveland.com/metro/2009/07/bank_walkaways_from_foreclosed.html

Bad link?

Works fine.

Bulls, Bears, Ducks, and Martians. Or is that a frog with big eyes? I can't tell.

I don't understand the point of arguing with a landlord about RE investment. I figure if a landlord didn't know anything about RE investment, he'd have been out of business a long time ago.

freak80 says

I don't understand the point of arguing with a landlord about RE investment. I figure if a landlord didn't know anything about RE investment, he'd have been out of business a long time ago.

There are a lot of amateur landlords out there. No doubt a lot of them will be out of business in the future.

APOCALYPSEFUCK is Shostakovich says

No one will real own up to how fuct things are until they realize they're reloading the fifth time in a single morning and that some of the fallen on the lawn are being eaten by the starving.

Please write a screenplay and get a movie made. Please. I want to watch it.

FunTime says

Please write a screenplay and get a movie made. Please. I want to watch it.

What about the movie Mad Max?

Goran_K says

Like I said to SF_Ace, do the numbers.

Are you using one of the calculators or using other calculations to come to your conclusion? Show them here. People here are better than me at coming to a quick understanding based on a few calculations and I'd appreciate seeing this math outright.

freak80 says

What about the movie Mad Max?

Really enjoy the whole series, but enjoying the more "zombie-movie-like" feel of AFIS' holed-up in a house keeping out the competition during the chaos state caused by national economic destruction apocalypse narrative.

Mad Max doens't have enough people, so more like 28 Days Later but driven by economics. Way scarier.

FunTime says

Goran_K says

Like I said to SF_Ace, do the numbers.

Are you using one of the calculators or using other calculations to come to your conclusion? Show them here. People here are better than me at coming to a quick understanding based on a few calculations and I'd appreciate seeing this math outright.

Goran_K: If this were a straight buy/rent comparison, would you rather rent for ~1850 or buy for 208k?

--

Let's do the math then..

208k / 20% down / @ 5.5% =
PI = 944
TI = 300
1244 / mo.

I'll leave out expenses and maintenance because I'm sure somebody will have a anecdotal story about how the roof caved it once and the landlord was screwed. One can fill in their own numbers there.

According to this 2010 thread 1900 doesn't seem unreasonable, 1850 would probably get it rented immediately to a good tenant. I'm guessing a rent increase in 2012 isn't out of the question.

http://64.142.97.50/?p=364226

If you consider a refi @ 4% that would drop PI by $150/mo and instead of growing principal by ~$2400/yr in the first few years of the loan it would grow at ~$3100/yr in the first few years.

Realtors Are Filthy Liars says

Why do people have to lie about housing?

Because Realtors are Liars. ;-)

freak80 says

Because Realtors are Liars. ;-)

Indeed. ;)

Why do anonymous cowards get upset when no one takes them seriously? If you want to have an honest debate then grow a pair and be willing to stand behind your opinions, statements and comments. Patrick does, as do all the most credible contributors.

Randy H says

Why do anonymous cowards get upset when no one takes them seriously? If you want to have an honest debate then grow a pair and be willing to stand behind your opinions, statements and comments. Patrick does, as do all the most credible contributors.

Reticulating Splines

Realtors have always been cowards.

Goran_K says

I think you're underestimating the home insurance, and tax part of the equations (I get closer to $1450 out of pocket), but even with your numbers, the margins aren't great.

According to the Contra County website, the tax total for 2010 was $2715.68 for that property or $226/mo. I don't know how much you think insurance is, but $900/yr for a 200k property is more than adequate.

That bring us back to $1244/mo for mandatory expenses. Doable at $1500/mo? Tight but possible, but how about @ 1900? Money-making machine.

You still didn't answer my question. Would you rather buy or rent the place if it were 1800 vs 209k?

You still didn't answer my question. W

Massive Housing Inventory says

Realtors have always been cowards.

...says the ironically anonymous coward. I'm no realtor lover; but I despise hypocrisy even worse. But thank goodness for "ignore".

zesta says

Let's do the math then..

208k / 20% down / @ 5.5% =
PI = 944
TI = 300
1244 / mo.

Let's run the math again with 4.25% for a 30-year fixed investment property, or a 7/1 ARM at 3.125% interest rate. :)

I used to come to this site for the information, now I just stay for the comedy.

robertoaribas says

As far as the renovation costs, I consider that part of my acquisition costs, NOT an ongoing expense.

What does it matter if it's "acquisition" cost? It's cash you invested into the property that counts against any profit you make from it which was my point. Any money you put into the house, whatever you choose to term the cost, you need to recoup before you can say your rental is profitable.

If your PITI is $2,000, and you collect $2,300 rent, but you spent $50,000 in renovations, it's ridiculous to say "Hey I'm profitable on this rental", because that completely ignores the fact that you put $50,000 into renovating the property to get it up to snuff.

I'm not sure what you consider foolish about that viewpoint.

Typically, budgeting 5% for vacancy is sufficient and $175/mo maintenance is high, but from previous threads I know that's going to be an argument nobody is going to win.

Did you consider in the principal that the owner accrues every year as well? ~2.5k/yr@5.5%
~3.5k/yr@4.5?
Growing much larger as time goes on!

How about the tax deductions, especially if the owner has an AGI of less than 150k?

There's a reason why you'd be buying if the buy rent ratio was $1800/208k, and I think it's still a buy if the rent ratio was $1500/210k. The same reason you'd prefer to buy vs rent is the same reason a investor wants to buy it and rent it out to you.

Re: Acquisition costs
How do you calculate ROI for this property...

Let's say it makes $500/mo or 6k/year after everything. Down payment was 41k and 9k was for renovation

Annual ROI = 6/50 = 12% ROI, not including accrued principal. Not too bad?

E-man says

zesta says

Let's do the math then..

208k / 20% down / @ 5.5% =

PI = 944

TI = 300

1244 / mo.

Let's run the math again with 4.25% for a 30-year fixed investment property, or a 7/1 ARM at 3.125% interest rate. :)

Learn from your victory. Prosper from your failure.

In Goran_K's world we're not allowed to refi. Not sure why, but it was one of his stipulations early on.

Goran,

Haven't you noticed that a lot of the space on this blog is on boasting about "how smart and savvy am I"?

Do you really wanna spend time to argue on details about it? Even if you "win" an argument like that, you lost because you lost ("wasted") your time doing so.

I started this thread to simply point out that for the first time in a long time, it seems that RE prices are moving higher rather than lower. Most are simply not convinced that this is yet a trend and rightfully so. But for market watchers and those wishing to catch the bottom this may be the news they are waiting for. Is this a false bump up and not a trend? Who knows, only time will tell. But for many, they are already making profits. Prices are down ~33%, depending on the local market from the highs in 2007. This may be all the 'discount' that may be forthcoming. As a point of reference, if something is marked 1/3 off, I generally feel that it is a fair purchase price. Granted, even a Prada, Chanel or Gucci bag/shoes marked 1/3 off may still be considered wildly expensive by many, however, for many who value these brands over a Walmart purse or shoes, this may be considered a great bargain. It simply depends on what you consider value and your point of reference. Sometimes there is no right or wrong answer, simply a person choice based upon your individual circumstances and personal values.

For full disclosure, I would always prefer buying a pair of Prada shoes that cost 500-700/pair over 10 pairs of Walmart shoes that cost 50-70/pair. Why? I get to enjoy the awesome design and value of a great pair of shoes that treat my feet and head well. The value comes to me from these two factors not to mention that I have many Prada shoes that I am still wearing after 10 years. Try doing that with a pair of cheap Walmart shoes. Possible I am sure but highly unlikely.

B.A.C.A.H. says

Goran,

Haven't you noticed that a lot of the space on this blog is on boasting about "how smart and savvy am I"?

Do you really wanna spend time to argue on details about it? Even if you "win" an argument like that, you lost because you lost ("wasted") your time doing so.

I think you're right.

When people think a $210,000 home as a rental property is a money making machine at $1,500 a month, and "$50,000 in renovations is just acquisition cost", it sort of shows that speculation has fueled this latest "housing rally". I think it's time to exit stage left and let the "smart investors" clean up, so to speak.

Goran seems to have a bit of trouble understanding how the cash flow equation works. We don't have all of azrob's variables, but it's easy to see how this investment could be NPV positive. So long as NPV > 0, then it is by definition a "money making machine". How much of one is the only real question.

Randy H says

Goran seems to have a bit of trouble understanding

Could be.

But we don't have a bit of trouble understanding that some people get off on boasting about themselves and their savvy accomplishments in a public forum.

Like for instance, you spared us all the gory details about how you are so much smarter and savvy than others from your Marin County Conquest.

B.A.C.A.H. says

But we don't have a bit of trouble understanding that some people get off on boasting about themselves and their savvy accomplishments in a public forum.

Exactly.

I think when people start threads about how profitable and accomplished they are, it usually indicates the exact opposite (as proven by this thread discussion).

Goran_K says

when people start threads about how profitable and accomplished they are, it usually indicates the exact opposite.

Maybe.

But I might be reading too much into it to think so.

Generally though I don't think I am reading too much into it or into anything about when we hear/read blowhards bragging up a storm, especially when they then belittle others while doing it.

We can probably think of all kinds of reasons behind that kind of behavior, but I sure cannot think of "good" reasons for it. Can you?

B.A.C.A.H. says

We can probably think of all kinds of reasons behind that kind of behavior, but I sure cannot think of "good" reasons for it. Can you?

"I didn't have any friends through high school, and college. I was dumped by the only girl I ever loved. Now my only solstice is my loyal, and friendly retriever, and my real estate empire. She will regret it all, they will all regret it, I just want to see the world burn."

robertoaribas says

pathetic turd ... liar ... jealousy ... personal attacks ... braggarts or social dysfuncionals...

.. it is a bs .. someone too stupid.. ... liars... ...ASSHOLE!

If you say so, doctor professor.