patrick.net

tatupu70 says

He can always walk away

He can certainly walk away, but it s a debt. Is there recourse, or no recourse?

tatupu70 says

but it's far from a certainty

Let me take this, and say I am certain that there will be defaults in Europe, or Ireland, or other forms of debt forgiveness.

Sounds good, right? However the price of these leveraged asset will fall, further.

That debt PockyClipsNow has will be a liability to whoever has the paper, and he's just one person.

So it's not the price of the property that concerns me it's the value of the commercial paper, and who will want it, or want to trade in it. Once you take out the common investor, once you take out the banks, you are left with large commercial investors who will clamp up the mortgage market until they can be made whole.

Fewer mortgages, smaller buyer pool.

tatupu70 says

so he'll never lose more than the $175K

There is a great investment strategy. Lose 175K. Never in my lifetime will that ever be an issue for me. Hence why I am still gladly a renter in the BA, but a buyer in many other places (i.e. NOT phoenix)

RentingForHalfTheCost says

There is a great investment strategy. Lose 175K. Never in my lifetime will that ever be an issue for me. Hence why I am still gladly a renter in the BA, but a buyer in many other places (i.e. NOT phoenix)

If you invest in the stock market then it's an issue for you. Every investment comes with risk.

Also don't forget that 100% of your rent payments go down the toilet.

Home Fart says

Also don't forget that 100% of your rent payments go down the toilet.

I never have gotten this argument about renting. If housing is a place to live, and if every one has to live some place, then the renter is getting everything they are paying for.

The person with the mortgage carries the risk, which I guess, according to tatupu, is what makes housing an investment.

David Losh says

The person with the mortgage carries the risk, which I guess, according to tatupu, is what makes housing an investment

Correct--carries the risk and is entitled to the rewards.

Home Fart says

Also don't forget that 100% of your rent payments go down the toilet.

Also don't forget that mortgage interest payment+property taxes - the deduction go down the toilet too. Hell,the principal part of payment goes down the toilet too if the property is very pricey and if there no appreciation. You'd be lucky if there is no depreciation cuz if it does it is double whammy - worst case scenario,underwater mortgage. So try that argument somewhere,not on a housing bear forum.

tatupu70 says

RentingForHalfTheCost says

There is a great investment strategy. Lose 175K. Never in my lifetime will that ever be an issue for me. Hence why I am still gladly a renter in the BA, but a buyer in many other places (i.e. NOT phoenix)

If you invest in the stock market then it's an issue for you. Every investment comes with risk.

I employ a strategy of capital preservation and take on risk that I understand. I have yet to lose any capital in 20 years of investing. Although, I don't chase after 20-40% returns either. 7-8% has been absolutely fine form me. You can get that easily with some dividend kings and selling calls.

David Losh says

Home Fart says

Also don't forget that 100% of your rent payments go down the toilet.

I never have gotten this argument about renting. If housing is a place to live, and if every one has to live some place, then the renter is getting everything they are paying for.

The person with the mortgage carries the risk, which I guess, according to tatupu, is what makes housing an investment.

Couldn't agree more, and I think everyone would see it this way if they didn't have skin in the game.

tatupu70 says

David Losh says

The person with the mortgage carries the risk, which I guess, according to tatupu, is what makes housing an investment

Correct--carries the risk and is entitled to the rewards.

asset depreciation is no reward.

RentingForHalfTheCost says

I have yet to lose any capital in 20 years of investing.

OK--whatever you say Warren.

RentingForHalfTheCost says

asset depreciation is no reward.

Agreed. Asset appreciation is.

bubblesitter says

Home Fart says

Also don't forget that 100% of your rent payments go down the toilet.

Also don't forget that mortgage interest payment+property taxes - the deduction go down the toilet too.

As Patrick has said before, you either rent the house or rent the money (mortgage). Mortgage ain't too effective at stopping the toilet flush sounds if you move every 7 years or refi every time interest rates tick down another .01 percent.

Philistine says

Mortgage ain't too effective at stopping the toilet flush sounds if you move every 7 years

Most(naive) buyers assume that rent is wasting money and mortgage payment is not. Hell, on a 30 year mortgage it takes beyond 7 years to break even....compared to renting. No wonder,America is falling behind in Math as compared to other countries.

robertoaribas says

BUT,

BUT, Roberto, you realize that Phoenix != USA and USA != Phoenix.

My turn to brag.

I made so much money this year I have to pay taxes out of pocket.

My heloc interest is just over $1,000, plus the property taxes does not exceed the standard deduction (Yes, I filed for extension)

I'm not going to buy crap I don't like or where I think it is not a good ... dare I say 'investment'. How about, where I can't loose my shirt on the deal.

robertoaribas says

the permabears here just can't understand that simple fact!

I'm a bear in this market, and have been since the tax credit. Nothing good will come from that. Then there is QE 1, 2, and now 3 that are giving us, and speculators these historically low interest rates.

It's not just housing that is propped up. It's all commodities, and the stock market that is buoyed by paper profits.

That bring me to....

robertoaribas says

Historically, in a normal market

We don't have a normal market. We have a weird marke that is volitile on all fronts.

David Losh says

I'm a bear in this market, and have been since the tax credit. Nothing good will come from that. Then there is QE 1, 2, and now 3 that are giving us, and speculators these historically low interest rates.

So you have been a bear since 2009 - how's it working out for ya?

Since you are so convinced I am assuming you have shorted homebuilder stocks, bank stocks, real estate stocks. Right? And how much money have you made being a bear?

:)

In the meantime, you have spend 4 years of rent and pumped it down the drain.

So in essence, if you add up those 4 years of rent then you know how much you have lost on that deal.

Darrell In Phoenix says

Less than losing 4 years of inflated principal, interest, taxes and insurance on a rapidly depreciating house.

If I rented my house for $2700.- (I am using a low number) - then 4 years of rent are $130k...

my house has not lost 130k of principal - but based on actual sales in my neighborhood my house is up in price.

Sorry Darrell. You just have to do the math. It's not that hard.

and btw,...

my hownowners insurance = $1000.-/y

when we rented our renters insurance for the house was $950.- /y

--

interest and prop tax is a deduction, while rent isn't. In our case it works out that the break we get on our taxes covers 95% of prop tax costs.

So at this point we are paying 300/month less than when we rented for a much bigger house in a much nicer neighborhood.

Like I said before, even if this house is worth $0. Does not matter to me. I am living in it. And I can always rent it out for more than what I pay monthly. And thats frozen in for 30 years. I am not planning on selling this house ever.

Darrell In Phoenix says

Dump it while you can still get something out of it.

...we just bought it almost 2 years ago - duh! - best move so far.

Darrell In Phoenix says

Sure it does. You wouldn't invoke "it doesn't matter to me" if it didn't.

what kind of logic is that?

SubOink says

So you have been a bear since 2009 - how's it working out for ya?

Actually it is working great. Our company provides services to the Real Estate agents in our area, so I'm very familiar with what the market is doing.

All my budies laughed at me about my quiting the business until last year when it was clear I was adding business while they tread water.

We have 20% growth and are on track to that again this year.

We've expanded, and have hardly scratched the surface of what we can do. Contractors who worked with us in the past are struggling, and we have added one person each of the past two years.

We have trucks that haven't moved since 2008 that we will put back in service next year.

Our growth is slow, but steady, and yes we could have maxed out our capacity within the past year, but we are making money, and I have time to sit here with you.

Good to hear your business is up but how would that be different if you bought a house in 2009/10/11?

Darrell In Phoenix says

"homes"?

You're pathetic.

Darrell is such a hater, it makes me laugh every time. No pun. It's just funny how you go against everything by principle. I'd love to know your story.

SubOink says

how would that be different if you bought a house in 2009/10/11?

Number one is that the cash out lay; for me t's next to nothing. I compare that to people who have done two, or four flips in the Seattle area to net $150K.

The margins are tight, and the cash flow is low.

My potential on the other hand is a matter of adding more employees. My cost is fixed, but the more people I add the higher my income.

When I say my cost is fixed I mean the taxes, and insurance per employees who is producing income. No income, the employee goes, along with that cost.

I'm saying that my risk is also high, it is challenging, but compared to going to the auctions which are dismal, and in my opinion way over priced, having sub contractors, and dealing with renters, it's kind of a wash.

The difference is I have more potential than my buddies. They see it while telling me they will be building additional housing units. Here in Seattle we have A Pod Ments which are small, and cheap, for the working single, and three bedroom apartments being built by the thousands. There are big money players in our town, how about yours?

I'll take my end; cash paid at the time of service.

David, are you renting?

Darrell In Phoenix says

And you're no better my underwater debtor.

other than not being underwater..

Darrell In Phoenix says

You're deep underwater and either don't know it or can't admit it. Don't fear it though. You're one of tens of millions of underwater debtors.

Just refied my loan to an even lower rate. hm...somehow nobody informed me of me being deep underwater. I am calling them now. Outrageous! Can you believe it - they refinance my loan and don't bother to tell me that I am deep underwater?? If it wasn't for you, I wouldn't even know it.

Man, thanks so much. You really know your stuff. No, really. Thanks for letting me know...

(ZOINK)

Darrell In Phoenix says

SubOink says

Just refied my loan to an even lower rate.

And you're still underwater... and sinking.

and you are still dreaming...deeper and deeper

SubOink says

David, are you renting?

No, I kept the family home, and maxed it with debt.

The interesting part is that I expected to be inflated out of the debt, which didn't happen, so I have to increase my income.

My income has been much easier to increase than if I was renting out my properties.

Do the math on what I'm saying. Even the most savvy investors who have portfolios going back to the 1970s are looking at me sideways, but not laughing.

If you really want to go into the depth of Real Estate Investing you now know that to increase your income you have to take on more debt. Saving the cash, at todays pricing would take too long.

The game is rigged.

Darrell In Phoenix says

And your losses grow by the month.

Yes! by the day! by the second!

just had a lightbulb moment - Darrell , are you really in Phoenix?

SubOink says

just had a lightbulb moment - Darrell , are you really in Phoenix?

You're a little bit late to that particular party.

Bigsby says

SubOink says

just had a lightbulb moment - Darrell , are you really in Phoenix?

You're a little bit late to that particular party.

Lol. It was a joke, duh!

It just explains his views...he's got no clue how the LA market is. That's why he thinks a 2500 sqft home rents for $1300/month. That's Phoenix prices. Not LA prices.

SubOink says

Bigsby says

SubOink says

just had a lightbulb moment - Darrell , are you really in Phoenix?

You're a little bit late to that particular party.

Lol. It was a joke, duh!

It just explains his views...he's got no clue how the LA market is. That's why he thinks a 2500 sqft home rents for $1300/month. That's Phoenix prices. Not LA prices.

You've lost me. He says he lives in Phoenix so that he can wind up Roberto. Who knows where he really lives? The empty wasteland of his own mind probably.

Darrell In Phoenix says

We know you're lost... lost in a sea of misrepresentations and lies.

Says Mr. Multiple Trolling Personalities.

Let’s see if I can do this without making a complete hash of things..apologies in advance if I do.

===========

Price: 875k
$ Financed: 700k

============

Meaning your paid $175,000 down, or 20% of the sale price, presumably to avoid mortgage insurance. I think I got that part. And I’m also presuming you incurred zero other expenses upon the purchase. Is that a fair statement? In other words, you either used the bank’s attorney or represented yourself, were able to stick the seller with everything from the cost of your credit report to every filing fee to every fedex delivery to I guess even the home inspection fee, presuming you had one done. Sound about right? Since this is a “real-life” example, I’m assuming all relevant facts were presented. Whereas in a typical house purchase the buyer’s side of the closing costs can run from 1% to (so I’ve been told) 3%. But not for you. I’d like to hear the “real-life” way you scooted around all that, personally.

===============
Loan: 5/1 Interest Only ARM at 2.875 with .25 points (union bank)
Payment: 1677
===============

So here’s my problem with your math: Something in the above is wrong, presuming all you did was put down a 20% down payment and do nothing else. To get to a $1,677 payment you have to ignore the .25 points. Both as part of the downpayment AND as part of the monthly payment.

Monthly: ( 0.02875/12 = 0.002396) * 700,000 = 1,677 (rounded). No .25% points there.

Downpayment: $875,000 * .20 = $175,000, what you said you paid, and what you would have needed to pay to avoid mortgage insurance. No .25% points there, either, else your downpayment would’ve been too small.

So, somewhere along the way 700,000 *.0025 or $1,750 fell of the table. Where’d it go? It is not in what you’re claiming as a monthly payment, and it is not stated as being included in any closing costs, which apparently were zero on your end, other than the 20% downpayment.

=============
Prop tax: 912
total: 2588
(im in 28% effective tax bracket so 2588 * .72 = 1863 'after tax write off payment')
Add fire ins of 129 per month and total pmt after tax write off = $1992
========

And here’s my second problem, not a math one necessarily, more revolving around logic: Are you saying you have no homeowner’s insurance? And that your mortgage was written in such a way to permit this? Or, is what you’re calling “fire insurance” of $129/month actually a homeowner’s policy? In that case, you’re getting the deal of a lifetime, since a property worth $875,000 is only costing you $1,548/yr to insure. I’d guesstimate a number double that, quite frankly, maybe more if you’re required to insure 125% of replacement value. So, neither scenario seems credible in my eyes, but perhaps you can offer an explanation.

And I’m a bit surprised that you included nothing at all for routine repairs and maintenance. No lawn to mow, no air conditioning to break down, etc? Any reason in particular you feel your lawn isn’t going to grow and nothing is going to break down over the next five years? In that case, I’d like to know the brand of grass seed you’re using AND the Uber-builder who has apparently constructed an invulnerable house.

Oh, yeah. Apropos of nothing, is your mortgage considered Jumbo or Conforming? In a sane society it would be Jumbo, of course. But I guess in certain parts of the country you would come in as conforming. And I’m guessing you’re conforming, FWIW, given the interest rate you’ve gotten. But I’d be curious to see if I’ve guessed right.

Thanks in advance.

EPD

Darrell In Phoenix says

We know you're lost... lost in a sea of misrepresentations and lies.

If you own property, sell it, if you want to buy, buy for what you would pay in cash.

Buy what you can afford to pay off within seven years, but don't tell the bank your intention.

The truth is out there, but I don't think you are listening.

The bank is always the enemy, be done with them as quick as you can.