patrick.net

Show me on my calculator:

http://patrick.net/calculator.php

Sounds too optimistic.

calculator says actual property value is 1.6m
and 'ok to buy'. not sure what intrest rates you put on that link.
one large factor is that I AM NOT MAKING PRINCIPAL PAYMENTS which I believe are for chumps. That would add 1k a month to the payment and its not a tax write off. also zero HOA on this house (hoa is not a write off)

Also I believe getting a 30 year fixed at a higher rate (it would be liek 3.6% for me) is for chumps.

IO ARMS are the way to go since if rates rise or the payment adjusts up you can always get a loan mod - they are doing 2% intrest only loans with 100k principal reductions by the million right now. That is not likely to change. If I were more daring I would quit my job, get a low paying job, get a loan mod, then get a better paying job but that is too much ifs lined up for me.

bubblesitter says

Sounds too optimistic.

what is optimistic? I locked the loan in already.
the rent might be optimistic. who is paying 4k in rent? i guess people who own horses or want a 5 bedroom custom home with the big tits kitchen remodel.

"I AM NOT MAKING PRINCIPAL PAYMENTS.... IO ARMS are the way to go"

Zombie needs to eat more brains.

That does make them smarter right?

No? Oh well.

Principal payments in a loan are stupid for two reasons:

1. If prices tank and you walk away you lose DP+all principal payments made
2. Most people just get a heloc anyway after a number of years to buy a dumb car or send kids to school.
3. the principal payment will blow up your debt to income ratio which limits your acquistion of other loans/mortgages. (we are year one of the next up cycle of real estate, time to buy quality properties located well at a good price - if you can find them, not easy)
4.If you think you can pay off a gigantic 500k+ loan rotsa ruck buddy, i am relying on future price appreciation then selling to make money.

PockyClipsNow says

the rent might be optimistic.

Yes. That's what I mean...come on 4K continuous flow? I doubt it...

I also seriously doubt the $4K rent for an $875K place. Even around here you'd pay only $3K for that place.

Even at $4K it doesn't work though, unless you put in unrealistic appreciation assumptions, as bubble buyers are wont to do:

http://patrick.net/calculator.php?uaddr=%2C+&rent=4000&price=875000

Congrats Pocky. Sounds like a beautiful house. I'm jealous. :)

Bubble sitting is a tough game. My friend sold in 2002 to bubble sit and had a really hard time watching prices double when he was betting for a crash. Only this year did he buy back in..... at 2003 or 2004 prices. Basically a complete waste of 10 years unless he couuld 'save money' or get stock gains with his wad during that time.

Heres another intresting detail. There was a bidding war.

I won.

How? I used listing agent to represent me, other bidder had a paid chaeffuer who wanted 2.5% of the deal.

Also there is a granny flat attached with sep entrance, thus the 3800 to 4200 in rent estimate might be correct and its in the good schools(code word) area.

PockyClipsNow says

total pmt after tax write off = $1992

The total payment seems optimistic to me. What about maintenance? You mentioned fire insurance, but what about flood or earthquake insurance? Does the mortgage payment include mortgage insurance?

PockyClipsNow says

rates spike in 5 years I will simply pay off the loan, refi, or get a loan mod

If you have $700k parked safely with which to repay the loan, then that would be simple but you're paying 2% while 5-year Treasuries are below 1% so you're losing $ on the spread. If you don't have $700k parked safely, then you're risking a worrisome loss, especially if you need to refi at a higher rate. What happens if prices continue to fall and you can't refi at the same rate so you need to sell? Do you lose "only" your $175k down payment or does the lender have the right to go after your other assets?