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?

How far away from work is this property? The days of living out in the sticks with long commutes to and from work are over with.

Its way way closer to work. (that why its so much $)
Commute now is 30 to 60m now it will be 15 max.

Maintenance is a cost. Its been remodeled, so should be low.
Im not getting flood nor quake insurance. There is no mortgage insurance, i put 20% down.

Lender does not have right to go after other assets on purchase money loan in california. so max loss if the pocky clips happens is 175k + 3k in loan fees + all maintance. But it takes 2 years to foreclose so I could rent it at 4k per month for 2 years which is 96k in rents while I play the loan mod/pretend to short sale shuffle with the bank in that scenario.

Keep in mind the risk of renting is that prices will go up. (they just did, the bottom was in 2010 and 2011). We might revisit that bottom, but not in 2013 or 2014 there is simply no inventory.

man it gets old. all those vacants are out in BFE not near job centers.
I realize the inventory is artificially low, so are intrest rates. Nothing to be done about it.

Well you are welcome to rent my house or one like it for 4k a month!

PockyClipsNow says

Well you are welcome to rent my house or one like it for 4k a month!

Sorry bud, can't afford it. Can't afford to buy it either. But we can help you squat it. :)

War says

Don't be silly. There is excess inventory in Manhattan.

Dude, do your homework. You don't know what the hell you're talking about. There is excess inventory everywhere, not just Manhattan. Wake me up when excess inventory is down to 1M.

PockyClipsNow says

I hope this is a real world math lesson for some of the 'should I buy now' crowd. Its a tough decision.

Price: 875k
$ Financed: 700k

Pocky, where is this in LA, exactly? Not many hoods w/horse digs, and any of the decent areas in actual LA are $1.2+ for 5 beds. I take it your math is pivotal on the 5/1 ARM?