patrick.net

anon_e09d2 says

Logan Mohtashami says

Whatever net equity you create that is even better as that goes into the forced saving thesis.

I bought my million dollar shaq in bay area in 2009. Now its worth $2M. I have a loan of $420K remaining on the property (it would have been lower if the bitch didn't ditch me and cash out her share of equity in the house) and my mortgage is around $2500 per month, out of which around $1500 is interest. So I figure my real cost of staying in the house is $1500 (mortgage interest) + $1000 (property tax) = $2500 per month. After cashing out all the equity in the house, my ex-bitch is now paying $3600 per month in rent compared to my $2,500. I already feel like I am one up on the bitch. If I rent out the house, I will get $5300 per month in rent or around $1500 profit every month.

Did you buy that house by yourself and let the bitch onto the title? Don't do that again, if you are the primary buyer, only you are on the title. Period.

ja says

anon_eba5e says

I’m an old timer from this site’s past.

Roberto,

Did you calculate if this investment would still be possible in Nevada? Or whether it would have been possible in a big city at all?

I"d be careful believing anything that is said on the interwebs. And today you should be doubly careful when buying for investment purposes, the ROI simply isn't much there anymore and the possibility of quite some depreciation is real. The 2008 crisis and the following QE bonanza was an anomaly for the market. Phoenix and Las Vegas areas WERE cheap though following the crash.

Logan Mohtashami says

Be mindful with housing that real home prices national are not back to 2006 levels here in the U.S. and interest rates are 2% - 2.75% lower in this cycle duration period which lasting a long time.

Channel out 10 year yield peaks in 2000 and 2006 & 2007 and we haven't even come close to breaking over the 3% 10 year yield data and even with more PMI data on fire our 10 year yield is still sticking in it's big cycle channel between 1.56% - 2.62%

2 year yield is up over 2% and we can easily see an inversion this year with any market pull back and drop in oil prices

I see the possibility of a drop in housing prices if rates rise significantly, but will they, that is the question. Not enough rumbles in the bond/rate market yet.

anon_eba5e says

I’m an old timer from this site’s past.

I have 16 homes in Phoenix, bought 2009-2012.

I collect $24000 a month in rent, and pay $9800 in mortgages, of which $2400 is principle. Of course, I average another couple k in repairs.

I’ve retired, and now live in Nevada.
If buying homes doesn’t work Out as an investment, you did it wrong.

Roberto! Long time no see!

Coastal communities prices will remain unchanged or go up slightly.
The government won’t allow another drop in prices, and certainly won’t allow another bubble to burst. Don’t bet on the fundamentals when there’s enough owned money out there to skew any economic function.
That’s what I failed to see in 2010, when I should have bought a house. But I expected it to crater further as the recession deepened, and didn’t realize the above truth until a couple years later. By then I’d missed out on at least 20% housing price growth.

anon_eba5e says

I have 16 homes in Phoenix, bought 2009-2012.

I collect $24000 a month in rent, and pay $9800 in mortgages

16 tenants and 32-48 toilets? Oh my!

anon_eba5e says

I’m an old timer from this site’s past.

I have 16 homes in Phoenix, bought 2009-2012.

I collect $24000 a month in rent, and pay $9800 in mortgages, of which $2400 is principle. Of course, I average another couple k in repairs.

I’ve retired, and now live in Nevada.
If buying homes doesn’t work Out as an investment, you did it wrong.

Pretty good.
Diversifying to other cities would be reasonable.

Quigley says

Coastal communities prices will remain unchanged or go up slightly.
The government won’t allow another drop in prices, and certainly won’t allow another bubble to burst. Don’t bet on the fundamentals when there’s enough owned money out there to skew any economic function.
That’s what I failed to see in 2010, when I should have bought a house. But I expected it to crater further as the recession deepened, and didn’t realize the above truth until a couple years later. By then I’d missed out on at least 20% housing price growth.

The Recession ended in 2009

To answer a few questions and comments:

I’m in Reno now, have been here a year. The prices in Reno are too high to make sense to a value investor. Also, I see land that could be developed everywhere here, so I don’t really understand the Imbalance between supply and demand here. It seems builders could come in, and prices would drop, since it is a small market, and one builder could add thousands of homes here. I’m sick of hearing how it makes sense because Tesla, Tesla average salary is in the mid 40s, and Reno is not a rich town.

We are moving to Vegas in a couple months though. My wife didn’t like reno much, too small, too far to see our friends in Phoenix often, very small Chinese community, plus few and small Asian markets. I’m going to miss Lake Tahoe, and the fantastic hiking here, plus the best rock climbing gyms I’ve ever seen, but oh well, I can explore Death Valley in the winter, southern Utah in the summer from Vegas. In Vegas, obviously buying a house a few years ago would have worked out fantastic. Today, homes of I type I’d like in the part of town I’d want to live cost around 300k, rent for around 1500. Those numbers are reasonable if you want to buy and live there for years, but not terribly compelling as an investor. Rental inflation will probably make them work Out ok, but my last purchase in Phoenix was 1.5 years ago for $195k. Close to asu. It’s rented for 1500 now to a family, but after I remodel it, and get it vacant in summer, it will get 2000+ to spoiled pain in the ass college kids, which is my normal business model.

those saying diversify to another city, sure, which ones have compelling price/rent ratios, that would be nice to actually live in too? Preferably in a low or no tax state, since my college pension is taxed in the state I live in!

mell says

I see the possibility of a drop in housing prices if rates rise significantly, but will they, that is the question. Not enough rumbles in the bond/rate market yet.

I can't see the 10 year yield going above 3% and staying higher with any duration period this late in a cycle. Heck, I am looking for a inversion this year. The economist at Freddie Mac and I have this on going discussion on twitter on what rate level will impact home sales enough.

You need to see 5.875% 30 year plus to just get back to the pre crash base level... that would mean a 4% plus 10 year yield and you need to see it with duration as well.

So, it's hard to have a higher rate thesis in this cycle.

A more plausible argument going out for decades is that rates can in theory be higher in the next cycle even if the 10 year yield stays below 3% because unless we print out a 1.25% -2.25% 30 year fix rate in the next cycle, then the 36 year trend of 2% plus lower mortgage rates in a new cycle goes away. This in itself would mean real home prices become less affordable.

That is something to look at in the next cycle until then ... 1.60% -3% 10 year yield for this cycle... anything over 3% should be short lived compared to this long expansion already

anon_eba5e says

those saying diversify to another city, sure, which ones have compelling price/rent ratios, that would be nice to actually live in too? Preferably in a low or no tax state, since my college pension is taxed in the state I live in!

Roberto, how's the dog?

Goran, are you still in Carson Valley area? Do you still like it there?

It is not fair to compare extremely low risk investment of buying a house and really risk investment of buying individual stocks which can go down to 0. If risk and winning chance are ignored, why not mention buying lottery as well since that can pay out even more? If everyone makes instant millions in stocks why are people still buying houses and other types of investments?

True individual stocks can make one a millionaire quickly but how many will win that lottery? Don’t forget, for short term wins, for every millionaire made in the stock market, a lot of people need to lose money. Otherwise where does the money come from? Long term everyone can be a winner since companies make money and pay dividends but It is a zero sum game if we talk about get rich quick. Will you be the lucky few?

A fair comparison should use index performance of the stock market and in that case there is no way stocks can outperform housing due to leverage. When i put down 3.5% and borrow 96.5%, a 6% annual appreciation translates to 171% return. Refer to my thread “Brag about your RE investment” for how I turned $10K into $160K tax free by buying in 12-2012. Literally.

There is no index fund that provided that type of return.

FortWayne says

Housing had some nice appreciation in last 6 years, but so did everything else. From 2012 and on you could have put money into stock market and gotten all same gains as houses. Hell some stocks would have made you an instant millionnaire.

Only difference, is you can't borrow money to buy stocks. So some borrow money to buy houses, and hope to cash out on appreciation. Although most house purchases are still families.

anon_ee4d1 says

A fair comparison should use index performance of the stock market and in that case there is no way stocks can outperform housing due to leverage. When i put down 3.5% and borrow 96.5%, a 6% annual appreciation translates to 171% return.

Lol, a fair comparison would point out that leverage works both ways. Houses may not go to zero (except in Detroit) but your equity can easily go to zero, and then keep on digging a hole you may never be able to climb out of. Stocks don't do that. If they go to zero, that's the end of the damage. (Unless you buy on margin, generally a bad idea.)

When you put down 3.5% on a house, you're already 2.5% in the red because of the 6% commission, and then if the investment goes down, you're doubly screwed.

I'll stick with stocks for now, thank you very much. Money has been raining on me since Trump took office.

Even if he did that she would still received half of the equity gained during the marriage. Unless the house has been in an LLC with its own money that never took any money from the him or her or community funds during the entire marriage. Correct?

Need some expert divorce Laywer or victim to confirm or correct this.

mell says

anon_e09d2 says

Logan Mohtashami says

Whatever net equity you create that is even better as that goes into the forced saving thesis.

I bought my million dollar shaq in bay area in 2009. Now its worth $2M. I have a loan of $420K remaining on the property (it would have been lower if the bitch didn't ditch me and cash out her share of equity in the house) and my mortgage is around $2500 per month, out of which around $1500 is interest. So I figure my real cost of staying in the house is $1500 (mortgage interest) + $1000 (property tax) = $2500 per month. After cashing out all the equity in the house, my ex-bitch is now paying $3600 per month in rent compared to my $2,500. I already feel like I am one up on the bitch. If I rent out the house, I will get $5300 per month in rent or around $1500 profit every month.

Refer to my thread “Brag about your RE investments” for how I turned $10K into $160K tax free after buying in 2012 putting 3.5% down.

A fair comparison uses performance of index funds. Owning individual stocks is highly risky and the chance of becoming millionaire this way short term is very low because it is a zero sum game. For every millionaire made in the stock market, a lot of people need to lose money. Good luck with that odd.

FortWayne says

Housing had some nice appreciation in last 6 years, but so did everything else. From 2012 and on you could have put money into stock market and gotten all same gains as houses. Hell some stocks would have made you an instant millionnaire.

Only difference, is you can't borrow money to buy stocks. So some borrow money to buy houses, and hope to cash out on appreciation. Although most house purchases are still families.

A lot of people think we are in a housing bubble simply because median home prices are back to where they were 10 to 12 years ago. That's pretty silly. We are in a totally different scenario than in 2006.
We don't have the crazy loans anymore. We have loans that must meet excessively tight underwriting conditions.
We don't have principal balances going up anymore. We have principal balances declining, especially with the 15 year fixed.
We have a ton of equity in our homes. Lenders are best protected by the equity in homes.
We have a housing shortage almost everywhere. We did not build enough homes to serve a rising population in the last 10 years. It will take builders years just to catch up.
------
Bottom line. A change in the trend for home prices is not gonna happen. Cannot, will not, and won't.

anon_ee4d1 says

Even if he did that she would still received half of the equity gained during the marriage. Unless the house has been in an LLC with its own money that never took any money from the him or her or community funds during the entire marriage. Correct?

Need some expert divorce Laywer or victim to confirm or correct this.

mell says

anon_e09d2 says

Logan Mohtashami says

Whatever net equity you create that is even better as that goes into the forced saving thesis.

I bought my million dollar shaq in bay area in 2009. Now its worth $2M. I have a loan of $420K remaining on the property (it would have been lower if the bitch didn't ditch me and cash out her share of equity in the house) and my mortgage is around $2500 per month, out of which around $1500...

Yeah, half of the appreciation, but if she's on the title it's half the value which is significantly more.

rando says

(Unless you buy on margin, generally a bad idea.)

I thought so too, but on the long side it has actually made me good $$. It's like an 7%-8% credit card with current rates, and if you don't buy extremely risky stocks but those on a good growth path this extra leverage can be awesome.

Aren’t you over exaggerating the risk of housing going down further in 2012, in the middle of a frenzy bidding war, when institional investors are scooping up everything? Inventory is down to 3 months and all the signs were “in your face” and hard to miss. Housing is 100 Times more predictable than stocks and almost zero volatility. It goes up for years then goes down for years.

$160K already takes into account the negotiated 1.5% buyer agent fee. The equity is actually $170K as of today. I will use flat fee listing company to list for only $3K.

I have stocks too. What funds/stocks did you buy to get 1600% tax free from 2012-today?

rando says

anon_ee4d1 says

A fair comparison should use index performance of the stock market and in that case there is no way stocks can outperform housing due to leverage. When i put down 3.5% and borrow 96.5%, a 6% annual appreciation translates to 171% return.

Lol, a fair comparison would point out that leverage works both ways. Houses may not go to zero (except in Detroit) but your equity can easily go to zero, and then keep on digging a hole you may never be able to climb out of. Stocks don't do that. If they go to zero, that's the end of the damage. (Unless you buy on margin, generally a bad idea.)

When you put down 3.5% on a house, you're already 2.5% in the red because of the 6% commission, and then if the investment goes down, you're doubly screwed.

I'll stick with stocks for now, thank you very much. Money has been raining on me since Trump took office.

anon_ee4d1 says

For every millionaire made in the stock market, a lot of people need to lose money.

No, that's not true at all.

It's not a zero sum game. A stock can go up simply because the underlying company is creating value. No one loses if you buy it. Even if you sell and take a profit, the next guy does not necessarily lose anything either.

anon_ee4d1 says

Refer to my thread “Brag about your RE investments” for how I turned $10K into $160K tax free after buying in 2012 putting 3.5% down.

A fair comparison uses performance of index funds. Owning individual stocks is highly risky and the chance of becoming millionaire this way short term is very low because it is a zero sum game. For every millionaire made in the stock market, a lot of people need to lose money. Good luck with that odd.

FortWayne says

Housing had some nice appreciation in last 6 years, but so did everything else. From 2012 and on you could have put money into stock market and gotten all same gains as houses. Hell some stocks would have made you an instant millionnaire.

Only difference, is you can't borrow money to buy stocks. So some borrow money to buy houses, and hope to cash out on appreciation. Although most house purchases are still families.

I don't disagree. To me it's just that, different way of getting to the same goal. Some people can make money in real estate, others do better with stocks. Can't do everything well.

it is almost a zero sum game in the lucky scenario he mentioned. in 5 years, from 2012-2017, no company can make enough money to pay $1M dividend to every single investor. so if you sell and make $1M after 5 years, you mostly take money from other investors.

Patrick says

No, that's not true at all.

It's not a zero sum game. A stock can go up simply because the underlying company is creating value. No one loses if you buy it. Even if you sell and take a profit, the next guy does not necessarily lose anything either.

If you wish to compare housing to stocks, compare it as an income investment. I'm a value investor, that is why I bought homes in Phoenix after the crash. I purchased condos for $30K that, with $5K in improvements I immediately rented for $750. after expenses, I was making $5K - $6K in rental income. Today, that one is rented for $950, others for $1000. Stocks simply don't pay 15 to 20% dividends. However, as housing continues to soar, that may not be the case much longer!

People on this site mocked those purchases. I really don't know what price would have worked for the patrick.net bears back at that time;

I actually wish that prices hadn't gone up so much, though it did help me refinance out of all the higher interest debt, private borrowing, etc. that I did to buy all the homes. Today, I owe roughly $1 Million, with rates of 4.125 - 4.875% on all of it. However, if prices were lower, I have plenty of cash in the bank now, and I'd buy more. As it is, I don't see many compelling places to invest in, and I would actually like to 1031 exchange some of my homes into other ones. It's hard to find a good buy today!

@Goran_K Rocky passed away. He was still healthy when I moved to Reno, but started limping one day. The vet and I thought he'd torn/injured a tendon, because he had done a long hike in the crazy snow we had last winter, and jumping in and out of the snow holes was very strenuous. But, on an x-ray, it turned out to be bone cancer. I had the leg amputated to try to stop the spread. He bounced back, and within a couple days was his same happy dog self, but he couldn't walk too far without assistance from a harness with handles. I had to carry him alot, and trust me, climbing stairs etc. with a 90lb dog is no easy feat! In the spring, I started taking him to Lake Tahoe, and he could still swim like crazy, sometimes following my paddleboard on the lake for 20 or 30 minutes, before I'd pull him up on it to rest. I got him a cart, and took him for long "walks" rolling him around the river trail in Reno, Virginia lake park, etc. and other places. The rock gym at Basecamp in downntown Reno is dog friendly, so he hung out there alot too. He still really loved life. But, the cancer came back, and when I could see he was in pain and having trouble sleeping, I put him to sleep. That boy nearly made 13 years old, and climbed mountains, backpacked multi day trips literally right up to the end! He was even "ring dog" at my wedding, and walked down the aisle with the rings pinned to a doggie tuxedo, then sat down obediently for the rest of the service!

Strategist says

We don't have the crazy loans anymore. We have loans that must meet excessively tight underwriting conditions.
We don't have principal balances going up anymore. We have principal balances declining, especially with the 15 year fixed.
We have a ton of equity in our homes.

Any idea how many new home buyers are going 3.5% FHA for loans? One report says over 35% of new Millennial buyers are going this route. They're underwater the day they move in. Almost 25% of all home buyers are going 3.5% FHA. They have no equity or cushion, even if housing just drops 10%. Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.

The average down payment today is barely 10% across all purchasers. The days of 20% down are long gone.

That's not a healthy market.

anon_85c53 says

Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.

They're only stuck with it until they build 20% equity.

anon_85c53 says

Strategist says

We don't have the crazy loans anymore. We have loans that must meet excessively tight underwriting conditions.
We don't have principal balances going up anymore. We have principal balances declining, especially with the 15 year fixed.
We have a ton of equity in our homes.

Any idea how many new home buyers are going 3.5% FHA for loans? One report says over 35% of new Millennial buyers are going this route. They're underwater the day they move in. Almost 25% of all home buyers are going 3.5% FHA. They have no equity or cushion, even if housing just drops 10%. Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.

The average down payment today is barely 10% across all purchasers. The days of 20% down are long gone.

That's not a healthy market.

With a 3.5% down, I agree you are starting out at a negative equity for all practical purposes. These low down payment homes have always been there, but the big crash happened after 75 years. They are not the primary cause of defaults. They go through full documentation unlike the 1% loans we had with no qualifying, which caused the the housing collapse.

HappyGilmore says

anon_85c53 says

Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.

They're only stuck with it until they build 20% equity.

Pretty sure it's the life of the loan now. Not sure if this site is reputable, but it changed in 2013: https://themortgagereports.com/7570/fha-mip-cancel
Loans prior to that year you can, but it was 78% LTV and minimum of 5 years with the loan. So even if prices skyrocketed, you're stuck with it for 5 years regardless.

anon_85c53 says

Any idea how many new home buyers are going 3.5% FHA for loans? One report says over 35% of new Millennial buyers are going this route. They're underwater the day they move in. Almost 25% of all home buyers are going 3.5% FHA. They have no equity or cushion, even if housing just drops 10%. Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.

The average down payment today is barely 10% across all purchasers. The days of 20% down are long gone.

That's not a healthy market.

There's still MIP on under 20% down loans, but I haven't seen a buyer with an FHA loan in close to 2 years on about 40 sales in Chicagoland. It's a total sellers market in most places and there's no need for a seller to fuck around with an FHA buyer. The primary residence buyers right now are the healthiest financially I've seen. I'm hard pressed to find evidence of a coming decline in my area. Not impossible, but it wouldn't be due to the previous causes of our last housing bubble.

HappyGilmore says

anon_85c53 says

Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.

They're only stuck with it until they build 20% equity.

Wrong, new FHA loans have MIP for the life of the loan, unless they refinance elsewhere.

"In January 2013, the FHA announced it would require most borrowers to continue paying annual premiums for the life of their mortgage loan. In 2001, the FHA cancelled required MIP on loans when the outstanding principal balance reached 78% of the original principal balance.
https://www.housingwire.com/articles/36272-get-used-to-the-fha-mortgage-insurance-life-of-the-loan-premium

Strategist says

They are not the primary cause of defaults. They go through full documentation unlike the 1% loans we had with no qualifying, which caused the the housing collapse.

They weren't the primary cause before, because of liar loans.

But today, with first time home buyers going that route, with 43% DTI qualifying, they might look good at loan closing, but any hiccup in jobs/income or having their first kid can put them in financial distress.

Remember, over 2/3rds of the population live paycheck to paycheck.

anon_ceed8 says

EconPete says

anon_d1db0 says

I am assuming from your comment you did not buy?

Property taxes are more than my rent, why would I buy. Plus interest from cd's pays the rent.....

Ok then - if that's true then what is your long term plan - rent forever?

It's never the plan but it is the trap many of us fall into. In my case I could have bought in 04 but I thought the prices were "unsustainable" and would come down in "2-3 years". Boy was I wrong...

Suddenly, 2-3 years became a decade and by the end my rent was suffocating. Rather than being continually squeezed to death by rents, I did buy in 2015 but at prices close to what I could have paid a decade earlier.

While I'm happy I bought, in hindsight I really regret not buying a decade earlier when I had the chance. It was short sighted and somewhat ego driven as I told everyone I knew that peninsula prices "would crater" and I didn't want to be proven wrong.

anon_09ed8 says

Wrong, new FHA loans have MIP for the life of the loan, unless they refinance elsewhere.

Who wouldn't refinance after you get to 20%?

HappyGilmore says

anon_09ed8 says

Wrong, new FHA loans have MIP for the life of the loan, unless they refinance elsewhere.

Who wouldn't refinance after you get to 20%?

Ones with crappy credit, living paycheck to paycheck, or don't have money for new closing costs.

anon_10ddb says

Ones with crappy credit, living paycheck to paycheck, or don't have money for new closing costs.

You can roll the closing costs into the loan value or opt for a slightly higher rate. I guess if your credit has taken a turn for the worse since you bought it, but I would think that's a small minority. With inflation and principal paydown, the ratios for most people will look better after a few years.

anon_eba5e says

The rock gym at Basecamp in downntown Reno is dog friendly,

Hoe do you like living in Reno Roberto? Can you describe why move there from Bay Area? And are you planing to come back eventually? Or Reno area is fantastic and your home forever?

anon_0128c says

Hoe do you like living in Reno Roberto? Can you describe why move there from Bay Area?

He didn't move there from Bay Area.

Satoshi_Nakamoto says

anon_0128c says

Hoe do you like living in Reno Roberto? Can you describe why move there from Bay Area?

He didn't move there from Bay Area.

I also believe he said he was moving to the Vegas area. Does this Anon not have the ability to read?

HappyGilmore says

You can roll the closing costs into the loan value or opt for a slightly higher rate.

Then what was gained by refinancing and eliminating PMI if you're going to add more costs and a higher rate?

HappyGilmore says

I guess if your credit has taken a turn for the worse since you bought it, but I would think that's a small minority. With inflation and principal paydown, the ratios for most people will look better after a few years.

If you only put down 3.5% originally on the FHA, it's going to take a lot more than a few years to get below 80% LTV.

rando says

Lol, a fair comparison would point out that leverage works both ways. Houses may not go to zero (except in Detroit) but your equity can easily go to zero, and then keep on digging a hole you may never be able to climb out of. Stocks don't do that. If they go to zero, that's the end of the damage. (Unless you buy on margin, generally a bad idea.)

YEs, but the overall expectation in a non-bubble market is that long term return of a house will exceed the cost of the lending. Same reason that short time rates for a savings accounts is less than a long term rate of a loan. Same reason than stock returns beat housing returns. I'd refinance my house to invest in SP500 for 30 years in a heart beat.

anon_e60ba says

Then what was gained by refinancing and eliminating PMI if you're going to add more costs and a higher rate?

It will obviously still be less than PMI

anon_e60ba says

If you only put down 3.5% originally on the FHA, it's going to take a lot more than a few years to get below 80% LTV.

Yep, most likely. But I didn't say that they'd be able to refinance in a few years, but rather that the ratios would look better in a short time. By the time they're ready to refinance, the ratios will probably look much better.