patrick.net

GNL says

There will be no housing bust. It's becoming more and more clear to me that America is moving toward 3rd world status

Yeah. Maybe.

But in that case if the high inflation continues and the house prices don't crash but "stay flat" then they sort of did crash by not keeping up with the inflation.

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Bitcoiner says

That’s freakin insane….3.7k for 2b/1b, 1Sqft
That’s Alpine….35min away from San Diego…

$3750 for a 2 bedroom, 1 bath that is 35 mins from San Diego ?

Wow, you can get the same condo or apartment as far as quality for around $1300 in Panama City Florida and only about 15 to 20 minutes from the beach.

.

San Diego is fucking expensive, moreso than other areas in CA by now. It has beautiful areas, but is overpriced.

B.A.C.A.H. says

GNL says

There will be no housing bust. It's becoming more and more clear to me that America is moving toward 3rd world status

Yeah. Maybe.

But in that case if the high inflation continues and the house prices don't crash but "stay flat" then they sort of did crash by not keeping up with the inflation.

Not gonna happen. Why? Muh inventory. Inventory will from this moment forward NEVER meet demand. Especially for middle and lower classes. They want to reduce consumption. They've been telling us this.

ad says

$3750 for a 2 bedroom, 1 bath that is 35 mins from San Diego ?

Wow, you can get the same condo or apartment as far as quality for around $1300 in Panama City Florida and only about 15 to 20 minutes from the beach.

They're not going to get it until they move out of CA. I actually don't have a beef with a user here currently, but people from CA see the world from their lens. It's not reality. It's their reality. My mom just sold 3 houses, 3 bed, 2.1 bath for $250k, on water that leads to Escambia Bay, to Pensacola Bay to the Gulf or you could do ICW. That would be $2-3M in CA.

They don't understand because the weather is so nice there, there's mountains, surfing, etc. They don't need to travel. They live in a bubble. Not digging at anyone, but housing is cheap as shit, including rentals in many parts of the country that are 100% acceptable places to live.

Not accounting for housing I would have lost $40k/yr moving to CA. Taxes out the gate. I had a spread sheet for it when we were contemplating it. Denver, CO was pure shit too. IL is shit, but I don't foresee us moving for a good 10-15 years. It's less shittier than other place financially which is surprising.

Bitcoiner says

home owners are protected from higher payments.

Lol! In you happen to live in CA, owner can be "protected" from property taxes and become (bigger) leach in the long run on ponzi scheme of CA 1978 Prop 13.

Blue says

Bitcoiner says

home owners are protected from higher payments.

Lol! In you happen to live in CA, owner can be "protected" from property taxes and become (bigger) leach in the long run on ponzi scheme of CA 1978 Prop 13.

How can we call Prop 13 a leech when it’s available for everyone the moment one becomes a property owner?

Look at all the CEOs who collect their paychecks through stock options so they only have to pay long term capital gains and avoid paying all kinds of taxes?

WookieMan says

The problem most don't understand is you literally owe nothing if debt was obtained without fraud. People have been trained that debt and leverage are bad because it could hurt your credit score. That's literally the only penalty as long as you didn't commit fraud by lying to get the loan and make sure your savings are in protected assets.

While a first mortgage normally has no collateral beyond the house itself, I believe if you refinance, then you are usually personally on the hook for the entire mortgage. So then the bank can go after your savings and checking accounts, etc, if you default.

Patrick says

So then the bank can go after your savings and checking accounts, etc, if you default.

Not going back to my comment, but I believe I said keep your assets in protected class investments. You should really never have more than $10k in a personal checking account and $10k in a savings. Once you stop paying go to cash, get a nice safe. NEVER borrow from the bank you have a checking or savings account even if you don't default. Have your 6 month safety net in cash so it's not traceable. Trusts are good as well for protection.

Also they cannot garnish wages. It's harder if you're into stock investment though. They can go after that. But you can still have fun with that in self directed IRA's. Remember too if it was on this thread, you're still going to short sale the property. You sign a document that releases you from all obligations of that loan. Amortization is a thing. The bank likely has no potential loss if you paid for 3-4 years. And they waive the right to come after you because they got most the money back.

Fact is lending is a business transaction. There's always a risk. Think of a restaurant. They make you food assuming you're going to pay. Well some people eat and drink and don't pay if service was bad or the food sucked. I've never done it, but it's perfectly legal. It's different law but kind of the same concept. Or think if you ordered a computer monitor and it was broken. Obviously first try for a refund or replacement, but you're not paying for it, that's for sure.

None of this is necessary though if you just don't over do you debt to income on a house. Our income is above our debt on our house. I'd never go above 3x's income to price on a purchase. You make $100k, a $300k property is the max you should go after. And as the price gets higher I'd cut that back to 2x's. With the 3x's rule I could afford a $1.3(ish) million dollar home. Hell no.

There are so many variables. The problem is education. 60-70% of people will own a home in their life. Guess who is teaching them about it? Realtors. Guess who taught the Realtors? Nobody besides a state licensing process an ape could guess its way through. Most realtors are not even college educated in anything worth while.

We need to fix education. No high school student should graduate without a real estate course and a banking/investment/credit type course. All the fluffy stuff should be extracurricular. Where I'm at FFA (Future Farmers of America) do all their shit outside the classroom. Same with 4H. It has to be in school though for this. No lobby is going to allow you to tell high schools what the real world is actually like though. They want you as blind consumers. It won't happen in our lifetime.

I'm not promoting defaulting. Just trying to educate people that it's not scary or bad. People kill themselves for defaulting on debt. Outside of mental illness, finances are probably the number 1 cause of suicides. It's just money and a score other humans just make up. I've had no money in the past and a lot now. I've seen my successful parents go bankrupt. Sometimes you have to just let go. The system allows you to say fuck it, I'm not paying. But you need to be prepared on how to handle it. High school and college doesn't teach you that. Never will....

Eric Holder says

Probably nobody. These rentals are probably sitting empty. I mean, look at that shit and its location.

My guess someone overpaid, and is trying to cover their exorbitant mortgage. Always a sure sign of a market on the decline. I watched rental prices for months before we got our house in Yuma. Made it really easy to tell long-time owners from those who over-paid.

NuttBoxer says

My guess someone overpaid, and is trying to cover their exorbitant mortgage. Always a sure sign of a market on the decline.

Too much Losing Face to say it like that.

Blue says

Lol! In you happen to live in CA, owner can be "protected" from property taxes and become (bigger) leach in the long run on ponzi scheme of CA 1978 Prop 13.

Blue,

do you live in California? Just asking.

On a tangent, but former Californian homeowners who sell and move to Texas do complain about property taxes and learn to protest them. Texas puts the "taxes" in Texas. You can't spell taxes without Texas :)

Basic economics, you can only charge what someone is willing to pay. Your market rental rate is determined by me(the consumer), not you. Properties that sit, sit for a reason. No one is willing to pay. That owner can spew market rates and charts out their ass all they want, they will lose money until they lower the price. That's what these rentals show. The chinks in the wishful thinking of the '06 crowd - "Rents will never drop again!!".

As your renters are squeezed more and more by inflation, lack of good jobs, what do you think they will do? The stupid ones will keep ponying up, taking side jobs, killing themselves to stay where they are. The smart ones will leave.

It's a lot easier to just know the values because you've been looking forever, than check the history of every rental. When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid. Because as you said, they don't want to take a loss on their "investment", so they pray for some sucker to bail them out. But the suckers are drying up fast, and the owners will be left holding the bag in the end.

NuttBoxer says

Basic economics, you can only charge what someone is willing to pay. Your market rental rate is determined by me(the consumer), not you. Properties that sit, sit for a reason. No one is willing to pay. That owner can spew market rates and charts out their ass all they want, they will lose money until they lower the price. That's what these rentals show. The chinks in the wishful thinking of the '06 crowd - "Rents will never drop again!!".

As your renters are squeezed mor (some text omitted to shorten quote...)
It's a lot easier to just know the values because you've been looking forever, than check the history of every rental. When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid. Because as you said, they don't want to take a loss on their "investment", so they pray for some sucker to bail them out. But the suckers are drying up fast, and the owners will be left holding the bag in the end.

I'd also think that they slow deterioration of society under xiden, widening of wealth gap will make renters more "destructive" and less reliable on payments, so being as landlord will become harder (has already, see moratoriums), unless you're a big corp.

https://www.calculatedriskblog.com/2023/05/update-framing-lumber-prices-down-57.html

Framing Lumber Prices Down 57% YoY, Below Pre-Pandemic Levels

https://www.homedepot.com/p/2-in-x-4-in-x-8-ft-Prime-Whitewood-Stud-058449/312528776
Shows $3.35 in my area.

It's going lower...https://www.nasdaq.com/market-activity/commodities/lbs

1337irr says

On a tangent, but former Californian homeowners who sell and move to Texas do complain about property taxes and learn to protest them. Texas puts the "taxes" in Texas. You can't spell taxes without Texas :)

No income tax. If you're a high income earner, Texas makes absolute sense. I'm not a fan myself and would never live there, but cost of living for upper middle class to wealthy beats the living shit out of CA. Prop 13 doesn't remotely make up for 13% top end income taxes unless you're locked in for 20 years to a house and don't make much.

High property taxes are trivial if you make $250k plus. Texas is still middle of the road property tax wise if I recall correctly. It's not NJ or IL. Lebron James would have been best just staying in Miami. You pay taxes where the games are played either way. He's getting raped in CA with the Lakers since half his games are there. That's 13% per game check. Any athlete that gets paid it's in the state you're playing in. Then the hassle of filing all the multiple state taxes.

As with anything everyone is getting their cut of your income. Agent, accountant, lawyers, etc. Mo money, mo problems.

1337irr says

It's going lower...https://www.nasdaq.com/market-activity/commodities/lbs

Fuck me running! Good! Great. Waiting on another quote on our build. I don't like puking after the first one. This one needs to be under $500k or we're pulling the plug I think and adding a basement bath and getting a new game plan.

NuttBoxer says

It's a lot easier to just know the values because you've been looking forever, than check the history of every rental. When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid

Sheesh Nuttboxer. Waste your time arguing on a blog with someone who is using the blog to rationalize and convince him/her self how savvy they are?

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/13c45dl/my_hoa_is_going_to_balloon_from_345_to_over_700/

My HOA is going to balloon from $345 to over $700 within my first year in my condo. Is this legal?

zzyzzx says

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/13c45dl/my_hoa_is_going_to_balloon_from_345_to_over_700/

My HOA is going to balloon from $345 to over $700 within my first year in my condo. Is this legal?

Totally different topic. They deferred the maintenance and the guy didn't pay attention. Generally if you own a condo you'r not good with trades, so you just expect it to be done. Most HOA's are run by morons and the maintenance doesn't get done.

No one should have to tell you, but if you're too dumb to realize there are things called special assessments, you're a common idiot and deserve the increase. Also it's $345 more. You don't have to do the work. Grow up or man up and get a house and do the work yourself. People have got to stop blaming others. It's unfortunate mommy didn't give you fresh milk from her tit until you were 35.....

I read shit like this and I know we're doomed. It's not an IF it's a WHEN.

WookieMan says

They deferred the maintenance and the guy didn't pay attention.

I have seen this in Dayton and in Virginia where a condo had to increase rates because the roads had to be repaved. Since the roads are private, the developer did not have to build to state DOT standards, so the roads deteriorated in less than 10 years.

https://www.calculatedriskblog.com/2023/05/lawler-american-homes-4-rent-net-seller.html

American Homes 4 Rent Net Seller of Single-Family Homes Last Quarter

WookieMan says

You should really never have more than $10k in a personal checking account and $10k in a savings.

How does one keep not more than 10 k in checking and 10k in savings? What are the options available?

Bitcoiner says

If he paid 20% down and has a 5% interest rate (remember rates were lower in 2021). his mortgage is 2,800 (including property taxes and insurance).

So what I see is they can't keep their renter. They found someone right away both times they listed, so price must have seemed rights, but for whatever reason, renter wasn't incentivized to stay. But this current listing has gone up only 8 months after signing last contract. Turnover costs money, and places that are priced right don't turn over for years. I know a guy in Santa Barbara that has rented the same house for 20+ years, paying WAY under market. I'd guess this owner is at best treading water, but likely negative assuming money for upgrades and maintenance. And with his rent going the wrong way, he may not ever see a profit. But that's what happens when you overpay at the top...

Bitcoiner says

“ When I see someone asking $500 over what comparable properties in the area normally go for, I don't need to check their history to know they overpaid”

“Overpaid” is subjective. And you don’t know how much capital someone put down on a property and how his loan is structured.

Anyways, the notion of high rent>means someone overpaid>means housing top is near seems a bit one-dimensional to me. But whatever….. you found a house in Yuma and I am happy for you. Hope it all works out and you like it there! Send us some feedback on what you like/not like in Yuma!

Your feelings about people like me being successful without owning are subjective. A property listing for $500 over what most properties list for in same location, same amenities, same sqft is the definition of objective.

When do you think people are more likely to overpay, and attempt to over-charge, at the bottom, or at the top? I'm not sure what dimension you want to hypothesize about here, common sense makes it pretty clear. Unless you don't believe there will ever bet a bottom..?

B.A.C.A.H. says

Sheesh Nuttboxer. Waste your time arguing on a blog

Isn't that why we're all here? Seriously though, these kind of discussions are the bread-n-butter patnet was founded on in the mid 2000's. Wishful thinkers who want to profit from doing nothing will keep saying tops don't exist, versus the Federal Reserve who will keep doing their job to blow bubbles, decade after decade, after decade.

Better read yourself some boom/bust by Rothbard, or learn from past mistakes before the tidal wave of greed, inflation, and leverage drags you out to sea.

NuttBoxer says

Seriously though, these kind of discussions are the bread-n-butter patnet was founded on

Yes.

But his/her discussion is with his/her own self, trying to rationalize or convince himself (or herself) of something.

Even the Most Major California Rental Real Estate Investing Cheerleader E-man himself mentioned the present pricing is insane and out of whack. But E-man's not trying to convince himself of anything.

Key is not to overleverage...

gabbar says

How does one keep not more than 10 k in checking and 10k in savings? What are the options available?

Roths, 401k, HSA, IRA, etc. If you max those out then fine have $40k or $40M in a savings account that could be seized if you default. At that point there's no reason to default, just pay. I'm strictly talking in strategic senses. Middle class person with $100k family income loses a job and can't pay the mortgage. Leverage the default as much as you can. One by not paying. Two protect yourself/finances. Third is short sell and get all liability waived. I/we did this with probably 90 short sales.

No one can take a dime from the accounts I mention unless it was fraudulent. Even then I don't think any party can take those funds. Not one client had a dime taken from their checking or savings. The loans are sold off, but even then I would never bank with who lends me the money unless it's a commercial/business account.

I'm in by no ways promoting dumping debt. If you get yourself in a fucked up situation there is a way out is all I'm saying. Too many think it's doom and gloom and do something stupid including taking their life... over money and credit. You can always make more and repair it.

NuttBoxer says

El Cajon is way too city for me. Where I live we call going to San Diego(which starts in El Cajon), "Going into town", or "Going down the hill".

Good! I'd rather you not have to live there it's a shit hole. Smog seems to accumulate in that valley as well. Further East IS quite nice though. I'd considered moving out that way but muh commute.

Bitcoiner says

I don’t know if CA allows these kind of agreements.

I do. In California you are not allowed to collect the remaining months on the lease unless you can prove you've made a reasonable effort to re-rent the property. It's California, the owner gets screwed at every turn, anyone who lives here knows that. I don't have to make assumptions because this has been my area of expertise for 20 years. You learn a thing or two after dealing with a bad owner, and we've had one or two. Most of them have been like you though, rare rent raises, and appreciation for the value good tenants bring.

Bitcoiner says

NuttBoxer says

When do you think people are more likely to overpay, and attempt to over-charge, at the bottom, or at the top? Unless you don't believe there will ever bet a bottom..?

You understand why I don’t believe in overpaying and why it really doesn’t matter?
Years later those prices appear as cheap.

I do, you very clearly answered the above question about if you think there will ever a bottom, you don't. Given the state of the economy, that is wishful thinking indeed my friend. You didn't answer the other part, but that's ok, with logical reasoning, it's pretty rhetorical.

just_passing_through says

Good! I'd rather you not have to live there it's a shit hole. Smog seems to accumulate in that valley as well. Further East IS quite nice though. I'd considered moving out that way but muh commute.

I went to college in East El Cajon, city never impressed me. I remember the joke was you're doing well if you could find an El Cajon girl with both of her front teeth.

Out in the mountains/foothills though you get almost daily sun, if fog rolls in from the coast burns off early morning. A bit warmer and cooler, but way less humidity. I really love this area. If we had been open to buying out here in '11 and known about the USDA, would never be leaving. But that's not who we were back then, we were city folks.

If only, if only...

With any housing situation the key is to not move. Rent long term and the landlord is happy with minimal increases. Own long term and you locked in your monthly nut for 30 years generally. It's the duration of living there that's the biggest factor.

The only issue with rentals and being a tenant is if the landlord decides to sell. They do. I've lived it. You're fucked. With renting there's another party in the monthly transaction. They might be an ass hole. They might try to control what you do with the property. My mortgage company give no shits about what I do to the property as long as I'm paying. And that payment will stay the same.

I get people don't like debt, but owning is the better route for 9 out of 10 people. The 10% that can save, invest and rent are kind of unicorns. Renters generally don't save as much as owners. Owners are forced savers by paying principle. Very, very few renters set aside money for investment. It happens, but is not common.

Place we paid the least for and liked the best got sold. We did get the first chance to buy, but mortgage would have been too high. Hmm, cheaper to rent than to buy?

So just on this site you know Patrick, myself, and I believe there are a few others who have rented quite a bit. The chances of that 10% being on patnet seems pretty slim. Further, as I've mentioned, my personal experience is irresponsible people certainly buy houses, and responsible people definitely rent. If I didn't know better, I'd swear you guys learned economics from realtors ;)

Definitely all for the long-term either way. Stability is a good thing.

NuttBoxer says

Further, as I've mentioned, my personal experience is irresponsible people certainly buy houses, and responsible people definitely rent. If I didn't know better, I'd swear you guys learned economics from realtors ;)

Renters are the worst to deal with. I've been a landlord. "A fucking ant is in my house come throw chemicals at it." "My dad died I need two weeks to pay rent." Fine, you're a good tenant. That's not the norm. It's not a judgement on you personally. Renters suck. It's not easy money like some portray. It's a pain in the ass and anyone saying otherwise is lying.

Even with the best of screening tenants are shit 50% of the time. This is 100% fact having rented over 1k apartment units. My evidence is beyond anecdotal. I was a good tenant when I leased. Most aren't.

WookieMan says

I've been a landlord.

Same here, but for only the 10 SFH houses that I personally owed. Even on that scale owning rentals is more of a part time job than a passive investment.

Bitcoiner says

Did you manage them all yourself or did you have a property manager? Did you end up selling them all?

I managed them all myself except one, and I sold the last one off a couple years ago. The one exception was because I left town. I did not own all 10 at once, I only had 4 that I owned simultaneously.

WookieMan says

NuttBoxer says

Further, as I've mentioned, my personal experience is irresponsible people certainly buy houses, and responsible people definitely rent. If I didn't know better, I'd swear you guys learned economics from realtors ;)

Renters are the worst to deal with. I've been a landlord. "A fucking ant is in my house come throw chemicals at it." "My dad died I need two weeks to pay rent." Fine, you're a good tenant. That's not the norm. It's not a judgement on you personally. Renters suck. It's not easy money like some portray. It's a pain in the ass and anyone saying otherwise is lying.

Even with the best of screening tenants are shit 50% of the time. This is 100% fact having rented over 1k apartment units. My evidence is beyond anecdotal. I was a good tenant when I leased. Most aren't.

Interesting data. I guess the quality of tenants is better here in the Bay Area? My biz partner and I have over 100 units. 96 units are managed by a property management (PM) company. The other could handful units, we still manage them as they’ve been our long-term tenant. Whenever these tenants leave, I’ll either sell or turn them over to the PM company.

Out of the 96 units, we had 3 evictions. They were all legacy tenants, which we evicted shortly after the purchase. I guess previous owners got burned out from self-managing. We have not had one eviction with our PM company. Pretty amazing screening process would you say?

I learned from our PM that it’s a business. Treat it as such and don’t let it bother us. It’s been serving me well. We have a full-time handyman who handles all the repairs and rehab. Without a handyman, the repair cost would be higher so it cuts into the cash flow, but it can be quite passive. The more passive, the more it’ll cost. It’s that simple.

I self-managed 18 units before I met my partner and scaled up to apartment buildings. At that time, I found it could be a little annoying at times as things tend to break on a Friday before the long holiday weekend. However, it’s still much much better than working a W2. What I’ve learned is that if I’m willing to pay a premium, someone will make fix it and make the problem go away. All in all, I’d rather scaled up to 200 units and be an investor than to hold down a W2. It’s a great trade for me.

Eman says

Interesting data. I guess the quality of tenants is better here in the Bay Area? My biz partner and I have over 100 units. 96 units are managed by a property management (PM) company. The other could handful units, we still manage them as they’ve been our long-term tenant. Whenever these tenants leave, I’ll either sell or turn them over to the PM company.

Out of the 96 units, we had 3 evictions. They were all legacy tenants, which we evicted shortly after the purchase (some text omitted to shorten quote...) 18 units before I met my partner and scaled up to apartment buildings. At that time, I found it could be a little annoying at times as things tend to break on a Friday before the long holiday weekend. However, it’s still much much better than working a W2. What I’ve learned is that if I’m willing to pay a premium, someone will make fix it and make the problem go away. All in all, I’d rather scaled up to 200 units and be an investor than to hold down a W2. It’s a great trade for me.

I agree! Just don’t lose money!