patrick.net

When in Scottsdale, do stop in to Chompie’s.

https://chompies.com/chompies-scottsdale/

https://www.dailymail.co.uk/news/article-12162843/Potential-time-bomb-economy-looms-1-5-trillion-real-estate-mortgages-come-due.html

Potential 'time bomb' for US economy looms as $1.5 trillion in real-estate mortgages will come due within the next two years
Some $1.5 trillion in mortgages will come due in the next two years - paving the way for a financial crisis as higher interest rates push down property values
As this event looms, big banks such as Wells Fargo are cutting their losses by preparing to offload debts at a discount even when borrowers are up to date
The phenomenon has been further compounded by office vacancies, as a sizable amount of Americans continue to work from home even after the pandemic

Patrick says

As this event looms, big banks such as Wells Fargo are cutting their losses by preparing to offload debts at a discount even when borrowers are up to date

Thank you for sharing, Patrick.

WF emailed me a notice about changes in their agreement this week, to go into effect in July. Buried way down in the bottom of many pages of legaleze was a summary of the newly imposed withdrawal limits (of the depositors' own money! )

For retail customers, a limit of $50k per withdrawal. For business customers, the limit is $10K.

Looks like they want some stops in place to prevent a First Republic kind of large-depositor stampede.

WookieMan says

Remember that Realtor contracts are written by attorneys. They want work. A new series of contract paperwork came out for CAR (Chicago Association of Realtors). It's been 6 years, but it was something like "if permits were not pulled the seller is held liable for work performed...." blah blah. These are 10-12 page contracts with 8 point font. Sooooooo much shit can be thrown in there. We'd cross that line out and initial before sending back to the buyer. Protects the seller if a previous own did shit. The attorneys WANT problems so they get more money.

Thank you, are these contractors deliberately written to give the upper hand to brokers, real estate agents and banks?

WookieMan says

Guess what, you can get out of any contract there just might be fees.

Yes, like loss of earnest money, which around here is 1% of the asking price. On a $500k home, you just lost $5,000.

B.A.C.A.H. says

Patrick says

As this event looms, big banks such as Wells Fargo are cutting their losses by preparing to offload debts at a discount even when borrowers are up to date

Thank you for sharing, Patrick.

WF emailed me a notice about changes in their agreement this week, to go into effect in July. Buried way down in the bottom of many pages of legaleze was a summary of the newly imposed withdrawal limits (of the depositors' own money! )

For retail customers, a limit of $50k per withdrawal. For business customers, the limit is $10K.

Looks like they want some stops in place to prevent a First Republic kind of large-depositor stampede.

Seriously, why does anyone still do business with WF, BofA, Chase, US Bank, or any of the other big banks?

Regional Credit Unions are where it’s at.

https://www.reddit.com/r/RealEstate/comments/142zj3h/how_much_of_my_130k_earnest_money_will_i/

How much of my $130k earnest money will I potentially lose if I decide to pull out of a home purchase deal in New Jersey?

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/142ifbp/massive_tax_increase/

I noticed our escrow payment nearly doubled from $750 to ~1500 and the bank says it’s because our taxes jumped from ~6,500 to 10,000. Am I just screwed or is there someone to contact for a clear answer on why they jumped?

zzyzzx says

How much of my $130k earnest money will I potentially lose

$130k in earnest money? Earnest money is typically 1% of the asking price. He is buying a home worth $13 million?

HeadSet says

zzyzzx says

How much of my $130k earnest money will I potentially lose

$130k in earnest money? Earnest money is typically 1% of the asking price. He is buying a home worth $13 million?

Outside of commercial RE, NO ONE is putting down $130k outside of those that can afford to lose it. Unless it was a multiple bid property and the buyer wanted it I think $25k was the highest I saw for earnest money.

There are many other ways to not lose it either. Any contract, if you're financing, has a line for what your mortgage interest rate you need. Say rates are 5%, You put 3.5%. Seller, agent and attorneys will miss it 9 out of 10 times. Rate comes back at 3.6% and you can walk and get the earnest money back. You can get out. Inspection. Appraisal. It's extremely rare to lose a earnest/escrow deposit in residential.

It's like debt. Everyone is afraid of it. What if I lose my earnest money. I never saw it happen once in over 1k transactions. I did see a lot of renters lose their security deposit though. Nothing shady on our end. They trashed the place or got evicted.

zzyzzx says

https://www.reddit.com/r/FirstTimeHomeBuyer/comments/142ifbp/massive_tax_increase/

I noticed our escrow payment nearly doubled from $750 to ~1500 and the bank says it’s because our taxes jumped from ~6,500 to 10,000. Am I just screwed or is there someone to contact for a clear answer on why they jumped?

I don't know if there's good stuff on Reddit, but that's pure bull shit. Flat out. $292/mo. They'd "maybe to $350/mo to get a loan from you. I didn't read the link, but the dip shit probably bought and didn't realize the taxes would get reassessed. Stop going to Starbucks or other frivolous shit if you can't afford it.

Bitcoiner says

zzyzzx says

Not worth addressing each troll post but I bite on this one: for CA, your property taxes can’t go up by 50%. Prop 13 limits increases yoy to 2% annually. Thank god for prop13!

Property taxes can go up in areas outside CA that high, but it's usually permitted construction work on your house. School referendums are the biggie for tax hikes generally which I believe can still happen outside of Prop 13 in CA, but I don't actually know. I've never read it, but I thought it was just limited to annual increases for non-school spending. If I'm wrong I'd never send my kid to a school in CA if I lived there.

zzyzzx says

How much of my $130k earnest money will I potentially lose if I decide to pull out of a home purchase deal in New Jersey?

North Carolina has a neat provision called a "due diligence" deposit in addition to the typical earnest money. It's quite literally the only leverage the seller has after signing the sales contract. Money deposited as "due diligence" remains with the seller regardless of the ultimate outcome of the process. Think of it as the cost to take the home off of the market for the closing period. When we sold our first home in 2014 the DD money was still typically under $1,000 and as a result you would have people kicking the tires and keeping you off market for 30 or 60 days. We learned this lesson the hard way. The last house we sold we said no earnest money but we won't accept an offer with less than 5% of the sales price in due diligence. That was in the 10's of thousands and gave us the leeway to agree to none of the requested concessions. It was as close to a 'zero bullshit' closing as I could hope for.

There's literally no way a buyer can get the DD money back, even if they discover that the house is about to fall down and even if there is evidence that the seller knew it (good luck proving it without a paper trail). The fact of the matter is that, in NC, using the standard realtor purchase contract, ALL homes are being sold 'as is'.

@Bitcoiner, I know you mentioned something about loving tenants breaking their lease because you can charge them for an empty unit. Was reviewing some Arizona renter law yesterday, and the state has the same clause California does, that you have to make reasonable effort to re-rent, even if tenant breaks lease.

I stopped being surprised about how many tenants and landlords don't know the law some years ago.

https://sfstandard.com/business/as-insurers-retreat-california-homeowners-may-need-the-fair-plan-so-what-is-it/

In the past week, Californians learned that two of the state’s largest insurance companies, State Farm and Allstate, have decided to stop signing new homeowner policies in the state.

Moreover, State Farm has sought significant rate hikes for its existing customers from California regulators.

Industry experts say both companies’ decisions are part of a broader trend in which insurers retreat from insuring California homeowners due to wildfire risks, climate change and construction costs that outpace inflation.

It's not "climate change" that caused those big fires but:

1. deliberate suppression of small normal fires
2. allowing massive amounts of underbrush to accumulate
3. arson by Pantyfa types

Dan Bongino(?) asked why there is no footage of these fires?

NuttBoxer says

Bitcoiner, I know you mentioned something about loving tenants breaking their lease because you can charge them for an empty unit. Was reviewing some Arizona renter law yesterday, and the state has the same clause California does, that you have to make reasonable effort to re-rent, even if tenant breaks lease.

I stopped being surprised about how many tenants and landlords don't know the law some years ago.

This is true. Lease break = Zero vacancy for the property owner.

1 month vacant in a year = about 8% vacancy. Say tenant breaks the lease and moves out in month 10. It takes a month to re-rent it. This means at least 23 months without vacancy.

This happens quite often for us as students finish college by the end of May or early June while their lease doesn’t end till end of June or July. We always credit the tenants if we re-rent the unit early. It takes us 1-3 weeks to re-rent a unit most of the time.

At $2M/year gross rent roll, that’s $160k @ 8% vacancy, which comes right off the top of the profit. Our vacancy has been 2-3% annually for the last decade.

Bitcoiner says

Not worth addressing each troll post but I bite on this one: for CA, your property taxes can’t go up by 50%. Prop 13 limits increases yoy to 2% annually. Thank god for prop13!

As California becomes a Nation of Renters, repeal or reform of Proposition 13 is inevitable.

Yes, yes, I know: the legislators are all property owners and landlords.

But their fear of the pitchforks is bigger than their greed.

B.A.C.A.H. says

As California becomes a Nation of Renters, repeal or reform of Proposition 13 is inevitable.

Especially as the state goes into a deficit as federal relief funds run out...
Prop 15 , the Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative (aka Split Roll) barely failed in 2020.
48.03% Yes
51.97% No
A "yes" vote supported this constitutional amendment to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value, rather than their purchase price.

How often does Prop 13 issues come up for a vote?

California doesn’t have tax revenue issues. It has spending issues. The more revenues the state collects, the more it spends. There’s no accountability. It’s a bottomless pit. Reform the state spending. Then I’m sure people will agree to reform Prop 13. Is that too much to ask?

EBGuy says

Especially as the state goes into a deficit as federal relief funds run out...
Prop 15 , the Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative (aka Split Roll) barely failed in 2020.
48.03% Yes
51.97% No
A "yes" vote supported this constitutional amendment to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value, rather than their purchase price.

Yep. As increasing numbers of Californians become renters, and as homeowner-voters die off, that slim majority will slip away.

Yes, yes, I know: The died off homeowner will be replaced with another homeowner, so not to worry about proposition 13 losing its appeal. I suppose that will be true for the few who inherit and move into their deceased parents' homes and so inherit the Proposition 13 assessment. But many more will sell and benefit from the stepped-up basis. I say this as a life-long resident and observer and simultaneously on both sides of the generational transaction.

Moreover, the "new" homeowner who buys the deceased person's home will be paying taxes on the reassessed value. That's how I have a neighbor who pays more than 3x the taxes than his neighbor in the house next door. Some or most of the "new" homeowners will also be unhappy with the Proposition 13 law and want a change.

Repeal or reform is as inevitable as demographics.

Eman says

California doesn’t have tax revenue issues. It has spending issues. The more revenues the state collects, the more it spends. There’s no accountability. It’s a bottomless pit. Reform the state spending. Then I’m sure people will agree to reform Prop 13. Is that too much to ask?

Said the landlord.

Eman says

California doesn’t have tax revenue issues. It has spending issues. The more revenues the state collects, the more it spends. There’s no accountability. It’s a bottomless pit. Reform the state spending. Then I’m sure people will agree to reform Prop 13. Is that too much to ask?

@Eman, I do not think anything will help/change. Once enough of society realizes the American dream is out of reach (economic mobility), it's too late. What is your opinion on how socialism comes about?

GNL says

Eman, I do not think anything will help/change. Once enough Californians of society realizes the American dream is out of reach (economic mobility), it's too late.

Yes, and they'll have nothing to lose by repealing or reforming the Proposition 13 laws.

B.A.C.A.H. says

GNL says

Eman, I do not think anything will help/change. Once enough Californians of society realizes the American dream is out of reach (economic mobility), it's too late.

Yes, and they'll have nothing to lose by repealing or reforming the Proposition 13 laws.

The correction is noted. I did use the word "society" because I believe we are headed to a reduction of the middle class. All of us should want as big of a middle class as possible. It creates a better society, imo. It also keeps the government as bay. Again, imo.

GNL says

Eman says

California doesn’t have tax revenue issues. It has spending issues. The more revenues the state collects, the more it spends. There’s no accountability. It’s a bottomless pit. Reform the state spending. Then I’m sure people will agree to reform Prop 13. Is that too much to ask?

Eman, I do not think anything will help/change. Once enough of society realizes the American dream is out of reach (economic mobility), it's too late. What is your opinion on how socialism comes about?

I came from a communist country. I know how that system works. I have never been under a socialist system to know and have an opinion on it.

I feel the American dream is alive and well for the doers. I came to this country without speaking the language. Kids made fun of my broken English in HS. I started working in HS and all the way through college. Worked full time while I obtained my MSCE degree. I work for what I have and continue to work everyday. I never complained about Prop 13 when I bought my house, properties and pay high taxes. I put my head down and keep doing what I can control. All my siblings own their houses in the Bay Area. We came to this country without speaking the language. Who had the disadvantage here? It’s funny to see people who grew up here, speak the language while complain about…..stuff.

My handyman came to me on Monday and said he’s almost ready to my a Tesla Model Y long range. He asked me to cosign the car loan for him. Next is to help him buy a house. It’s achievable IMO.

B.A.C.A.H. says

I have a neighbor who pays more than 3x the taxes than his neighbor in the house next door.

I pay 10x my neighbor, and they have a better house. There are some that pay 20x in my area.

B.A.C.A.H. says

Eman says

California doesn’t have tax revenue issues. It has spending issues. The more revenues the state collects, the more it spends. There’s no accountability. It’s a bottomless pit. Reform the state spending. Then I’m sure people will agree to reform Prop 13. Is that too much to ask?

Said the landlord.

True story though.

Bitcoiner says

The American dream is in reach IMO. I am an immigrant myself, I worked extremely hard to move up the ladder at the biotech company I started working for over a decade ago. I started out at rock bottom. On paper I am a millionaire today. Work hard, live frugal and invest wisely. Time and inflation will do the heavy lifting if you have assets. Rent long term in places like California and you commit financial suicide. I know there are exceptions (like Patrick). this game isn’t rock (some text omitted to shorten quote...) th sweat equity and rented it out with a nice cash flow. Did a cash out refi on this one and bought the next property. Meanwhile they were living like poor people and stashed away every penny for the next downpayment. If you want it you have to work hard for it. What really made me pause is when they said they both have social worker careers. They don’t make a ton of money. They are just willing to make sacrifices. Before you know it they will be multi millionaires and retire early.

This story sprinkled with rose petals sounds to good to be true. Wookieman has a more realistic take on real estate/life. So does Patrick. IMO

gabbar says

This story sprinkled with rose petals sounds to good to be true. Wookieman has a more realistic take on real estate/life. So does Patrick. IMO

It can be rose petals though. Risk tolerance is everything. Will I risk losing my job being 15 minutes late everyday even if I get everything done? Yes. If I put $200k down on a $1M six unit building, could I lose it? Yes.

Eman seems to have a somewhat unique situation. I'm guessing though up front it was miserable to an extent. Some people enjoy that though seeing the light at the end of the tunnel 5-10 years down the road. In any individual business to earn income non-W2, your life might suck for a couple of years. Some people get found or inherited money and it's easy. Every situation is different.

Everyone also has a different personality and business acumen. I'm frugal and try to do it on my own. I'm not the best person to deal with people that aren't family or friends. I tend to be an ass hole. I'm not good in social situations. I'm not going to be a good residential landlord. So my views are a bit jaded.

Managing a brokerage burned my ass out after 15 years. I was young as shit too. Took the risk. I got paid and went through one of the worst housing crisis in modern history. My 15 years of hell and some flexibility hour wise, turned into my wife making $300k/yr in rural IL. Key is to look for any opportunity. Real estate is a good path. Stocks are fine, but any time I get too greedy and gamble. Look for any partner in anything in life.

Look at the people that are wealthy. What do they buy? Especially women. If you have woodworking skills you can build outdoor furniture for example. It's an easy sale too and you mark it up 10x's what it cost to make. Real estate is super beneficial for taxes. You can get paid and pay little to no taxes. That's why it's so popular. And everyone needs a roof over their head besides LA....

Fact is I'm looking to be as lazy as I can be. Not joking. I took 3 years off. Was mostly during Covid, so managing kids was my deal. I'm now going to work two jobs. Don't need to, but my alcohol consumption is up and I need to get out of the house. Two part time jobs which will maybe equal a full time job. Beauty is I will eventually get a federal pension and health benefits. Have them now, but comes out of the wife's check. Will be about a $700/mo savings for health care.

I'm just more conservative than most. And a dick. Real estate if started young enough and get the right deals WILL make you wealthy. I've got 8 years and I'm done. Might get back into music and play some shows and get a little money. So 48 is the goal to semi official retirement. I still want to get back into RE.

Another niche market I've been eyeing is airplane hanger space for real estate. It's expensive, but I think general aviation is going to see an uptick. Need a place to store your plane. Most hangers are on leased municipal land, so I got to figure that all out.

Rant over. I'll give bit coiner credit. If you're not confident it was you're doing it's probably not going to work. Fact is there might be growing pains we never hear about. He may only tell the positive, not the negative. You have to believe in something though.

https://finance.yahoo.com/news/the-housing-market-looks-bad--except-to-these-folks-134351457.html

zzyzzx says

https://finance.yahoo.com/news/the-housing-market-looks-bad--except-to-these-folks-134351457.html

Who here bought a house in 2010-2013?

I’ve bought something every year since 2009-2019. Minimum was one property, and maximum was 5 per year including apartment buildings.

Interesting to see the divergence in early 2021 only to see prices went higher till spring/summer 2022.

WookieMan says

It's expensive, but I think general aviation is going to see an uptick.

I would love to see that. Back in the 1970's nearly anyone could own a plane as a new basic Cessna cost about the same as a Corvette and used planes were cheap. Then a couple of pilot error crashes and lawsuit payouts ruined everything. The price of the basic Cessna went from about $10k to $35k very quickly to cover legal costs, and then a death spiral as the high costs caused fewer sales, and now those legal costs are spread over fewer units and more price increases. Aerospatiale wanted to sell the awesome Trinidad/Tobago series but decided to pull out until America gets its legal system under control.

And back in those 1970s, general aviation fields were everywhere and loaded with parked planes. To get general aviation back, the manufactures are going to need protection against frivolous lawsuits like the one that started it all - a joker who ignored the Cessna 150 flight manual and tried to take off with 40 degrees of flaps. The plane of course stalled and crashed, but the pilot was not injured, showing how safe the planes really are. (Cessna not only had to pay out, but then the follow on Cessna 152 was built with flaps limited to 30 degrees, which hurt the short field landing performance. If a jury of peers were actual pilots, the case would have been found for Cessna).

Eman says

Who here bought a house in 2010-2013?

I did. Had to liquidate a shitload of stocks and options though and I wouldn't be surprised if these were much more $$$ than the shack when all is said and done. I dare not calculate, lol.

Eric Holder says

Eman says

Who here bought a house in 2010-2013?

I did. Had to liquidate a shitload of stocks and options though and I wouldn't be surprised if these were much more $$$ than the shack when all is said and done. I dare not calculate, lol.

I hear you. It depends on what stocks you owned and sold at the time.

A family member has been working for AAPL for a couple decades. Had to sell some AAPL stocks to upgrade the primary residence and bought a few rentals during the downturn 2010-2012. The difference was that this person had to pay taxes on the stock sales. The properties have gone up 3-4x in value while rents have essentially doubled. Imagine using the cash flow and bought AAPL stocks back in all those years. 🚀🚀

HeadSet says

Back in the 1970's nearly anyone could own a plane as a new basic Cessna cost about the same as a Corvette and used planes were cheap. Then a couple of pilot error crashes and lawsuit payouts ruined everything. The price of the basic Cessna went from about $10k to $35k very quickly to cover legal costs, and then a death spiral as the high costs caused fewer sales, and now those legal costs are spread over fewer units and more price increases.

HeadSet says

back in those 1970s, general aviation fields were everywhere and loaded with parked planes.

Yep.

In those days I financed as a teenager a private pilot license and instrument rating with minimum wage jobs, and a commercial license at age 20, without borrowing.

I quit flying when I was in college in the 1980's because I could not afford that hobby and also playing golf with my friends. The two pastimes, - golf and flying - costed about the same, in the early 1980's.

Fast forward to recent years. After the kids' educations and house were paid for, I got interested in picking up this hobby of flying again. I looked into a bit. I don't think so. I don't really need life insurance,. but the liability insurance premiums would cost more than the flying time. That would be a silly, wasteful hobby.

B.A.C.A.H. says

In those days I financed as a teenager a private pilot license and instrument rating with minimum wage jobs, and a commercial license at age 20, without borrowing.

Impressive. That is at least 250 flight hours.

HeadSet says

If a jury of peers were actual pilots, the case would have been found for Cessna

Yeah good luck now.

Its mostly "jury nullification" which means the social justice or Woke "interpretation" of equal justice under law.

Think OJ jury. Remember at end of trial one of the black male jurists stood up and gave the black power fist to OJ.

.

HeadSet says

B.A.C.A.H. says

In those days I financed as a teenager a private pilot license and instrument rating with minimum wage jobs, and a commercial license at age 20, without borrowing.

Impressive. That is at least 250 flight hours.

Yeah for sure. And I didn't know BACAH flew. We give each other shit from time to time but he always gives me shit about flying on vacations. Didn't know he was a pilot at one time. It's cool..... but stop giving me shit about flying BACAH ;) Giving you shit now. It's cool you were able to do that. Likely a different era in aviation. That's easily $100k now unless you're military.