patrick.net

If you can rent for less than the total cost of owning over the typical ownership period (7 years) then you should rent.

Prices in a lot of areas are way beyond what rents can support. I think another real estate big crash is coming soon.

You can do a pretty good calculation of fair price with this calculator:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

I think it depends on your circumstances and the location, and it's a place for you to live in for several years..

I wouldn't want to be a landlord unless it was a $50,000 house in Mexico that I rented to some digital nomads for $500+ per month cash.

I'm still a fan of stock mutual funds and it's been great for me.

Bob Brinker radio show said it was all about critical mass as in saving enough so you can live off the savings comfortably like withdraw 4% annually while it is still grow at least 1% over annual inflation.

I started to listen to him around early 1999.

Just need to figure out how much to save based on earning an annual inflation-adjusted return of 8%.

Can also earn a $300 to $400 dollars per month working at home a couple of hours a day on online surveys and gigs like thru Rat Race Rebellion website.

.

would you sell now? or buy now?

I am looking to sell my primary residence now.

Ad, save/invest $20 per day and in 30 years or so you should have a million bucks.
The key is 1. invest for capital appreciation 2. avoid taxes. So, buy a Roth IRA.
I would tell a friend to invest more, although you can bring a horse to water, but you can't make him drink.
I'm living off dividends from mutual funds which I bought and interest from bond funds which I inherited.
Even stock funds which are not "income" funds still distribute capital gains and dividends every year. You can just take dividends and reinvest capital gains.

Patrick says

If you can rent for less than the total cost of owning over the typical ownership period (7 years) then you should rent
calculator:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

What about consideration for equity upside? Isn’t that one of the primary wealth building vehicles for the middle class?

Years ago I rented a home in San Carlos for approximately 5yrs. During that 5yr period, the following equity gain was observed:

Landlord: +$500k
Me: $0

The home I own now in the tri valley has gained >$500k in equity. That wouldn’t have been mine if I was renting,

Yes, you can argue that equity downside needs to be considered as well but it’s dwarfed historically compared to the upside.

My point is that if I didn’t consider Bay Area equity upside when making my buy vs rent decisions (along with RE being an inflation shield), I would be much worse off.

Equity is enforced savings. You would have to factor in invested differentials between rent and owning, not just nominal paper equity gains, and equalize the equity gains against maintenance costs, insurance, taxes, etc. Turning over home real estate with financing costs and commissions and moving expenses is usually an off the top loss of about ten percent, that has to be made up in future appreciation, which again is only theoretical if unrealized.

Maybe all those Orange County types who live like kings with cars, clothes, vacations, plastic surgery etc. on second and third mortgages then go bankrupt have the right idea.

Patrick's calculators are common sense over emotion. However, emotion has a market value, too, and the delusion of owning has a psychologic value that will vary from individual to individual.

Fort Wayne,

Real estate is local. Without knowing the market and the parameters, how can anyone offer any inputs?

For me, I’m always a buyer and seller regardless of where we are in the cycle of the housing market. I’ve shared examples on here. The latest one is 846 Adams St in Albany. The listing agent said it would be ours if we offered $680k for it so I passed. I would be a buyer at $620k. It was in contract, and then fell out of contract. It comes down to who can perform, not the highest price. Agents don’t get paid unless the deal is closed.

Eman says

$680k for it so I passed. I would be a buyer at $620k.

You were going to rent it ? What was your desired capitalization rate if you were going to rent it ?

How much would you finance or take out a loan for ?

.

ad says

Eman says

$680k for it so I passed. I would be a buyer at $620k.

You were going to rent it ? What was your desired capitalization rate if you were going to rent it ?

How much would you finance or take out a loan for ?

.

@ad,

It’s a flip with an ARV of $1.1-$1.2M. Just like the one we just sold down the street for $1.3M last month.

https://redf.in/Bdc4iU

Eman says

The latest one is 846 Adams St in Albany. The listing agent said it would be ours if we offered $680k for it so I passed. I would be a buyer at $620k. It was in contract, and then fell out of contract. It comes down to who can perform, not the highest price. Agents don’t get paid unless the deal is closed.

That one will be interesting to follow. Not a lot of land but still eligible for an SB-9 lot split for a developer who doesn't mind holding costs. You could end up with 4 x 2/1 condos (800 sq.ft. min by right). I suppose the quicker flip would be to build out the the ADU in back and rehab everything.

EBGuy says

Eman says

The latest one is 846 Adams St in Albany. The listing agent said it would be ours if we offered $680k for it so I passed. I would be a buyer at $620k. It was in contract, and then fell out of contract. It comes down to who can perform, not the highest price. Agents don’t get paid unless the deal is closed.

That one will be interesting to follow. Not a lot of land but still eligible for an SB-9 lot split for a developer who doesn't mind holding costs. You could end up with 4 x 2/1 condos (800 sq.ft. min by right). I suppose the quicker flip would be to build out the the ADU in back and rehab everything.

@EBguy,

The existing ADU is too small. Need to expand it 100sf to make it more livable and valuable. The front house can also use 150-200sf feet expansion to make it a legit 2/2, or keep it in its current size as a 2/1.

ARV can be as high as $1.4-$1.5M if doing one or both. Below is the template that we exited at $1.75M on a flip in the adjacent city last year.

https://redf.in/H28A6Z

Eman says

Fort Wayne,

Real estate is local. Without knowing the market and the parameters, how can anyone offer any inputs?

For me, I’m always a buyer and seller regardless of where we are in the cycle of the housing market. I’ve shared examples on here. The latest one is 846 Adams St in Albany. The listing agent said it would be ours if we offered $680k for it so I passed. I would be a buyer at $620k. It was in contract, and then fell out of contract. It comes down to who can perform, not the highest price. Agents don’t get paid unless the deal is closed.

thanks. any tips you can share on what you look for in a rental? financials i mean. out here it’s all over the place, 2,000 rent is not unreasonable for a 3/2 sfr. so i’ve been basing my buying criteria just off rent assuming 10% vacancy… out here that’s not unreasonable.

Fort Wayne,

I look at the numbers. Each building has to be able to sustain itself AFTER 6-12 months max. No one is going to sell us a property with 7-8 cap as people like to believe. Ask yourself this question, if a property gave you 7-8% return and also appreciate, would you sell it?

In general, sellers want market value, or even future value when they sell. I don’t mind paying “current market value” where I know I can unleash the upside potential to make the asset worth more.

Example: We just got a 35-unit asset sent to us for $6M. It’s not in our core market, but close by. That’s $172k/year. The asset is vacant and needs a ton of work. Let’s say it would cost $50k/unit to renovate and bring them up to snuff. They would worth $275k/unit once rehabbed. That’s about 80% ARV. Worth the effort? 🤷‍♂️

Rubicon says

“ You would have to factor in invested differentials between rent and owning, not just nominal paper equity gains, and equalize the equity gains against maintenance costs, insurance, taxes, etc.”

Nominal Equity gains is an added bonus for later in life when you retire early. Need 1M USD? Just sell one your rentals. On any comparison of renting vs owning, I would factor in ever increasing rents too to make it more realistic. Many homeowners today either paid their house off early or pay less in PITI than someone renting a 3B/2B.

I don't think residential is bad, but I know very few people that make it long term. They get roasted at some point. I fucked up and didn't buy my neighboring towns post office when interest rates were low. I could have had a $300k asset paid off in 15 years for next to nothing monthly with debt. When was the last time you saw a post office move? They generally don't own the land outside of major cities. Even big suburbs. It's all leased. And they don't move.

Rent. Moving to a new area, so won't consider buying for at least a year. But beyond that I don't buy at the top, as I don't like loans for more than the asset is worth.

Nobody ever went broke by selling too soon, bankruptcy courts are full of those who tried to sell too late.

Rubicon says

AmericanKulak says

Nobody ever went broke by selling too soon, bankruptcy courts are full of those who tried to sell too late.

Speaking of bankruptcy, we have historic low distressed sales

These stats are rough. Banks are going the deferment route after the last crash. Or just simply not foreclosing on owners. Banks suck at being land/property owners. I witnessed it first hand. They will figure out a payment arrangement that keeps the balance sheet solid. Many owners are FHA and VA and they have insurance to cover a default that they pay as well. It's highly unlikely that 2006-2008 happens again in our lifetimes. The loans were bad out the gate. Everything now is pretty solid and with low interest rates. People ain't moving and the banks are protected.

Only if they were over-leveraged to start with. Don't buy if you NEED the house to increase in value in order to make it workable.

Buy land in place where you can grow crops.

Bd6r says

Buy land in place where you can grow crops.

Lasagna Gardening is the new Bay Windows and Steelamogranite.

As a previous poster who was made madder by TDS would say:
How else can we grow the always important YAMS!

Eman says

Let’s say it would cost $50k/unit to renovate and bring them up to snuff.

Possibly so, but pricing on anything construction related is insane right now so that 50K might be way low.

AmericanKulak says

Lasagna Gardening is the new Bay Windows and Steelamogranite.

I was thinking more of 50+ acres.

First time I heard of lasagna gardening.