patrick.net

I don't know why this one cracks me up so much?

Off topic, but I just attended the most obnoxious seminar on baby-boomer retirement. It was called "The Power Years!" It was a nonstop self-congratulatory infomercial about how baby boomers will "reinvent" retirement. Ugh.

The only highlight was when the presenter told an anecdote about a delusional client who decided to use her meager retirement savings to buy a second house. I have a feeling boomers will "reinvent" retirement by never retiring.

Glen,

Why in God's creation would you be in attendance? (was it one of those "threat of employment" deals?)

Isn't this a sign of the housing peak? Two former Presidents at your national convention... Nowhere to go but down as fewer folks will be paying dues next year.

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2006/11/12/national/a111526S13.DTL&hw=bush+clinton&sn=011&sc=307

They're separated by more than 20 years, they come from opposing political parties, and one evicted the other from the White House. But Bill Clinton and George Bush act like a team, a pair of touring comedians with a well-honed act.

The two former presidents even have their entrance down pat, striding in with arms aloft, music pounding, lights flashing, the crowd standing and going wild.

The pair addressed more than 25,000 people attending the National Association of Realtors convention on Saturday, drawing at least six standing ovations and almost continuous applause.

EBGuy,

Talk about horsepower? Do you have any idea what having ONE former Pres. speak at your event (let alone two!) Now that's what I call a "dog and pony show"!

What do these guys get for speaking fees? 50K? 100K? More?

Sorry for the ignorance, but how do you include images on your posts?

Because only threadmasters can post images, you’ll have to just post them as normal links and I’ll try to convert them to viewable images as time permits.

Thanks!

A true story of madness and (shortly) woe ...

Imagine a 60ish woman, with a paid for house and a middling investment portfolio. Somewhat at loose ends, she became a realtor two years ago and has just found her sea legs in the business. No great boom in her area, unlike elsewhere, so she hasn't made all that much money at it. Figuring in mileage and marketing costs and electronic gadgetry and desk rent, it's probably sub minimum wage. A small pension from her late husband's employment plus the realtor gig doesn't quite cover the monthly nut, so the investment portfolio is set up to throw off cash. There is no way of avoiding the truth though: half her net worth is undiversified residential real estate. Financial adviser warns her explicitly to stay away from more real estate because she's overexposed as it stands.

Of course, realtors know everything about real estate. Visiting children (and grandchildren!) three hours drive away, a bargain presents itself. Waterfront. Charming. Close to grandkids. Tenant in place. Makes an offer, has it accepted, all contingencies including financing expire. Contract ironclad, close in two weeks.

Net worth now 80% residential real estate, still undiversified because 3 hours away isn't far enough to change dependence on local economics. Back of the envelope figuring: new house is a grand a month negative cash flow against the mortgage broker's cheapest recommendation of an IO. Unwilling to sell current house to fund purchase and move because (1) spring is the right time to sell, (2) she's a realtor and she knows in her bones that the market is D-E-A-D, and (3) she's just gotten her business presence established where she is now.

Let me summarize: No financing commitment in place but financing contingency has expired. Barely making ends meet now but has committed to burn a thousand a month from here on. 80% of net worth now in one real estate market. The house she needs to sell - but does not WANT to sell - is in a locale where the inventory/sales ratio is already at 15 months. Local sales rates - but not prices - are at the lowest levels in 10 years.

NOW she calls her financial adviser to ask, "How do I pay for the new house?"

I shouldn't have picked up the phone.

Punchbowl Says:
Back of the envelope figuring: new house is a grand a month negative cash flow against the mortgage broker’s cheapest recommendation of an IO.

hmm, well, that is the sole problem. Why would you 'invest' in something that costs you a grand a month with no real prospect of significant capital appreciation? How is that ever a 'bargain'? And that is on an IO loan, not P&I...

Examples of moneymakers to me are:

- a licensed boarding house put on the market near me, 7 bedrooms, 1 minutes walk from the central station in a major metropolis, asking $700K. Licensed B/H status means that there is no land tax to pay each year, only a $200 council inspection fee. The return on the room easily covers principal and interest on a loan. Cash flow positive, would be paid off in 15-20 years by tenants even on a 100% loan.

- block of land with an old worthless shack on it, street frontage at front and rear, close to train station, city and major hospital, plans approved by council to subdivide and build 2 brand new brick homes of 3 and 4 br. Do the sums and see if you can walk away with $200K in 12 months as a cash flow venture. Possibly even avoid stamp duty and capital gains tax if you do it right by occupying while constructing.