tag:blogger.com,1999:blog-13164186.post115266776503221897..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: Federal Reserve Likely to Raise RatesDavidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger64125tag:blogger.com,1999:blog-13164186.post-1152833459611185832006-07-13T19:30:00.000-04:002006-07-13T19:30:00.000-04:0025% is just the industry standard typically used w...25% is just the industry standard typically used when evaluating real estate. <BR/><BR/>This is a good article to get you started.<BR/><BR/>http://www.landlord.com/buying_pitfalls.htmAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152829376161416792006-07-13T18:22:00.000-04:002006-07-13T18:22:00.000-04:00anon said, "Once you consider the property tax, th...anon said, <BR/><BR/>"Once you consider the property tax, the maintenance, the property management fees (or the cost of your time), the additional tax issues which may neccesitate hiring an accountant at tax time,<BR/>the fact that it could sit empty (isn't the standard assumption 25%), you might make money eventually but up front it is a drain."<BR/><BR/>Are you speaking from experience? I'd really like to know. Do you think 25% vacancy is accurate? The $300 cash flow is after taxes and hoa. It doesn't include manintenance or accounting (if that would be necessary, I'm not sure).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152829185987939362006-07-13T18:19:00.000-04:002006-07-13T18:19:00.000-04:00"But, that's okay, we need people like you who are..."But, that's okay, we need people like you who are satisfied with $300/month per rental income to buy the glut of overpriced condos, townhomes, and homes." <BR/><BR/>That was probably the most idiotic post I've ever read on this blog, which means a whole lot. <BR/><BR/>Lets see, buy a condo with zero down and generate $300 immediate positive cash flow.<BR/><BR/>Don't need to have an MBA to see the upside there. Someone else pays the entire mortgage, tax bill, etc. Plus there's tax depreciation (a concept, of course most bubbleheads don't understand since they don't own their own house, and definatly not an investment property), $3600 positive cash flow a year (not factoring tax benefits).<BR/><BR/>Compare this to a bubblehead's CD return. A bubblehead would need about $150k in the a CD to achieve $3600 after tax income.<BR/><BR/>This housing buyer is looking at a zero down purchase (i.e., about 5k in closing costs), and about $3000 a year in after tax income (factoring depreciation). <BR/><BR/>So, housing buyer spends 5k out of pocket to produce the same income as what a bubblehead needs 150k to produce.<BR/><BR/>Plus, the renter will be paying off housing buyer's mortgage, and housing buyer will be owning an appreciating property.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152820350862232782006-07-13T15:52:00.000-04:002006-07-13T15:52:00.000-04:00'Most' renters probably don't put away those funds...'Most' renters probably don't put away those funds...but those on this board do. So assumming the lowest common denominator is poor form. (Sort of like people who eschew credit cards because they themselves don't have the discipline to pay them off each month.)<BR/><BR/>I have yet to hear one person on this board advocate lifelong renting. I would bet that almost everyone here plans to be a homeowner someday. But not now. Not when rents are that much cheaper. Not when there is a possibility that prices could decline. Not when renting makes real investing possible.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152818261419135192006-07-13T15:17:00.000-04:002006-07-13T15:17:00.000-04:00anon said:"Wow, you must be a big time investor. $...anon said:<BR/>"Wow, you must be a big time investor. $300/month positive cash flow... what's the capitalization rate? My bet is that it is very low, like 1% or less."<BR/><BR/>Another person who can't see the forest for the trees. This person could be having to shell out money each and every month, and this might still be a good investment if he believed it was going to go up in value along the way. In any case, his point seemed to be that the whiners who are saying there are no bargains to be had out there, don't know what they are talking about. Here is someone who has gone out and found a place that not only covers his mortgage ... i.e., pays off the place, but provides him with an immediate $300/mo cashflow in, AND will provide depreciation deduction for years to come. This is a smart individual who is able to see the forest for the trees. He is looking longterm. Yes, it's easy to live high on the hog for a while by either living off your equity from a house sale or just from not ever making that house purchase, but eventually the chickens come home to roost ... and it is time to pay the pieper. Honestly, do you really want to have to worry about making rent payments when you are 72 and with no income coming in? (And don't count on your "savings" between rent and mortgage to do the trick 'cause (1) most people never end up really saving that savings ... they live high on the hog ... and (2) while the homeowner's payment stays steady for 30 years, the renter's will increase over and over again during that time period ... quickly eating away at whatever savings you have managed to actually put away. This guy here is smart in making the investment he did.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152816619454540682006-07-13T14:50:00.000-04:002006-07-13T14:50:00.000-04:00It is tough to make money initially by renting ou...It is tough to make money initially by renting out.<BR/><BR/>Once you consider the property tax, the maintenance, the property management fees (or the cost of your time), the additional tax issues which may neccesitate hiring an accountant at tax time,<BR/>the fact that it could sit empty (isn't the standard assumption 25%), you might make money eventually but up front it is a drain.<BR/><BR/>If you will be making $300, be sure you have considered all the added costs and not just the mortage versus rental rate. TGhe mortgage doesn't come close to equaling your actual costs.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152808960489514002006-07-13T12:42:00.000-04:002006-07-13T12:42:00.000-04:00Anonymous said... I've not seen any evidence of bu...<I>Anonymous said... <BR/>I've not seen any evidence of bubbleheads taking matter into their own hands. All I see is bitterness, complaining, and finger pointing.<BR/><BR/>This past weekend I checked out a 2 bd. condo in Adams Morgan. Its for sale, but not widely listed. In other words, you wouldn't find it if you only spend your time complaining on blogs.<BR/><BR/>Anyway, the place is for sale at big discount to comps. It could be rented immediately, at break even to mortgage, taxes, insurance. If I make a 20% downpayment, it would rent for nearly $300 a month positive cash flow.<BR/><BR/>I'm seriously considering to buy and rent it. Its just a matter of calculating how much I expect condo prices to fall vs. how much interest rates will increase vs. how rents will respond. I'll be honest, I'm not sure whether I'll pull the trigger.<BR/><BR/>I've previously found properties like this. It takes a little more work than what most people do, but, as Lance knows, doing a little extra can pay big dividends. </I><BR/><BR/>Wow, you must be a big time investor. $300/month positive cash flow... what's the capitalization rate? My bet is that it is very low, like 1% or less.<BR/><BR/>But, that's okay, we need people like you who are satisfied with $300/month per rental income to buy the glut of overpriced condos, townhomes, and homes.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152756478180731012006-07-12T22:07:00.001-04:002006-07-12T22:07:00.001-04:00That's the ticket! There is a secret real estate ...That's the ticket! There is a secret real estate market where all the cheap houses are for sale! If only we had known...<BR/><BR/>Lance appears to have taken advantage of the elderly and cheated them out of $200K. Please don't hold him up as an example.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152756442798882782006-07-12T22:07:00.000-04:002006-07-12T22:07:00.000-04:00That's the ticket! There is a secret real estate ...That's the ticket! There is a secret real estate market where all the cheap houses are for sale!<BR/><BR/>Lance appears to have taken advantage of someone. Please don't hold him up an example.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152747373103706872006-07-12T19:36:00.000-04:002006-07-12T19:36:00.000-04:00I would agree that one more rate increase is likel...I would agree that one more rate increase is likely followed by a pause (and the resulting positive over-reaction), but then I read this and again am thrown in the darkness and dispair:<BR/><BR/>http://tinyurl.com/ntraxMarinitehttps://www.blogger.com/profile/01778945220593425787noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152743931678243722006-07-12T18:38:00.000-04:002006-07-12T18:38:00.000-04:00I've not seen any evidence of bubbleheads taking m...I've not seen any evidence of bubbleheads taking matter into their own hands. All I see is bitterness, complaining, and finger pointing.<BR/><BR/>This past weekend I checked out a 2 bd. condo in Adams Morgan. Its for sale, but not widely listed. In other words, you wouldn't find it if you only spend your time complaining on blogs.<BR/><BR/>Anyway, the place is for sale at big discount to comps. It could be rented immediately, at break even to mortgage, taxes, insurance. If I make a 20% downpayment, it would rent for nearly $300 a month positive cash flow.<BR/><BR/>I'm seriously considering to buy and rent it. Its just a matter of calculating how much I expect condo prices to fall vs. how much interest rates will increase vs. how rents will respond. I'll be honest, I'm not sure whether I'll pull the trigger.<BR/><BR/>I've previously found properties like this. It takes a little more work than what most people do, but, as Lance knows, doing a little extra can pay big dividends.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152743540258906872006-07-12T18:32:00.000-04:002006-07-12T18:32:00.000-04:00And also, I should point out that on the 31st year...And also, I should point out that on the 31st year Lance will be paying NO mortgage.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152743510568624502006-07-12T18:31:00.000-04:002006-07-12T18:31:00.000-04:00Lance said...“... and bought the house at about $2...Lance said...<BR/>“... and bought the house at about $200K under market at the time….”<BR/><BR/>“Because it wasn't on the market. I checked tax records and just approached people. Squeezing out the real estate of course helped, and the person being able to carry the loan helped too (i.e., his CDs weren't going to pay him 5%.)<BR/><BR/>So, forget the listings, days on market, inventory, FSBO’s, forclousures, just check tax records (for what Lance?) for homes you’d like and just drop by and ask the owner to sell (-$200K of course). Sounds like some very good Carlton Sheets bird dogging there lance. Especially to find such a deal on a $2Mil home!<BR/><BR/>“…..after several months and several offers (and a change of agents along the way) I still hadn't won a house in a the bidding wars, so I just took matters into my own hands. Which is all I advocate here for the bubbleheads rather than relying on a bursting bubble that..”<BR/><BR/>What the hell do you think we’re doing? We (bubbleheads) have said no to the $300k-$400K+ 50 year old 2 bedroom shit boxes and taken matters in our own hands. As the inventory doubles for those $300K-$400K+ shit boxes, sales are starting to slooooow. <BR/><BR/>Just one more thing. You did not purchase a home “$200K under market”. You, as a buyer, set the market value for the home. Oh, and made a nice comp for any other perspective buyer in the neighborhood. Thanks!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152743448554684812006-07-12T18:30:00.000-04:002006-07-12T18:30:00.000-04:00Anon,"Wow. This only works if the house appreciate...Anon,<BR/><BR/>"Wow. This only works if the house appreciates faster than inflation. (And over time, they don't)."<BR/><BR/>No, you're wrong. Evidently you've missed all the previous discussion yesterday where bubbleheads argued at length that real estate over time appreciates at about 1% above inflation. There were multiple links posted, supporting this.<BR/><BR/><BR/>"SO even if you sell for $400K that will only buy what $40K would have bought 30 years ago."<BR/><BR/>You can start by thinking where else would you have been living during those 30 years, and think about how much your rents would have increased over 30 years. Bubbleheads don't give this much thought. But, assuming you rent a shoebox apartment in DC now for only $1500, historic inflation rates indicates that in 30 years your rent will be in excess of $5000. And this will be for the same shoebox.<BR/><BR/>Lance, on the other hand, will be paying the same mortgage in 30 years as he is now. And its most likely that his mortgage will be less than your rent.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152740223068136062006-07-12T17:37:00.000-04:002006-07-12T17:37:00.000-04:00Obviously the whole story is not being told here.1...Obviously the whole story is not being told here.<BR/><BR/>1st People buy a Dupont Row house for $20K (in ummm, 1955)<BR/><BR/>2nd Lance approaches people in 2003 and says 'name your price'. (Other homes in area are going for $800K+)<BR/><BR/>3rd These people name a price $200K under market (and have no agent either to advocate for them)<BR/><BR/>4th Lance buys it and says 'I'm a real estate genius!'<BR/><BR/>Sounds shaaaaaaaaaaaaaaady, like someone took advantage of the elderlyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152739938293720382006-07-12T17:32:00.000-04:002006-07-12T17:32:00.000-04:00"Payment of principal is not what gets you any rea...<I>"Payment of principal is not what gets you any real equity in your property. It is simply time and the fact that as time goes by the gap between nominal dollars and real dollars grows and grows such that what was a $40,000 house 30 years ago is now a $400,000 house"</I><BR/><BR/>Wow. This only works if the house appreciates faster than inflation. (And over time, they don't). SO even if you sell for $400K that will only buy what $40K would have bought 30 years ago. See how that works? How exaclty have you come out ahead here.<BR/><BR/>If all you want is to <I>"ensure that I have monthly payments that are affordable"</I> how can you advocate people that people buy now? You yourself admitted that you could barely afford your first home. So how 'unaffordable' should it be initially? Should it be a tight sqeeze for 1 year? 5 years? 10 years?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152733357057300582006-07-12T15:42:00.000-04:002006-07-12T15:42:00.000-04:00my2cents asked:"How did you approach someone and p...my2cents asked:<BR/><BR/>"How did you approach someone and pay $200,000 under market? It sounds like you took advantage of someone's ignorance or found a very, very, very special circumstance..."<BR/><BR/>They set the price, I didn't. Considering they had paid $20,000 for the house, they made out pretty well. Incidentally, we're talking about a Dupont row house here ... I.e., $200K wasn't half the value (or anywhere near there ...) Also, he had no real estate agent to pay. My agent wasn't happy, but 'oh well' after several months and several offers (and a change of agents along the way) I still hadn't won a house in a the bidding wars, so I just took matters into my own hands. Which is all I advocate here for the bubbleheads rather than relying on a bursting bubble that may or may not happen (and which I personally think IF it happens won't mean the 50% reductions that are being bantered around.)Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152732099744516662006-07-12T15:21:00.000-04:002006-07-12T15:21:00.000-04:00anon,"Very few did an overview of the market, accu...anon,<BR/>"Very few did an overview of the market, accurately predicted a real estate boom and reacted accordingly by buying all they could."<BR/><BR/>I did ... when I bought that first condo 10 years ago. It was really evident to me that DC, our nation's capital, was well undervalued compared to what things were selling for in the 'burbs. (Remember, I believe all real estate markets are "local", so I wasn't concerning myself with the "national" real estate market ... which I don't believe really exists.) So, in any case, I bought full well knowing that things couldn't get worse ... DC was in bankrupcty that year, the mayor had had all his powers stripped from him by Congress (except for Parks and Rec) and the District had just gone through a period of no garbage pickups and no snow plowing during a major storm that shut it down for almost 1 week.) To me this was the nation's capital and obvious that Congress would have an interst to fix things ... which they subsequently have been working on in various means including the Control Board. Obviously, not everyone saw this since the place I bought had been on the market 2 years and had been reduced in price by something like 18% the day before I saw it in the listings my realtor was providing me. Going forward to 1999. The market had gone up a little then and the 2 bedroom I'd wanted had already gotten to the point where I didn't think I could afford it ... so my first reaction was to think "I'll wait till prices come down". Then I happened to be at a local (ANC) meeting where a developer in our neighborhood was trying to get a variance, and prices came up in the discussion. He explained that his clients were a Dutch company that had been doing a lot of work in NYC and that they wanted to start work in DC because it was so comparatively undervalued. He said they'd done studies and determined that condos in my neighborhood would be going for $400 per sq ft by the time their project was completed in a couple year. At that time they were going for $200 per sq ft ... I thought to myself "this is someone who knows what he is saying, if I expect to ever get that 2 bedroom condo, I am going to have to buy it now ... even if it means really stretching myself." ... it took nearly a year, but I got that condo and I got it for something like $170 sq foot (absentee owner who had moved back to Europe 10 years prior)... and at the same time an identical unit 2 floors up sold for $230 per sq ft ... I sold this unit last year for $585 per square foot ... so that I could by the house that had always been my dream.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152731356452767382006-07-12T15:09:00.000-04:002006-07-12T15:09:00.000-04:00How did you approach someone and pay $200,000 unde...How did you approach someone and pay $200,000 under market? It sounds like you took advantage of someone's ignorance or found a very, very, very special circumstance...<BR/><BR/>My $0.02.MyTwoCentshttps://www.blogger.com/profile/10642606797401998999noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152730891991923982006-07-12T15:01:00.000-04:002006-07-12T15:01:00.000-04:00anon,"Can you explain why your house was $200K und...anon,<BR/><BR/>"Can you explain why your house was $200K under market in a hot market? Curious as to why. Are you counting that $200K as part of your 40-45% equity?"<BR/><BR/>Because it wasn't on the market. I checked tax records and just approached people. Squeezing out the real estate of course helped, and the person being able to carry the loan helped too (i.e., his CDs weren't going to pay him 5%.) <BR/><BR/>No I am not really counting that as part of equity ... I am comparing with houses of similar sq footage that have since sold in the adjoining streets in similar condition ... which incidentally was "good" ... i.e., no problems, but could use updating of kitchen, baths, etc. As for asking if that equity is from making payments over the less than two years I have owned it ... Your asking the question indicates you are not understanding "time value of money" and how payment of principal is not what gets you any real equity in your property. It is simply time and the fact that as time goes by the gap between nominal dollars and real dollars grows and grows such that what was a $40,000 house 30 years ago is now a $400,000 house and yes you could say the person who stayed there "made payments" that got them the equity equal to the original loan ($32,000?), but who really cares since in today's dollars, it is the other $360,000 in equity that we care about!<BR/><BR/>The point I have been trying to make all along is simply that <BR/><BR/>(1) real estate should NOT be viewed as an investment ... it is your roof over your head. Yes, at first glance you think if I am talking dollars, then "what's the difference?" the difference is that my end goal is not to make (or lose) money but rather to ensure that I have monthly payments that are <I>affordable</I> and just as importantly <I>predictable</I> well out into the future so that I can rest easy at night knowing that come what may, I will have a roof over my head as long as I am healthy enough to work ... and hopefully when the time comes that I am not, then that I will have enough equity in the house to be able to downsize to something small that is completely paid off. That means I am not concerned about price fluxations. If they happen and it happens to be that they are UP fluctuations, and I can do another "move up" or whatever that leaves me in at least as good of shape financially, then so be it. If not, I just stay put.<BR/>and (2) that irrespective of whatever the market conditions are, a smart buyer putting in due diligence can buy for an affordable and predictable monthly payment provided they are realistic in their expectations. I mean we all may want that big manse in Great Falls, but we all can't afford it.<BR/><BR/>Good luck to you. I hope this was helpful.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152730709268964682006-07-12T14:58:00.000-04:002006-07-12T14:58:00.000-04:00Anon 11:01 So, now what do you think will happen ...Anon 11:01 So, now what do you think will happen next in the market? You have reason to be confident in your opinion so don't hold back.<BR/><BR/>And have you cashed out yet?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152730446453153232006-07-12T14:54:00.000-04:002006-07-12T14:54:00.000-04:00“May the best side win” true, but it’s kinda sucks...“May the best side win” true, but it’s kinda sucks when your GF (I mean girlfriend) and your friends are on the other side too…..<BR/><BR/>As for the FED, I don’t have the slightest idea, but if they raise, good time to buy some more GLD and SLV, and if they pause same for DOG, and PSQ. IMHOAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152728168147631512006-07-12T14:16:00.000-04:002006-07-12T14:16:00.000-04:00Same here.. sold my town home 04/06 (bought it 02/...Same here.. sold my town home 04/06 (bought it 02/03) in SoCal, have more than 200K in CDs and MM, and happily renting. I think it’s lot more common than people would think, but if you think that RE never goes down you wouldn’t waste you time reading blogs like these… just my 2c.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152727282048493672006-07-12T14:01:00.000-04:002006-07-12T14:01:00.000-04:00I did an overview of the market and guessed correc...I did an overview of the market and guessed correctly. YOu did not. I am a winner. You are a loser. Have a nice day!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1152726792899246182006-07-12T13:53:00.000-04:002006-07-12T13:53:00.000-04:00Many people have been able to trade up their homes...Many people have been able to trade up their homes in the last decade, largely due to rising appreciation. I think that is great, but mostly lucky. Very few did an overview of the market, accurately predicted a real estate boom and reacted accordingly by buying all they could. If you did this, than you have every right to make fun of renters and lord your financial acumen over everyone.<BR/><BR/>However, if you did not do this, please be intellectually honest and acknowledge that superior gains were made mainly because you happened to buy at a pivotal point in history, largely due to luck or personal circumstances that prompted you to buy at that time. You are still allowed to feel good about your gains, of course, but please don't act like it was due to your incredible ability to predict the next financial trend.Anonymousnoreply@blogger.com