tag:blogger.com,1999:blog-13164186.post115289301638818115..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: Price Index for Average Selling Price for Housing Units in Northern VirginiaDavidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger101125tag:blogger.com,1999:blog-13164186.post-1153231684777357202006-07-18T10:08:00.000-04:002006-07-18T10:08:00.000-04:00No, but many on this board are.btw - va_investor h...No, but many on this board are.<BR/>btw - va_investor has the wisdom of experience, lance less so.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153231676501256812006-07-18T10:07:00.000-04:002006-07-18T10:07:00.000-04:00No, of course not. The average reader of this blog...No, of course not. The average reader of this blog works menial jobs and has minimum savings. The average reader also has only the most basic understanding of finances and investing. The average reader would much rather pout and rant than do anything to improve his/her lot in life.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153191876230315892006-07-17T23:04:00.000-04:002006-07-17T23:04:00.000-04:00Does anyone reading this blog really believe that ...Does anyone reading this blog really believe that the average homeowner in DC or Northern Virginia is anywhere near as advanced as Va Investor or Lance? (This is not a facetious dig at VAI or Lance, btw).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153171085466414622006-07-17T17:18:00.000-04:002006-07-17T17:18:00.000-04:00Keith,In Cinn., we went from an apartment to a hou...Keith,<BR/><BR/>In Cinn., we went from an apartment to a house. I don't think the house rent would have been that much more.<BR/><BR/>By "undermarket" I mean less than the comps - at least 10%. We wanted/needed to be able to get out if necessary. We didn't have much money back then and looked long and hard for the right deal.<BR/><BR/>Later on, I learned about foreclosures and started buying those as our rentals.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153169411447789082006-07-17T16:50:00.000-04:002006-07-17T16:50:00.000-04:00Investor,On the 275 to 650 rent increase in Cincin...Investor,<BR/><BR/>On the 275 to 650 rent increase in Cincinnati: Were you renting a house before? <BR/><BR/>I.e., was your rental hedonically similar to the house you bought? I think this is important.<BR/><BR/>For instance, your housing costs doubled plus some in DC in the 1980s, but you went from a 1 bedroom condo to a house in a decent suburb. <BR/><BR/>Frankly, with the amount of saving you did, especially during your neg cash flow years, it sounds like you'd be rich today either way, either through housing or the stock market. <BR/><BR/>Arguably, the leverage you can bring to housing, along with your willingness and ability to spot "deal," may have made real estate better.<BR/><BR/>Question: When you say "undermarket," are you talking about houses that are going for less than the houses around them?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153156349273971072006-07-17T13:12:00.000-04:002006-07-17T13:12:00.000-04:00Lance,Right on regarding the tax aspects. Those w...Lance,<BR/><BR/>Right on regarding the tax aspects. Those who have been around awhile remember when the passive activity loss limitations went into effect in the late 80's.<BR/><BR/>This caused some heartburn for us until around 93 or 94 when the Real Estate Professional exceptions were created. Our effective tax rate is extremely low and my husband used to claim 20 exemptions to increase the cash flow.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153154297467710972006-07-17T12:38:00.000-04:002006-07-17T12:38:00.000-04:00Keith,Note though that from a "profit" and a "cash...Keith,<BR/><BR/>Note though that from a "profit" and a "cash flow" basis, Va_Investor's deficits between what he was renting out for and what they were costing him were not as bad as they seemed from the numbers he quoted ... assuming he knew what he was doing, and I wouldn't doubt that he did. Firstly, when you are renting out an asset such as a house, you are allowed to take a depreciation deduction each year. And since the mid '80s (Reagan's tax changes) that has been accelerated depreciation ... meaning you could write off a fairly large chunk of the basis (i.e., "value") of the house each year. (Basis is what you paid for it minus buying expenses ... Mortgaged vs. Non-mortgaged amounts are not differentiated.) So, assuming he had a good income, he could benefit each year by not paying tax on income that otherwise would have been taxed. And from a cashflow perspective, he could just adjust his exemptions (W4 Form) to reduce tax withholdings on a monthly basis. On a rough basis, I would bet that at least 1/2 (if not much more) of the differential between rents and mortgage costs was reduced because of this tax benefit. Any comments Va Investor?Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153146895447332662006-07-17T10:34:00.000-04:002006-07-17T10:34:00.000-04:00Thank you va_investor for your honesty.It is impor...Thank you va_investor for your honesty.<BR/><BR/>It is important for people to understand that it is very difficult to make money with rentals right off the bat. especially without significant cash up front.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153145384519521232006-07-17T10:09:00.000-04:002006-07-17T10:09:00.000-04:00Keith,You'd be surprized at some of the numbers.We...Keith,<BR/><BR/>You'd be surprized at some of the numbers.<BR/><BR/>We bought our first house in 1981. This was in Cinncinati - very cheap living. Our rent had been $275 and our mortgage was $650. Huge increase. Our income was about 30K.<BR/><BR/>We were transferred to D.C. area 6 mos later. We had bought undermarket and were able to get out without a loss.<BR/><BR/>Here, we could only afford a one-bedroom condo in a bad area so we rented for 2 yrs. at $400 per month.<BR/><BR/>We then bought with a one-year arm. Got a fixer in Falls Church for 100K. Our monthly payment doubled to $860.<BR/><BR/>We bought a rental in the interim in Silver Spring for 78K. Also a fixer (estate sale). Also one year arm. As I recall the rent was about 3/4 of the payment. We looked at plenty of places for around a 100k where the negatives would be 400-500/month. Huge as a ratio.<BR/><BR/>We were never positive on cash-flow until the early 90's when rates dropped and I was able to refi everything AND raise rents.<BR/><BR/>We, basically, took it on the chin for some years but had plenty of income to cover things.<BR/><BR/>We always bought well under-market so the negative (after taxes) did not concern me too much.<BR/><BR/>Cash-flow is vastly improved now as one would expect.<BR/><BR/>As I have said before, absent a brief window in the late 90's, it has always been impossible (at least for me) to be break-even absent 30-40% down.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153141944351113512006-07-17T09:12:00.000-04:002006-07-17T09:12:00.000-04:00Anonymous posted a lame article that says nothing ...Anonymous posted a lame article that says nothing about Arlinton real estate fundamentals. Pretty desperate.<BR/><BR/>I don't think a young person could implement Investor's plan in the DC area today. I do think a young person could do it in many other areas, though. <BR/><BR/>Investor, could you provide some information on your first house payments, and what the rents were on your first few homes when you started?<BR/><BR/>We could then compare this to payments and rents today, and see if the plan would work in the present market.<BR/><BR/>Of course, Investor himself says he hasn't bought much, especially since 2002. So he likely agrees with me.<BR/><BR/>I think Investor is a bubblehead, actually, who's had a strong reaction to some of the crazier bubbleheads on the board. But really, Investor, Lance is crazy the other way, and you just gotta face that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153096203032782572006-07-16T20:30:00.000-04:002006-07-16T20:30:00.000-04:00Yes, what a horrible, terrible, no good very bad A...Yes, what a horrible, terrible, no good very bad Arlington real estate market<BR/>http://sungazette.net/articles/2006/07/16/arlington/news/nws906a.txtAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153018487268933782006-07-15T22:54:00.000-04:002006-07-15T22:54:00.000-04:00Va_Investor,Way to go! I like your thinking ... a...Va_Investor,<BR/><BR/>Way to go! I like your thinking ... and proven success!Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153016950562684582006-07-15T22:29:00.000-04:002006-07-15T22:29:00.000-04:00Thanks for the info...I would have thought that mo...Thanks for the info...I would have thought that mortgage co's would want a substantial downpayment if it was not an owner occupied residence.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153015666821401412006-07-15T22:07:00.000-04:002006-07-15T22:07:00.000-04:00godot,Wow, lot's of questions. We have had at lea...godot,<BR/><BR/>Wow, lot's of questions. We have had at least 6 or 8 properties since our mid-late 20's.<BR/><BR/>Early on the financing was difficult. We started buying at age 22 and moved every year or two - keeping the old place as a rental. That way we received low-downpayment favorable terms. Several acquisitions were owner-financed ( an excellent way to go).<BR/><BR/>In our late 20's, we developed a relationship with a small, family-owned bank. I could get a loan in a matter of days with 20 or 25% down.<BR/><BR/>I did at one-time cross collateralize some of our properties to establish a line of credit to buy foreclosures.<BR/><BR/>With the advent of credit scores, plus our income and job history, financing has been a piece of cake. I refied 4 properties at once thru a national lender and did not have to produce one piece of paper (3 yrs ago).<BR/><BR/>I now have checkbook lines-of-credit on most of my places so that I can pay cash if needed for a great deal.<BR/><BR/>I have never "had" to put more than 20% down and often only 5%. I usually put 25 -30% down or more if it is a 1031.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153014583194355362006-07-15T21:49:00.000-04:002006-07-15T21:49:00.000-04:00VA,Sounds like you got it together...yeah, the one...VA,<BR/><BR/>Sounds like you got it together...yeah, the one property that I have left, I bought in early 2005 at a steal, and I will hold that beyond retirement. I would like to accumulate several more places, but my better judgment tells me to wait and that there will be a better time.<BR/><BR/>I have never owned more than 3 places at one time. Have you had any difficulty with mortgage lenders when it comes to financing? Do they require that you offer the free and clear places as collateral? Have you used different lenders or the same ones all of the time? How about down payments…have you had to increase them each time, or has 25% been an acceptable amount?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153013932826364352006-07-15T21:38:00.000-04:002006-07-15T21:38:00.000-04:00godot,I bought a couple of places last year at abs...godot,<BR/><BR/>I bought a couple of places last year at absolute steals. I 1031'd into them, so no new money was invested.<BR/><BR/>Prior to that, I last bought in2002 at a foreclosure auction. I have 12-14 properties. I put a contract on some land last weekend.<BR/><BR/>I will and am buying if the price is right. My longterm plan is to have everything paid for by age 55 and then use the rents to supplement retirement.<BR/><BR/>Even in this market, it is still possible to buy low and sell high.<BR/><BR/>My 2 retirement homes are alraedy free and clear. I used 1031's to acquire both.<BR/><BR/>At present, I plan to leave all the property to my son (now a teenager).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153012883821949922006-07-15T21:21:00.000-04:002006-07-15T21:21:00.000-04:00"Didn't your transaction costs and taxes equal or ..."Didn't your transaction costs and taxes equal or exceed any projected downturn? "<BR/><BR/>Point well taken. I made out well on one place because I lived in it for over two years, but the other had substantial costs even though I sold it FSBO. To me it is about opportunity cost...if I have a cleaner slate once the downturn takes place, which I understand is not a guarantee, then I will load up on house or houses at that time. I am of the belief that this is the "sell high" portion of the buy low sell high cycle. The biggest issue that I am facing is finding the patience to wait out the downturn before buying again - This could take years. I will also be willing to start buying again if the rent to mortgage ratio gets in line by higher rents and higher national income. Plan B will be to move somewhere that this is the case...I like DC, but I am not in love with it. Are you still buying properties? Prices must seem ridiculous to you if you own some at pre 2001 prices...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153009284385857702006-07-15T20:21:00.000-04:002006-07-15T20:21:00.000-04:00Godot,Didn't your transaction costs and taxes equa...Godot,<BR/><BR/>Didn't your transaction costs and taxes equal or exceed any projected downturn?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153006730168089552006-07-15T19:38:00.000-04:002006-07-15T19:38:00.000-04:00"Any feedback on my posting guys? Thank you!"Nah, ..."Any feedback on my posting guys? Thank you!"<BR/><BR/>Nah, you pretty much nailed it. Watch those who tell you that condos will be hurt, but townhouses and single family homes will be ok. If you took econ 101 you learn that a substitutes rise and fall with the primary item. They may not fall buy the same percentage, but if condos drop 30%, you can expect townhomes and sfh's to follow a similar pattern.<BR/><BR/>Also, don't listen to those who say "my place is in DC or Arlington, so it won't be hurt...it is the ones in the suburbs that will be hurt." Also bunk, if you have watched this market, then you know that percentage gains in ashburn have been similar to those in arlington - they just started at different levels. The inventories seem to be rising in lockstep, so you can expect that the price declines, which are just starting, will also follow the same pattern.<BR/><BR/>You would think that I would be selling my last place after having said all of this...I am not. Crazy things happen (like the last 5 years) so I will hold on to one as a hedge against the remote possibiliy of higher pricesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153006675784328312006-07-15T19:37:00.000-04:002006-07-15T19:37:00.000-04:00va_investor and lance,I am in my 20s. And I certa...va_investor and lance,<BR/><BR/>I am in my 20s. And I certainly plan to own one day. I am not saying that the reasons listed above are reasons not to own, they are simply reasons to plan, to keep assets liquid, to not over extend yourself, and to be very knowledgable about the inherent risks of sophisticated financials tools (such as I/O financing). <BR/><BR/>A lot of folks just aren't counting doing this stuff. An interesting book about this is The Two Income Trap. It talks about how two income families are declaring bankruptcies because couples based their finances on two incomes. When one loses their job, they can't carry the load and in comes cases declare bankruptcy. <BR/><BR/>I am not controlled by fear. In fact, by being aware of the above, I feel more confident about my financial future because I am 'expecting the unexpected' and planning for it accordingly. That said, I appreciate your concern for folks like myself.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153006169710053652006-07-15T19:29:00.000-04:002006-07-15T19:29:00.000-04:00godot,Don't know about Charlotte, but 75% of what ...godot,<BR/><BR/>Don't know about Charlotte, but 75% of what I own is waterfront and I have seen some good run-ups.<BR/><BR/>The Boomers are buying second homes.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153005771854842302006-07-15T19:22:00.000-04:002006-07-15T19:22:00.000-04:00Anyone follow the Charlotte, NC market? I was loo...Anyone follow the Charlotte, NC market? I was looking at some 2br condos on Lake Norman about a year and a half ago that were selling for about $125k. I just looked on-line and see a couple for sale and a couple under contract for just over $200k. I did not think that charlotte was participating in the run up in prices. Is this a lake thing, or is the rest of charlotte jumping up in price too?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153005537794946992006-07-15T19:18:00.000-04:002006-07-15T19:18:00.000-04:00Actually, fear is what prevents people from taking...Actually, fear is what prevents people from taking risks. It is when the fear is unreasonable (as in the case of anon 3:37) that success is undermined.<BR/><BR/>I hope that all my tenants are afraid! I hate turnover.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153004161284562492006-07-15T18:56:00.000-04:002006-07-15T18:56:00.000-04:00yes anon 337, you don't understand that nothing in...yes anon 337, you don't understand that nothing in life is EVER sure ... now, as I have said, i am fiscally conservative and don't believe in "gambling" ... please don't confuse "gambling" with looking around you and making your best guess as to future events (and how they will impact you) with "gambling". "gambling" is looking around you and seeing all the fundamentals such as economic growth and inflation are there to increase housing costs (i.e., monthly mortgage payments), and deciding you're going to bank on the 5% chance that the economy is going to collapse and let you get that condo you've been wanting for a 50% discount before some other bubblehead gets it first and/or you end up in a bidding war for it. and yes, i realize that it IS possible for one person's "gambling" to be another's "reasonable estimation as to probability" ... and that is what we are on here for .. .i.e. to discuss what is reasonable out there and what is not ... NOW, you're bringing up the possibility of everything and anything that can happen to you ... well, unless you are the worst worker in the world (and not entrenched in a government job that you can't be fired from), why should you worry about that which is improbable? any one of us can get laid off or get sick, etc. i personally was laid off from my job of 11 years only 2 1/2 months after buying the house last year! did i expect this? no, of course not. did i deal with it? yes ... and you know what? i ended up with not only 5 months serverence pay, but making some $18,000 a year more because in the new job! (it doesn't pay to stay in one job too long ... you get your big "raises" by switching companies.) in the end, all is well ... actually, "better" than it was. my experience has shown me that whenever one door closes, another opens. change is good ... it is opportunity. PLEASE, for your own good, stop fearing "what may happen" and start looking forward to "what may change" as this is what brings you opportunities! Nothing in life is guaranteed ... not for anyone ... under any circumstances.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1153003412521241682006-07-15T18:43:00.000-04:002006-07-15T18:43:00.000-04:00anon 3:37,One thing can be predicted here. Based ...anon 3:37,<BR/><BR/>One thing can be predicted here. Based on your comment, you will never own. I bet you have a book full of excuses/reasons.Anonymousnoreply@blogger.com