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Re: crazy real estate market
Old 02-05-2007, 09:51 AM   #41
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Re: crazy real estate market

semtex - nice job!

(That was a predictable outcome)
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Re: crazy real estate market
Old 02-05-2007, 10:24 AM   #42
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Re: crazy real estate market

Hi Tryan
What do you think of the Boston market - Are you seing any good deals? I am still on the sidelines and waiting to buyfor the first time. I am looking in the Natick to Boston proper.

-h



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Re: crazy real estate market
Old 02-05-2007, 03:20 PM   #43
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Re: crazy real estate market

Nothing in the Boston area works as an investment property ... took over a decade to run up it'll take a recession to bring prices back to reality. That's my 2 cents.

Of course if it's your primary residence then it's more a quality of life issue. But if you can't afford the mortgage with conventional financing ... better to just keep renting. You'll get more house for your rental dollar today than you will paying a mortgage - at todays crazy prices.
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Re: crazy real estate market
Old 02-05-2007, 04:04 PM   #44
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Re: crazy real estate market

Quote:
Originally Posted by tryan
Nothing in the Boston area works as an investment property ... took over a decade to run up it'll take a recession to bring prices back to reality. That's my 2 cents.

Of course if it's your primary residence then it's more a quality of life issue. But if you can't afford the mortgage with conventional financing ... better to just keep renting. You'll get more house for your rental dollar today than you will paying a mortgage - at todays crazy prices.
Nobody is buying multi-family as an investment. It would take a 50%+ drop in current prices for things to get somewhat sane.

The only people buying in the Boston area are homebuyers. Even then, there's lots of irrational buying with 2-family condos (buying half a house), interest-only mortgages, and other "creative" buying strategies.

It's going to take a long time for the rest of the economy to catch up to the real estate market.
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Re: crazy real estate market
Old 02-05-2007, 08:40 PM   #45
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Re: crazy real estate market

I am looking to buy a primary residence, but I am a single guy who is happy renting. I keep an eye on the market and though right now I am finding a few condos in my price range but nothing screams buy. I was wondering if anyone else is finding any good deals. If you guys see any deals give me a shout :-)

-h
p.s: I do have 20%+ for my down payment and making monthly payments is not an issue on $350K loan at 6% interest rates.

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Re: crazy real estate market
Old 02-05-2007, 10:31 PM   #46
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Re: crazy real estate market

I invest in the Boston market. Near the universities, rental demand is incredibly strong, population count is (slowly) growing, and there is nowhere to expand to. That covers Beacon Hill/Back Bay/Downtown, Allston/Brighton, and Cambridge. I am pursuing some deals right now - condos that will be cash flow positive with 10% down. They are out there, because sellers are panicked. I think inflation will pick up and incomes and rents will increase; if I'm wrong, I won't make much money and may lose some. If you look at condos in places like Worcester or Lowell - they are overpriced, and the rental market sucks. Those are the properties that will fall 20%-30% and even then not sell. If you look at houses in Lexington, Weston, Wellesley, etc, I think prices will remain relatively stable, maybe falling a little bit ( < 10% ).

Boston is a great town for landlords who don't mind renting to students and young professionals. I think less than 30% of housing in the metro area is owner-occupied. Many people associate Boston with overpriced housing but compared to other "bubble" areas it is quite reasonable, because of a higher ratio of investors to owners buying.
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Re: crazy real estate market
Old 02-05-2007, 11:15 PM   #47
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Re: crazy real estate market

hi macdaddy
I am one of those young professionals and cash flow positive with 10% down sounds very good. I was running the numbers for a few places around the brookline area and I haven't seen anything like that yet. I have lived in the Huntington ave area and brighton for about 4yrs and now live near natick. I am looking at condos right now close to boston.

-h
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Re: crazy real estate market
Old 02-05-2007, 11:22 PM   #48
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Re: crazy real estate market

Quote:
Originally Posted by macdaddy
...I am pursuing some deals right now - condos that will be cash flow positive with 10% down. They are out there, because sellers are panicked....
I'd be curious to see how successful you are with 10% down rental condos with positive cash flow in the Boston area.

If you ever close on a deal like this, maybe you can let us know the details behind your purchase.

I don't see any deals even close to that in this area right now.
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Re: crazy real estate market
Old 02-05-2007, 11:44 PM   #49
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Re: crazy real estate market

I'll post the #s on a place I am working right now, if you two promise not to steal it from me.

FSBO - 210k - 3/1 800 sq ft in a hot area ( which means to me - no vacancies and some appreciation over the next decade ). Brookline is a hot area but also desirable for owner occupants (families), which means prices will be higher than in student-dominated pure rental areas.

20k down. 190k balance for 30 years @ 6.75% = ~ $1070/month interest. HOA $150/mo. Tax and insurance $200/mo. PITI = $1420. Rent is $1300-$1400 and it will always be rented. Maybe there is some benefit from depreciation write-off, tax benefits, etc. So lets call it a wash on a YOY cash basis, but it should appreciate a bit.

The market here has definitely fallen from the peak. The risk I take is that it could fall more (if there's a recession). But there are a lot of cash rich investors operating in this area which puts a limit on how far prices can fall. This one is in the top 5% of deals I see. I agree with retire@40 that most multi-families are ridiculously overpriced and won't cash flow even with 20% down. A lot of them were bought by local contractors who rehabbed them and are now trying to flip them.

Feel free to PM me with any specific kinds of properties you are looking for, I'll be happy to keep my eyes open and share info on what I'm seeing in the market.
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Re: crazy real estate market
Old 02-06-2007, 08:05 AM   #50
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Re: crazy real estate market

macdaddy,

there's the difference .... you see a good deal; while I see a negative cash-flow nightmare.

You can "plan" for 100% occupacy but the reality is students leave every year or two. And the clean up from these kids is extensive, expensive and time consuming. Which calls out another piece you're not seeing - maintenance.

Sure they MIGHT appreciate .... but you can get much quicker results - and have more fun - betting on RED in Vegas.

I had 2 condos in Brighton for years ... I'ld rather rent parking spaces in todays market.
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Re: crazy real estate market
Old 02-06-2007, 08:26 AM   #51
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Re: crazy real estate market

redefining cash flow positive...
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Re: crazy real estate market
Old 02-06-2007, 10:32 AM   #52
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Re: crazy real estate market

tryan - that's a valid point... I guess "cash flow positive" HAS been kind of redefined to mean "no loss". However, the units I like are in well-built brick buildings with very few maintenance issues. I have owned a few of these units for going on 8 years now and have had pretty much zero issues. (In 8 years, each unit has been vacant for a total of about 3 months.) I will need to update the kitchen and bathroom at the 15 or 20 year mark, but everything else is part of the HOA. This unit is in Allston, which from my experience is a bit stronger of a rental market than Brighton. The play with these units is to wait for Harvard to come in and increase the population density. There are other metrics like - Boston University charges $500/mo per bed for dorm space, for poor conditions, which will increase to $600/mo soon. This helps set the rates for student rental properties. Student demand is so tight all the time that if you price a unit appropriately, it will be gone in a day or two. And I agree, many landlords would not be comfortable with student rentals. Being a recent student and resident of the area, I have a high comfort level. I have had students trash units before but the cost never exceeded the security deposit so it worked out in the end. Most of the time I try to rent to Harvard, MIT, BU or BC students and it's typical for the parents to co-sign. When someone is paying $40k/year to go to school I don't worry too much about them covering their $600/mo rent payment.

Compared to renting a parking spot, just getting out of bed in the morning is hard work. I have a few of those are they are great.

I was in North Carolina and saw real "cash flow positive" units. 100k to buy a 3/2 SFH on a nice little plot of land. Rents for $1200/mo. In my mind, that is much more of a headache... harder to fill vacancies, deferred maintenance... I would be sitting there thinking "how long until the roof falls off?" and "how long until I have to repaint it?".
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Re: crazy real estate market
Old 02-06-2007, 10:54 AM   #53
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Re: crazy real estate market

Things are free-falling around here north of Sacramento, which IIRC was the most "overheated" market in a study done last year.

People were snapping up houses near where I live and commuting down to the city, until they drove prices from the high 100k to mid 250k up into the 400-500k range.

Developers built some huge subdivisions between sac and here and then buyers evaporated. Now the mid-commute properties are being sold for huge discounts. A nice new home 1/2 hour from work for $325 or go an hour away and look at stuff at the same prices...

I could have gotten $425 for my house 18 months ago...be lucky to get $325 for it right now.

Given the long rise in equities, i'm starting to think about yanking out a chunk and starting to do some bargain hunting for a fixer with a seller that has to go.

As far as pricing, I go with several metrics. I look at new construction cost to rebuild the home in question, plus landscaping and upgrades, then sub off some money for age/depreciation and stuff that needs replacing in the short term. If I can get close to that price, i'm getting a bargain. Once you've floored out on buying an existing established home for close to new construction cost (with adjustments) you dont have far to fall. The difference is what you're putting at risk and the quality of town, neighborhood, amenities and job opportunities is the premium. If that premium seems worth it, or theres upside in new companies/retailers/restaurants/parks/etc moving into the area...you've got a good basis.

I do look at zillow but their prices for individual properties is lame. But its probably a fair representation of average cost per home/lot square foot. What I've been using zillow for is to find the comparable sales in the region, then doing a drive-by to have a look at the homes, how they look, how the lot is laid out, and to see exactly how "comparable" it really is.

Another good pricing rule of thumb is to look at what a comparable house is renting for, factor in costs of ownership with renting in mind. If you can get cash flow out of that, you've got a good deal. If you can rent a home for 1/2 what it costs to buy, you're overpaying. Rents are pretty good about establishing a floor value as renters will start translating to homeowners when the numbers hit parity and homeowners will start dumping properties when they can make more selling than renting.

As far as negotiating...as soon as you're "in love" with a house you're screwed. I'll go through my valuation process and then put a fair offer on a home that suits my needs. I could care less what the asking price is. A few times I've "insulted" the seller, a few times i've been surprised.

Unless we're in the ballpark and based on circumstances, I rarely accept a counter or counter-the-counter. I thank them for their counter and go look for another week or two. If I dont find anything else that excites me, I often come back and offer slightly less than I did the first time.

Yes, slightly less.

If you have a motivated seller and few competing buyers, they panicked when you walked away and will sometimes jump on your new offer before you rabbit off again.

When the agent says "but thats less than you offered the last time!", the answer is "yes, but I felt my offer was reasonable based on my evaluation and I didnt want to pay more than that. When the seller didnt take the offer, I felt like I should look at other properties and that took time. My time is worth money."

The couple of times I did this, it worked. Seller hated me though. Obviously this doesnt work in a sellers market. In the current market in many regions where prices are falling and the bottom isnt obvious...could be some opportunities to play hard ball.
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Re: crazy real estate market
Old 02-06-2007, 11:20 AM   #54
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Re: crazy real estate market

Quote:
Originally Posted by macdaddy
I was in North Carolina and saw real "cash flow positive" units. 100k to buy a 3/2 SFH on a nice little plot of land. Rents for $1200/mo. In my mind, that is much more of a headache... harder to fill vacancies, deferred maintenance... I would be sitting there thinking "how long until the roof falls off?" and "how long until I have to repaint it?".
Yep. There's a 4 BR house a block up the street from me for sale at ~$132.5k from the bank. That's $833/month mortage+insurance+taxes w/ 20% down and a 6.75% 30 year fixed. ~$100/month of that PITI is principal. Not sure what it would rent for, maybe $1150-1200/month. It may need a little work, probably a fresh coat of paint.

Here's the house for you playaz: http://www.realtor.com/Prop/1074489808

You're right about the maintenance with a SFH. It's always something.

(edited to change asking price and add link to property)
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Re: crazy real estate market
Old 02-06-2007, 04:01 PM   #55
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Re: crazy real estate market

macdaddy - glad the student rental is working for you. I agree it's very stable in the Boston area. Always had the parents co-sign ... that's where the $$ was coming from.

Biggest "head-ache" was the complaints from the owner occupants who did not appreciate living in college housing. Something about all night parties when they were triing to get to work the next day ... or worst, let the baby sleep. Those were hard phone calls. Funny Brighton rental story . .. rented to Chris O'Donnell (aka Robin) before he hit big. Wasn't in the unit 2 months and he left to film Fried Green Tomato. Weeelll his roomate basically trashed the place. Parties every night ... lost a month cleaning that mess. Now if I could find the lease ....EBAY, maybe.

Quote:
I look at new construction cost to rebuild the home in question, plus landscaping and upgrades,
Yup, that's why places like Texas RE is going nowhere.
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Re: crazy real estate market
Old 02-06-2007, 10:04 PM   #56
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Re: crazy real estate market

I don't mind if my tenants throw all night parties, as long as I have a standing invitation (and accident insurance).
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Re: crazy real estate market
Old 02-06-2007, 10:52 PM   #57
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Re: crazy real estate market

While they were installing more gold in my mouth this afternoon my dentist and his assistant were talking property. She had recently moved up from Alamo, CA which irrc is out near Pleasanton on the dry side of the Berkeley Hills. Don't know how close BART gets.

She said that in late 2005 her home appraised at $2.4; and that they sold it in December 06 for $1.3mm. This seems highly unlikely to me, the appraisal must have been phony. But who knows? She said it was a big high quality house. But that is almost a 50% haircut!

As far as I can tell, the Seattle market is still very strong. Maybe it will take layoffs at Microsoft to change it. OTOH, at some point I would think MS's positive stimulus should start to wane, because I don't know how much longer they could add headcount at the rates of recent years.

Anyone who sees signs of prices falling in Seattle please let me know.

BTW- you Boston guys- do you stay north of Huntington Avenue when you are hunting for rentals?

Ha

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Re: crazy real estate market
Old 02-06-2007, 11:20 PM   #58
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Re: crazy real estate market

Quote:
Originally Posted by HaHa
Anyone who sees signs of prices falling in Seattle please let me know.
You're shopping for a downtown condo, aren't you? Some say there's already a condo glut, and they're still building more.

article

I think Microsofties drive the eastside market, so you might have a pretty good chance of catching a bargain downtown.
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Re: crazy real estate market
Old 02-06-2007, 11:40 PM   #59
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Re: crazy real estate market

Quote:
Originally Posted by wab
You're shopping for a downtown condo, aren't you? Some say there's already a condo glut, and they're still building more.

article

I think Microsofties drive the eastside market, so you might have a pretty good chance of catching a bargain downtown.
Thanks for the link Wab.

Ha
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Re: crazy real estate market
Old 02-07-2007, 07:10 AM   #60
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Re: crazy real estate market

Ha - I think what you're seeing on the numbers is a real estate appraisal for maximum value at a peak time period designed to get someone to put their house up for sale vs actual sales price. I could realistically have gotten 425k for my house around the same time hers appraised at 2.4M, maybe 320-325k right now.

Yep, pretty good haircut but the stuff had grown so long it was dragging on the ground. A little trim to the knees isnt that unreasonable.

Pleasantons pretty nice but it can get hot; bart was run to it around ten years ago IIRC. You can take a blue train right into SF or change trains and get down to fremont.
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