Housing Crisis Bad - people choose to sleep on lawns?

[calmloki]

I was indolent today - PAID a plumber to go under the place I pumped out and had a fan going on. Nasty stinky grey water leak. Little bitty guy with a business called Pink Sized Plumbing. Drove a lifted F350 Diesel and had something to prove to the world about his capabilities. Charged a fair price, did nice work; think we've got a new go-to plumber.

Also happened to be a several of the places we have yard work done when the new yard guy showed up. He did a better job with me onsite, I praised his work mightily, suspect better work will continue for a while. Something about the owner being right there... Met 3-4 of the new tenants, which was fun. Something to being an offsite landlord and steaming into port to show the flag.

 

[arebelspy]

The only way I am going to add any more units is if I can get a certain ROI after I pay a mgt company to take care of everything!

That's definitely the way to go about it: calculate a management fee of 8-10% in when calculating your cap rate.

I'm managing our properties right now (because I figure why pay a thousand or two per property per year to a property manager, when I can think of it as a side gig), but there will definitely be a point where that changes, and I'd want a good return on our money even after paying someone else to do it.

 

[freebird5825]

My only real estate investments are our house and Vanguard's REIT index fund.

RE is too much work for me. I am also away from home too much. And it is not liquid.

You guys go ahead--start without me.

Can I sit next to you on the bench ?

I have my own home for my sole RE investment. I used to own a small amount of VG REIT but exchanged it to VGENX in the course of a multi-year exercise to simplify my portfolio (too many funds). It turned out the exchange was a good move at the time...in my case, pure dumb luck.

 

[Rodreinvestments]

Good Day All,
I am a Real Estate Investor and US Soldier out of NC, I also trade on the FOREX, Commodities and the Futures markets. As I read most of these post I see a lot of speculation and FEAR. With any market, regardless of the investment vehicle it's all about positioning. Is your money in a position that is producing?! Real Estate is a great vehicle (To Me), my money as well as the money of thousands of other Investors are in a position to produce or we wouldn't keep investing. If you are not making money in this market then you are positioned incorrectly! You may need to invest in another state or city to find better deals. I know that every city and state does not have gems laying around, but they are just laying around, just not in your backyard! Instead of saying how bad the market is "reposition yourself". Find individuals that are making money in the market and find out what they are doing that you aren't. Being a landlord can be a huge headache, but it can also be very rewarding "if done correctly". What most are not told is that being a landlord is a skill that is developed. You don't just buy property, collect rent, make a few repairs and zing your rich! You really do need to have a system for how you run your properties, so that they are not running you! Being a landlord is also not the only way to invest in Real Estate! Many of you have money in accounts that are not performing the way you hoped they would; we continually give investors a SECURE 12-15% return on Privately Invested money. I am sorry to be long winded, but for those that speak negative about how the market is (reposition yourself, you are investing WRONG!)

To Your Success,
Oscar Rodriguez

 

[M Paquette]

we continually give investors a SECURE 12-15% return on Privately Invested money.

Oh, this will end well...

 

[Nords]

Oh, this will end well...

Only if he diversifies too!

 

[Rodreinvestments]

I find it amazing that people find these returns impossible! We do these types of transactions on a weekly basis. It's not my intent to persuade anyone to invest in Real-Estate, I just wish people were better educated before making comments of skepticism.

V/R,
Oscar Rodriguez

 

[M Paquette]

I find it amazing that people find these returns impossible! We do these types of transactions on a weekly basis. It's not my intent to persuade anyone to invest in Real-Estate, I just wish people were better educated before making comments of skepticism.

I don't find the returns impossible at all. Heck, I think quite a few folks here have seen pretty good returns on a variety of investments over the past several decades we've been investing.

we continually give investors a SECURE 12-15% return

There's a couple of interesting keywords Rodreinvestments uses here that send up a flare.

Continually... SECURE 12-15%

See, claiming continuing, secure, very high real rates of return is something we've seen before.

[FONT=Verdana,Arial,Helvetica]Words like "guarantee," "high return," "limited offer," or "as safe as a C.D." may be a red flag. No financial investment is "risk free" and a high rate of return means greater risk.[/FONT]

 

[calmloki]

An old thread:
http://www.early-retirement.org/forums/f28/funding-private-loans-30900.html

I know at least one other member on here has loaned on property recently and is doing well. We are down to three loans, all current, in the 10-11% range. We also have a loan that is worth a year of our retirement living expenses that is worthless: no pay, no security. I anticipate that one of the loans we hold, on an old trailer park with a number of acres of land, will go bad, leading to a costly foreclosure, costly cleanup/fixup, possible introduction to trailerpark management, and ultimate ownership of some nice wild property and sale of a funky trailerpark.. Have had two consecutive late pays so we drove up to take a look and three of the five trailers that had been there are gone, taking with them our borrower's income.

The investment group we had made a number of loans to has pretty much stopped in this area - the houses just weren't selling.

I like and make money on real estate, but it's not for everyone. (more for me)

 

[REWahoo]

Honobob? Is that you?

 

[Nords]

Honobob? Is that you?

From another thread:

I'm sorry, no harm no foul, just trying to help! Note taken.
V/R,
Oscar Rodrigeuz

We all know that Honobob would never have said that he was sorry... at best, he would have expressed sorrow that we were too stupid to see the light!

Even now when I drive through a certain portion of town I find myself hunched down over the steering wheel hoping to avoid detection...

 

[Rodreinvestments]

I try to never take anything too personal (M Paquette), every comment that I have made regarding what MY company does is FACT. I can't speak for what other jokers are and have been doing with their scams masked as a business. Again my post was not and is not to persuade anyone that Real-Estate is the right investment vehicle for them or to even invest in what I am doing. It was simply to say that repositioning yourself in the market can help you realize the returns that other investors (Like Myself) are raving about. If it's not the vehicle for you; don't speak badly about it. It's not that it does not work or isn't producing, it's simply that it did not or is not working for you with the strategy that you were implementing.

 

[sheehs1]

Why is that?

arebelspy...I doubt we could make an offer, go thru negotiations, close and furnish it much more the summer is almost over. Both properties need some cosmetic work. Also, since the banks took possession of these two properties, neither was "available" or advertised for rental. The bulk of families have booked their summer vacations. With all those factors I just think the prime season...would be out for us this year. Hence...we need to be prepared to carry it until next spring/summer.
We might be able to get some of the fall fishermen....in one of the properties but not a given as they have probably booked their weeks as well.

 

[sheehs1]

The part missing from this discussion is looking at the real books. Plus, it is a forward looking investment opportunity discussion (hopes and dreams) and not a backward look at what actually happened (i.e., the accounting books).

I am more of a hands-off passive investor (i.e., securities). That, of course, influences my opinion.

A common sense question is: Why that investment vs another? Will it yield a higher risk adjusted profit? On average... I doubt it.

For many (I suspect the reason is): they borrowed the money (leverage). It is a business venture and they hope the eventual ownership (and sale of the property) along with net income yields a profit in the end with + cashflow along the way.

But if they subtracted their sweat equity (i.e., paid themselves a fair salary for their work along the way) and subtracted that from the rental income... they would find out the actual return on investment is less than they think.

This is not a criticism of owning/managing/maintaining/renting... just an observation.

Good points Chinaco.

 

[Nords]

I try to never take anything too personal (M Paquette), every comment that I have made regarding what MY company does is FACT.
If it's not the vehicle for you; don't speak badly about it.

As you might imagine, over the last 8-9 years we've seen more than our share of performance claims. (Some of the people who read this board seem to have formed the mistaken impression that the other posters are rich folk with more money than sense.) Reactions to board members' skepticism have been met with a variety of reactions ranging from defensive to... well... quite a variety.

Honobob and a couple other real estate investors were especially noteworthy for their reactions, which might account for the welcome you're receiving here. We don't need to have that mess start up again.

Claimants are welcome to back up their performance numbers with verifiable and publicly-available records. If they're selling something then a fee structure would be informative, but only after the performance numbers have been assessed.

Otherwise it's just another bunch of data that might as well be added to Mark Hulbert's newsletter rankings.

M_Paquette (who incidentally is also a veteran) is not speaking badly about the vehicle... only the words being used to describe it. We're especially [-]cynical about[/-] sensitive to hyperbole like "secure".

 

[clifp]

I try to never take anything too personal (M Paquette), every comment that I have made regarding what MY company does is FACT. I can't speak for what other jokers are and have been doing with their scams masked as a business. Again my post was not and is not to persuade anyone that Real-Estate is the right investment vehicle for them or to even invest in what I am doing. It was simply to say that repositioning yourself in the market can help you realize the returns that other investors (Like Myself) are raving about. If it's not the vehicle for you; don't speak badly about it. It's not that it does not work or isn't producing, it's simply that it did not or is not working for you with the strategy that you were implementing.

After you've been retired for ten years lets talk.

I just yesterday completed a purchase of a property in Vegas, that I believe over the long term say 10+ years, will generate a return in the 10-15% range. However, in the short term term say 2 years I think it is equally like to result in a loss of money due to the decline in value of real estate, my inability to find tenants, lower rents than anticipated. In addition there is the real possibility of homeowner association assessment, HOA lawsuits, tenant lawsuits, title disputes, unknown maintenance issues, tenants that trash the place, and the slim possible bankruptcy of my property and title insurance companies. I know for a fact that if I sale it tomorrow I will likely 10% because of the transaction cost associated with real estate. Plus since I am newbie in real estate, I know to quote Rumsfeld there are also unknown unknowns – the ones we don't know we don't know.


So I am really curious of those litany of risks I just laid out which ones does your strategy eliminate so that I can truly have a SECURE investment.

 

[Texas Proud]

I try to never take anything too personal (M Paquette), every comment that I have made regarding what MY company does is FACT. I can't speak for what other jokers are and have been doing with their scams masked as a business. Again my post was not and is not to persuade anyone that Real-Estate is the right investment vehicle for them or to even invest in what I am doing. It was simply to say that repositioning yourself in the market can help you realize the returns that other investors (Like Myself) are raving about. If it's not the vehicle for you; don't speak badly about it. It's not that it does not work or isn't producing, it's simply that it did not or is not working for you with the strategy that you were implementing.

Yea, I think the wording that you are using is the problem... there is no SECURE 15% return... there is 15% return that has risks... and somebody might be better at mitigating the risk than someone else.... but that does not mean the risks go away....


Take a look at the Japanese nuclear plant.... they had fair warning about the risks and even did a lot of things to try and mitigate their risks.... but the earthquake and sunami kind of put those risk mitigation plans in the toilet...

Look at BP in the Gulf... they did things that they had always done without having a problem... but when the problem came it cost them big time...


I remember some people back in the 80s who lost everything in RE in Houston when the S&L crisis occurred.... they also thought they had a sure thing.... but when tenants moved out and nobody was renting... and the mortgage had to be paid etc. etc..... they started to lose everything....

Again, not saying that someone can not make what you say... there are lots of people who do it.... but SECURE not....

 

[M Paquette]

Now, don't get all cranky with us. You just happened to use a couple of words in describing high return investments that, for a registered investment, would get the SEC all riled up, and that we're used to hearing from investment scam artists like R. Allen Stanford and Bernard Madoff.

Most of us here understand that there are nice high rates of return that can be had, in real estate, bonds, or certain stocks, but we also understand that high rates of return are associated with risk. That is, if I originated or took over say, half a dozen second mortgage loans at a high interest rate, I know that I could wind up with 3-4 of them performing, and perhaps one or two slow to pay and one that was almost worthless. (And that's if I'm lucky!) I might make 10% interest, but I could lose 16-33% of my capital on one or two failed second mortgages out of that half dozen.

SECURE, in investing, generally implies essentially no risk to capital. You know, like an FDIC deposit is secure.

You might want to avoid the sort of terms that we generally associate with scams in describing your company's activities. That way we're more likely to pay attention, and less likely to potentially misidentify you. M'kay?

 

[BunsGettingFirm]

So I am asking myself the questions others have brought up. Do I want that much money tied up in one asset that is not liquid? What happens if it doesn't rent? Do I want this headache and this risk?

Read the books recommended by Nords, and then bug Tryan on PM until his ears and your finger tips fall off, then invite Tryan to lunch and talk until both of your faces are blue and the wait staff look at you impatiently so that they get you out of the dinning room. Have all of your fears settled and questions answered, buy the properties, and then spend the next 6-8 weeks thinking, "What if it doesn't rent?" as the first thought every morning and the last thought every evening and the theme of half of your dreams. A leaky roof, a missing condenser, a roach infestation problem, a $12k check that didn't get recorded, and a lazy HOA are almost welcoming diversions.

The thing is that there is nothing you can do about that fear except realizing that a) people are not moving out your area and b) they haven't turned into monkeys who can sleep in trees. If people are leaving, then the area is not great for investment properties. When all else fails, just keep chanting, "It will rent!"

As with Glippy, my next batch of properties will be SFHs. They are little more expensive than condos but more profitable if chosen correctly as there isn't a bunch of unproductive administrative types in HOAs and professional management companies sucking up your profits in HOA fees and slowing things down with their speedy DMV-level service circa 1980.

However, on the low end versus high end, I'd go for middle. I don't want the super low end where I have to pack my Kimber to go visit the property, but I do look for decent $45k to $55k houses that are rentable for $1,000-$1,200. Smaller starter homes in newish burbs, older, bigger homes in blue collar neighborhoods, or recently renovated older homes on the edge of gentrifying neighborhoods all fit the bill.

Still a newbie, but let's just say that the last 2 months has been extremely interesting as in that old Chinese proverb (which by the way is made up for American fortune cookies), "May you live in interesting times" interesting.

 

[chinaco]

For the first time we are seriously looking at the possibility of a 2nd home. With that came the thought ...o.k. we want an option of having it produce income. We have found a short sale at a popular beach destination. Have not put an offer in yet. While I get the depreciation and the stepped up basis at death and the tax deductions...etc. I'm more concerned about what happens while I am on this earth.

So I am asking myself the questions others have brought up. Do I want that much money tied up in one asset that is not liquid? What happens if it doesn't rent? Do I want this headache and this risk?
...

My Opinion.

Over the last 15 years I have worked through the 2nd (vacation) home exercise 2 times. The latest one was just a few months ago... a popular beach area that is laden with foreclosures and short-sale houses/condos on or near the beach. With the real estate debacle, I thought that perhaps it might be a opportunity for us. There are some pretty good deals out there on short-sales. But I quickly realized that one cannot compare the current prices to the peak bubble price... those prices probably will not return for many many years. One should compare the price to a pre-bubble value. I would be comparing to something like the price in 2000 or maybe 2002. That short sale home may not look like such a great deal!! What I mean is it may not generate the windfall quick equity ownership increase some think might happen in a year or two. Bubble means they were grossly overvalued! Add to that all of the normal ongoing expenses plus the added expense of keeping it up when we are not there... I could not come up with a sure fire plan where it would make money or even come close to breaking even. But... I am conservative in these matters.


Before you make any decision to buy anything... you should identify your primary goal and your motivation. Separate the financial aspect of it from the dream/emotion aspect of it. This is key to making a good decision.


This is what goes on in many peoples' minds: Fulfill my vacation home dream (goal) need to do it now because of cheap prices (motivation)... it may be just that... a dream (goal) and not a reality (motivation)!

This was a likely common narrative a few years back: Fulfill my vacation home dream (goal) need to do it now because of I won't be able to afford it later, look at how the value keeps increasing.... hey! if it keeps going up it is almost FREEEEEEE (motivation)... What did it end up being?... A nightmare!


If I want to live in another location for a short period of time on a yearly basis (weeks or months)... That is my primary goal, not home ownership. Owning a 2nd home would be a personal preference that comes with a big price tag. I can fullfill my goal with a short-term lease for less money, lower risk, and more flexibility. I will leave the risk, headache, and dream to the actual vacation home owner! He should get the dream... he paid for it!

However, ownership is important to some people... and there could be special circumstances (needs) that require it. The financial perspective is much lower on their list of priorities. They look at it from a lifestyle perspective or have certain needs they want to fulfill... that is prefectly fine. But hopefully they went through the goal/motivation exercise.


Carefully think it through and get rid of the dream/emotion factors for a little bit. Look at it like an accountant. You can go back to dreaming once you have analyzed it.

 

[sheehs1]

My Opinion.

Over the last 15 years I have worked through the 2nd (vacation) home exercise 2 times. The latest one was just a few months ago... a popular beach area that is laden with foreclosures and short-sale houses/condos on or near the beach. With the real estate debacle, I thought that perhaps it might be a opportunity for us. There are some pretty good deals out there on short-sales. But I quickly realized that one cannot compare the current prices to the peak bubble price... those prices probably will not return for many many years. One should compare the price to a pre-bubble value. I would be comparing to something like the price in 2000 or maybe 2002. That short sale home may not look like such a great deal!! What I mean is it may not generate the windfall quick equity ownership increase some think might happen in a year or two. Bubble means they were grossly overvalued! Add to that all of the normal ongoing expenses plus the added expense of keeping it up when we are not there... I could not come up with a sure fire plan where it would make money or even come close to breaking even. But... I am conservative in these matters.


Before you make any decision to buy anything... you should identify your primary goal and your motivation. Separate the financial aspect of it from the dream/emotion aspect of it. This is key to making a good decision.


This is what goes on in many peoples' minds: Fulfill my vacation home dream (goal) need to do it now because of cheap prices (motivation)... it may be just that... a dream (goal) and not a reality (motivation)!

This was a likely common narrative a few years back: Fulfill my vacation home dream (goal) need to do it now because of I won't be able to afford it later, look at how the value keeps increasing.... hey! if it keeps going up it is almost FREEEEEEE (motivation)... What did it end up being?... A nightmare!


If I want to live in another location for a short period of time on a yearly basis (weeks or months)... That is my primary goal, not home ownership. Owning a 2nd home would be a personal preference that comes with a big price tag. I can fullfill my goal with a short-term lease for less money, lower risk, and more flexibility. I will leave the risk, headache, and dream to the actual vacation home owner! He should get the dream... he paid for it!

However, ownership is important to some people... and there could be special circumstances (needs) that require it. The financial perspective is much lower on their list of priorities. They look at it from a lifestyle perspective or have certain needs they want to fulfill... that is prefectly fine. But hopefully they went through the goal/motivation exercise.


Carefully think it through and get rid of the dream/emotion factors for a little bit. Look at it like an accountant. You can go back to dreaming once you have analyzed it.

Chinaco...these are the exacts conversations I'm having with myself. Am trying not to get tied up in the emotional aspects and am looking at it from an accounting and business perspective. After all ...it IS a business decision first (at least for me it is ). In researching...I've asked for 2000/2002/2004 tax assessments and what people paid for things at that time..etc. I'm finding that while these properties may be 40ish to 50ish % off the highs they are still listed 50% higher than what others paid in 2003/2004.

I recognize that what people paid for or borrowed for real estate from 2005 forward...means nothing. Current tax assessments mean nothing. Possible appreciation means nothing. Because as you stated..."It WAS a BUBBLE".

I was ready to walk away from it last night...when I calculated the amount I had to put into it to get it rentable and to carry it until next spring. That figure is close to the price that the original owner borrowed to build it back in 2005 (which probably did not include the land purchase).

I may very well take 2 big steps back, let the emotional buyers who may be creating some current price support...leave the market...which may be in a month or so...and if it is still on the market in October...take another serious look.

But all of what you said I recognize. My husband and I have had conversations surrounding all of the good points you made. We can rent ....without the headache, worry of hurricanes...etc. We can travel for far less money...etc. The only thing renting does not give us ...is some psuedo benefit of home ownership for the family having a cottage adding some undefined "new dimension" to our lives.

As an aside, I sold my interest in a family beach cottage back in 2003/2004...for some of the exact same reasons. Going didn't feel like a vacation as there was work to do, we felt we had to go there because we owned it (rather than going to other interesting locations), it centered around the needs and requirements of "the renters" and "property manager", it paid it's expenses but did not make money....etc...etc. In almost all years it "cost" money.

At a certain income level, losses on 2nd homes can not be deducted (they can be carried forward against cap gains on a sale), so this side of it does not help my tax situation...etc. Any profit is taxable...so it could at some point potentially hurt my current tax situation. Meaning...minimally one wants to be "break even" to have no affect on taxes.

Also, I keep going back to how much money I'm making for others (taxes, insurance, property managers, utilities housecleaning, pool maintenance, pest control,..etc) ....and how little I'm making for myself. The only thing I can reasonably expect to really get out of it is some appreciation over the next 20 years...but as we all now know...that may be slow in coming.

All of that said...at a certain price it may be attractive. I don't think we are there yet.

 

[chinaco]

Chinaco...these are the exacts conversations I'm having with myself. ...
All of that said...at a certain price it may be attractive. I don't think we are there yet.

Sounds like you speak with some experience. If you sold the other one in 2004 you probably made out well... the bubble was inflating. Good for you!

If you intend to keep an eye on it and it begins to look really good... alert the rest of us.

I would not be opposed to it at the right price!

Where I seem to get hung up is on the ongoing cost (not the purchase). The taxes, insurance, upkeep, maintenance, etc for 12 months seems to exceed my cost of renting for.. say 3 months... which would be the max I would probably use it (as a snowbird). So I would either need to pick it up at a really steep discount, or property prices would need to skyrocket, or something combination of those. Prices look lower... But the direction of prices is a bit more fuzzy.

Now that the FDIC seems to be planning to be more restrictive on home loans... Owning multiple single family properties looks a bit like a trap if one needed to sell it. The market is likely to be thinned out for primary home ownership. It will probably be really thin for a 2nd home! Many of those popular beach areas contain a large percentage of 2nd homes!

Federal plan to limit mortgage lending frightens resort realtors | www.oceancitytoday.net | Ocean City Today


Of course, as you alluded... this might be a factor that could turn the vacation home market into a real buyers market as mortgage holders desperately try to rid themselves of the foreclosures and delinquent loans. Add on top of existing vacation home owners that need to sell and, sellers (mortgage holders and owners) get desperate to cut their losses and begin to dump them just to unload it and get rid of the liability related to it.

That is where people like you and me that have cash and/or no debt could really make a great deal.

 

[arebelspy]

But I quickly realized that one cannot compare the current prices to the peak bubble price... those prices probably will not return for many many years. One should compare the price to a pre-bubble value. I would be comparing to something like the price in 2000 or maybe 2002.

I disagree.

What it sold for at ANY time is mostly irrelevant. Why would the 2002 price be more relevant than the 2005 price, or either of those more relevant than some other random day (1993, or 1977)?

What matters is what NOI you can get from it... not what it sold for at some arbitrary point in time. Determining what it's worth has almost nothing to do with past sale prices, IMO.

 

[chinaco]

I disagree.

What it sold for at ANY time is mostly irrelevant. Why would the 2002 price be more relevant than the 2005 price, or either of those more relevant than some other random day (1993, or 1977)?

What matters is what NOI you can get from it... not what it sold for at some arbitrary point in time. Determining what it's worth has almost nothing to do with past sale prices, IMO.

That is your prerogative!

This set of discussions (tangent) is about a 2nd vacation home.

The date I listed was a somewhat arbitrary date... trying to make a point through the use of an example. Using valuations or prices paid at the height of the bubble would seem to overstate the true value!

But... if I were in the market as a buyer looking for deals... that might actually be the reference I would use.

Case Shiller National Home Price Index, Inflation Adjusted Chart

Some of those vacation hotspot areas ballooned more than the average.

Plus, it seems that there is much debate lately as to whether the bottom has been reached yet.

How would you do it? Enlighten me!

 

[jackontrack]

I don't think we've reached the absolute bottom just yet. Every month, Real Estate news just keeps getting worse and worse as people continue to experience more dire circumstances financially. The government tried to prop it up for some time with incentives, loans, etc., however restrictions have gotten much tighter, and I think the housing market has a ways to go until it hits its actual real value because so much of it was produced in the boom years.

At the end of the day, the value of anything is only what someone else is willing to pay for it at that given time, even if that's less than what the previous owner paid for it, or the actual cost of building it. With Real Estate right now, it seems that the best way to go about purchasing something is seeing it's worth to you and only you, not to the market. This is the first period of time in a long while where you could possibly buy a property and it could be worth less money in the near future.

I would only be buying property now in one of the 2 scenarios:

1. I wanted to live there for a long period of time, so the peaks and valleys of pricing over the next decade or so would matter to me less.

2. I could generate a good ongoing cashflow for a long period of time, and the mortgage payments are low.

And I think that if anyone is going to purchase a property now and take out a loan to do so, that there is a good chance in the near future where the mortgage could be underwater for a period of time until values rise. That is, unless they put down a sizeable down payment of greater than 20%, or live in a very desirable neighborhood.