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Old 05-28-2008, 01:43 PM   #61
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I have been keeping an eye out for a possible rental, but the prices just are not low enough, even on foreclosures. By the time you cover taxes, maintenance, the mortgage, and a premium for the headaches involved, the returns are paltry at best. Unless prices get a lot lower, I'd rather avail myself of the many alternatives in the capital markets.
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Old 05-28-2008, 01:56 PM   #62
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Quote:

Tryan Am I on your ignore list or do you not read other peoples posts? The sales I referenced were in 2006 and I would like to think they were OK maybe even a little happy when they got their 27-29% gain in 12-18 months. But I'm thinking you'd find a way to be glum about an extra $350,000-$550,000. I also think you're confusing owner-occupied properties that turn on average about 7 years. If you have other evidence for investment properties I'd like to see it. If you are in a market that depreciates for twelve years and then triples in twelve years then it would not be prudent to invest unless you were in for at least 24 years. Why do you pick bad markets and then complain when they perform like they historically have? Did you think YOU were the part of the equasion that was missing?

Anyway the OP is talking about the Bay Area which has experienced double digit appreciation for at least the last 22 years so I don't believe you trying to convince her to use your Boston market techniques here will do her any good when they didn't do you any good. Spread the pain?

Also, how is it that you can predict the market everywhere for the next 7-10 years but weren't able to predict 12 years of down market in your own home town? I would reread Hellbenders first post.
Hono, you're a great cherry picker .... I'ld like to see someone try carrying one these gems for 7 years with a tenant. Whats the negative cash flow 8-9k/MONTH ?!? Good luck with that.

Fact is they were flipped quickly because they could and the monthly negative cash flow was killing the owner.

The blind squirrel found a nut.
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Old 05-28-2008, 02:42 PM   #63
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CHERRY PICKER! Them's fighting words! Actually they were the first two comps I looked at from a report that came in the day this thread started that had recent paired sales. Now I might be able to find resales that are down in garbage areas where people buy "deals" just because they're getting it at 50% less than the guy before them and then selling them at ..oops 50% less to a guy that's saying "I got a deal cause I'm buying at 50% less than what the guy before me paid. I'd be a fool not to slurp up the blood!" Buying "deals" in property, furniture and jewelery usually doesn't work out. Well, you know that by experience, right?

Anyway, I'm sure the recent buyers are among the tons of people that don't read newspapers and don't subscribe to your newsletter. There must be a ton of these people in the market for multi-million dollar condos. I think another plane load from Boston is arriving today. Gotta go and greet them. Bye.
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A Whole Bowl of Cherries!!
Old 05-28-2008, 03:56 PM   #64
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A Whole Bowl of Cherries!!

More resales!! All in 999 Green street
Unit 3104 1/1997 $1,050,000
Resold 2/2002 $1800,000 12% annual appreciation


Unit 2903 4/1999 $1,040,000
12/2006 $2,300,000 12% annual appreciation

Unit 2402 8/2002 $1,170,000
7/2007 $2,250,000 14% annual appreciation

How about them apples, ..er cherries?

Penny wise, pound foolish?
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Old 05-28-2008, 05:04 PM   #65
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Here's a fun interactive link:

http://www.nytimes.com/2007/04/10/bu...T_GRAPHIC.html?#


Tells when it's better to rent or buy ... when the home values hit SF range (1.5M) it takes ~8k/month in rent to EVER justify buying. Not sure what rents are in SF ... but where are these people working to pay 8k/month (rent OR mortgage)? Just doesn't pass the sniff test ... Something tells me these things are renting for whole lot less and therefore NEVER justify ownership (unless your looking for the fairy's gold).
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Old 05-28-2008, 05:30 PM   #66
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Originally Posted by honobob View Post
More resales!! All in 999 Green street
Unit 3104 1/1997 $1,050,000
Resold 2/2002 $1800,000 12% annual appreciation


Unit 2903 4/1999 $1,040,000
12/2006 $2,300,000 12% annual appreciation

Unit 2402 8/2002 $1,170,000
7/2007 $2,250,000 14% annual appreciation

....

FYI, this is 999 Green Street:

Eichler Network: Feature on File: Summit
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Old 05-28-2008, 11:02 PM   #67
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FYI, this is 999 Green Street:

Eichler Network: Feature on File: Summit
Cuppajoe
Thanks for posting that! I did not realize that although I live in a single family Eichler knockoff. I've only been in one 999 Green unit and although I've been in many a view SF Property I went "OOOOOAH" at the view in a unit that only faces SE and not the NW view to the bay and GG Bridge. Isn't this your NHBD? Anyway I was with a friend of the owner who bought in 2000 and paid $1,000,000 more than market value!!! There was nothing that supported that price even in the crazy .com so I asked why he would pay so much. The answer was that he wanted the unit and $1,000,000 was NOTHING to him to guarantee him the unit. My friend said to Google the owner and he was some major .com guy. Gotta luv SF!
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Old 05-29-2008, 10:52 AM   #68
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Well Hono, once again, we'll have to agree to disagree ...

I say: don't trap yourself into a negative cash flow "investment". Trapped because if the value drops you can't sell or refi and you're stuck with the negative cashflow for years.

Hono says: Values don't drop and past results gaurantee future returns. Negative cashflow? Suck it up.
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Old 05-29-2008, 11:38 AM   #69
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Originally Posted by honobob View Post
Cuppajoe
Thanks for posting that! I did not realize that although I live in a single family Eichler knockoff. I've only been in one 999 Green unit and although I've been in many a view SF Property I went "OOOOOAH" at the view in a unit that only faces SE and not the NW view to the bay and GG Bridge. Isn't this your NHBD? Anyway I was with a friend of the owner who bought in 2000 and paid $1,000,000 more than market value!!! There was nothing that supported that price even in the crazy .com so I asked why he would pay so much. The answer was that he wanted the unit and $1,000,000 was NOTHING to him to guarantee him the unit. My friend said to Google the owner and he was some major .com guy. Gotta luv SF!


Iím not competent to evaluate the numbers but it seems logical that property that can be marketed to the ultra-wealthy would appreciate at a quicker clip than others. Tryan is also right to wonder who would you rent those properties to? My property management company used the 3 to 1 rule, that gross income should be more than 3 times the rent. If you google 999 Green, there are tenants who say that many of the condos are pieds-a-terre that sit empty much of the year....


I posted on this thread because several retirement decisions are touched on here:

1) What will I do when I have an extra 40-80 hours a week to myself? When I was semi-retired, I developed many interests, one of which was hanging out at City Hall; (Iím itching to back to it). I chose one issue and followed it through the committees and hearings; it was the proposed extension to the moratorium on "Richmond Specials."

2) The (mis?)conception that you cannot alter anotherís viewpoint which I see so often in the Soap Box category. Near the end of the hearing process on the moratorium, a homeowner spoke her 2 minutes of allotted time so convincingly that I woke up and saw her sideís dilemma. Aside: there was a wonderful moment when a fellow spectator turned around to me and said, "this is great theater!" And I met Sue Bierman!, the best of the best at City Hall.

3) Two of the properties Honobob used as examples swirl in controversy. a) the Fontana Apt. complex at the Wharf is credited with sparking the movement to limit heights for new construction. I would have loved to be at City Hall during those hearings where activists might have been yelling, "no more 999 Greens!". b) 188 Minna sits on land that was cleared (of low-rent housing) for the Yurba Buena redevelopment project. It is across the alley from the MoMA and across the street from Yurba Buena Gardens. Iíve been busy working but I think the controversy there is that the project fell way short of providing required affordable housing. The height limits have been in effect since about 1970 and apparently (?) have been thrown out the window for the South of Market area. Gotta research that issue! My experience now is that it is difficult to find noontime sunlight on Mission Street.


4) Yes, Bob, I do live on Russian Hill. The retirement topic here is the oft-discussed concept of a walkable, livable neighborhood. I posit that it would be a far less pleasant, less desirable area without that height cap.
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Old 06-10-2008, 10:19 AM   #70
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Well Hono, once again, we'll have to agree to disagree ...
Tryan
The facts keep proving you wrong! Three new condo sales reported today. Here's the FACTS on all three.

1700 Jones Street #4 Sold 3/2005 $1,225,000
Resold 1/2008 $1,500,000 8% annual appreciation.

1083 Clay Street #201 Sold 3/2005 $455,000
Resold 2/2008 $589,000 9% annual appreciation.

2005? Top of the market? Doesn't appear to be!

Longer term........1170 Sacremento Street 16B Sold 8/1993 $710,000
Resold 2/2008 $3,500,000 12% annual appreciation over 15 years!!
$15,500 appreciation each and every month for 180 months!!
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Old 06-10-2008, 01:28 PM   #71
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No offense honobob, but those "facts" are incomplete... we need to know how much was put into remodelling and other fees/costs to know how much those properties are appreciating.
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Old 06-10-2008, 01:56 PM   #72
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No offense honobob, but those "facts" are incomplete... we need to know how much was put into remodelling and other fees/costs to know how much those properties are appreciating.

Quote:
Originally Posted by JayOh
Just curious, but I am assuming these buildings were flips given the fairly short time between sales. Do you know how much money went into them to update them? I know you're just using ballpark numbers but I have to imagine that the carrying cost for 1 year on a 1.2MM mortgage (plus insurance/tax), not to mention cost of upgrades is going to take a fairly big bite out of that $400k profit you quote on the first example. Just my 0.02

free4now, basically answered in post #43.


Not sure they're what most people would consider a flip. 188 Minna is new construction 2005 and only 1527sf 2/2 so not alot for upgrades. 999 Green is 1964 construction but again only 1681sf 2/2. No permits were pulled on either so 400K goes a long way for paint/carpet and appliances plus most people at that price range don't pay so much for other peoples decorating. So with maybe $100K expenses and a years use or rent of at least $48,000 then you're still up $350,000 on Green and $555,000 on the Minna property. What's the best anyone has made on a $3-400K investment in the last year and a half?

Again these are all condos so not alot of upgrading that would translate into increased market value. These are in Cuppajoe's NBHD. Maybe we can get him to make some window peeks.

But if we're looking at things that way then maybe there really wasn't a bubble, just alot of first time home buyers that didn't maintain their houses which caused their values to plummet...etc. on and on.

This appreciation is reflective of properties that I do have knowlege of conditions and sales prices so I feel that they are reflective of the market now. Also double checked that no permits were pulled on any of these last three properties. From experience I know it is hard to get an illegal remodel past a HOA so I'm thinking at best paint and carpet.
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Old 06-10-2008, 03:09 PM   #73
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I still don't see any accounting for closing costs honobob... When the real estate agent gets 6% and everyone else gets their pieces of the pie, I figure one loses about 8-9% on any round trip sale. That makes the profit on your 8% and 9% examples about zero. I'm not saying there isn't appreciation going on, but your examples don't prove it.
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Old 06-10-2008, 04:03 PM   #74
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I still don't see any accounting for closing costs honobob... When the real estate agent gets 6% and everyone else gets their pieces of the pie, I figure one loses about 8-9% on any round trip sale. That makes the profit on your 8% and 9% examples about zero. I'm not saying there isn't appreciation going on, but your examples don't prove it.
Free4now Sales costs and sales commission have nothing to do with appreciation. You are confusing different concepts. If you want to look at rate of returns, etc. then you would consider those items but you would also be looking at returns in the 20%-30%-40% + on your leveraged amount before you would start subtracting. So if I'm making a 40% return I could spare a little for closing costs or sales costs. Commission, no way! I only buy the best in my price range and would only sell in an up market. I can sell myself.
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Old 06-14-2008, 11:25 AM   #75
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Never again. Unless I have a huge positive cash flow.
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Old 06-15-2008, 07:10 AM   #76
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I for one have made 100 times as much with rentals as stocks.

It really does come down to leverage. Over time houses increase a little more than inflation. Figure about 4 percent a year. A general rule of thumb is they double in just less then 20 years. Rent follows the price.

My wife and I follow a few simple rules to determine what we buy.

1. Never buy a house we would not live in. That means no run-down crack houses in the hood. Most are three bdrm, 2 bath in nice neighborhoods.
2. The house must pay for itself from the first month.
3. Figure on getting 11 months income per year.
4. Apartments are your competition. Stay on top of their vacancy and rental rates.

We only buy middle class houses people would want to own. All needed repairs; some minor some major.

Real estate is local and relative. In lower cost areas, rent is also lower. In higher cost areas, rent is higher.

Generally speaking, when I buy a house I plan on increasing its value by 15-20% and making at least 8% a year starting the first year.

If I can buy a house for $80,000 and put $5000 in repairs I expect it to be worth at least $100,000 when I'm done. I'll expect to rent the house for $800 - $1000 a month.

In most cases I would have put 20% down or $16,000 in this case leaving $64,000 financed. For a total investment of $21,000 for a $100,000 house. That is nearly 5 to 1 leverage.

Here comes the fun part. That house will be positive cash flow from the start and the value and rent will go up about 4 percent a year.

The increased value of the house from $80,000 to $100,00 = +$20,000
The increase appreciation per year from $100,000 $104,000 = + $4,000

On paper, I have made back my entire investment plus a little profit the first year.
In ten years the house will be worth about $140,000. The rent will be increased to around $1300 a month and by applying the rent to the mortgage, it will be paid off.

In ten years my original $21,000 investment is worth $140,000 and is clearing $8,000 a year. Renters paid the mortgage.

I've done this over and over for +20 years.

You can't leverage stocks at 5 to 1, and even if you could, the margin costs would eat up any gains.

If you find you aren't good as a landlord, you can hire professional property managers to manage the properties. We are looking at doing this now to free up our time to do more pleasant things.

In my opinion, there is no better way for average people to become wealthy than in real estate, but like any business you have to understand the numbers.

At one point we owned 16 houses and 12 apartments. We sold most at the top of the bubble and are beginning to look at buying again.

We knew to sell because the market price of the house far exceeded a reasonable rent return. Now the returns are coming back in line.
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Old 06-15-2008, 09:41 AM   #77
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If I can buy a house for $80,000 and put $5000 in repairs I expect it to be worth at least $100,000 when I'm done. I'll expect to rent the house for $800 - $1000 a month.
I only have one problem with this. P+I on 80K (at 6.5% ?) is only 500 per month. What is wrong with a person who can buy for 500 per month and is paying you a 1000 in rent instead?

Probably not the kind of people I want to deal with.

The only other problem for me is that I live in Calif, and there is no such scenario here.

If I did like owning real estate I would borrow out of my home and put the money in the Vanguard Reit which has a 12 year record of over 13%. If I borrowed 100k out of my house at 6.5% my payment would be 632. My return in Vanguard would be 1167, for a nice monthly profit of 535. Did I mention these REIT funds have nice dividends too?

The best part is no renter headaches and I can be out of the investment this afternoon. If I was smart enough to average into the REIT over the years in my Roth there would be no taxes on the profit, and I could write off the interest on the loan.

Capital gains and recup of depreciation stuck me good on the rentals I sold. Not to mention points, the real estate agent, etc.
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Old 06-15-2008, 10:54 AM   #78
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Gee guys - according to MSN being a landlord is just a profit wonderland in which we squeeze the poor tenant for all manner of gravy. (note to self: you're doing it wrong.) New landlord tools for squeezing renters - Rentals - MSN Real Estate
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Old 06-15-2008, 12:12 PM   #79
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As I romp through the land of wealth building, I keep encountering four types of people:
  • Stock market people -- owning stocks is the best way to build wealth.
  • Real estate people -- owning real estate is the best way to build wealth.
  • Business people -- owning your own business is the best way to build wealth.
  • "Tridextrous" people -- making money with whatever income-producing assets you own (and however you own them) is the best way to build wealth.
When I go to the supermarket to buy groceries, the cashier doesn't care whether my cash came from dividends, rents, profits, or capital gains. They only care that it's enough cash to cover the total cost of the purchase.

The point is that each form of investing has its tradeoffs in terms of leverage, taxes, risks, time, capital, expertise, and so forth. As long as you stay within your circle of competence and use common sense, you will do OK financially over the long term.

When your investment income exceeds your living expenses by your desired margin of safety, you have achieved financial freedom and don't have to work for someone else anymore to earn a living (unless, of course, you choose to continue to do so). Instead, you are "working" for yourself by managing your income-producing assets so they will continue to produce income for you for the rest of your life.
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Old 06-15-2008, 01:57 PM   #80
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Case Schiller data is out for March 2008, and the SF bay area is still declining. The bay area index value is at 168, down from 174 last month, and the high of 218 from 2006. This means no net appreciation between March 2008 and May 2004 when the index was last at 167.

S&P | Indices > Alternative Indices - S&P/Case-Shiller¬ģ Home Price Indices - Home Price Values
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