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Bridgette
12-21-2004, 11:35 AM
Theoretically any house can qualify for HUD money. I found info on a rehab loan program where one can buy an existing building, rehab it and/or convert it to up to 4 apts, all under one loan.

^^Also TONS of info about other programs and links on the HUD site.

DJ_WuLf
12-21-2004, 11:43 AM
Call HUD maybe? Seriously ... there is a local HUD office in every major city. Look in the blue pages of your phone book and call them and ask. Almost any Urban property that needs to be re-habbed before its liveable qualifies for HUD money. HUD money is what Habitat for Humanity works on. Prepare for paperwork though. (Ya didn't think this was gonna be EZ did ya?) I'm guessing from B's description that it would be better to re-hab an entire block than just 1 or 2 houses. Improve the Location along with the property.

Negative is the Ground side of the battery Sparky .... I prefer to be called well grounded TYVM.

Bridgette
12-21-2004, 01:06 PM
Yes, I was thinking of buying a ROW to rehab rather than just one building. As I stated earlier you can pick up a row of houses in need of rehab for @ 10k. I was thinking of a particular group I know of just around the corner from me. ;D

primetime21
12-21-2004, 06:44 PM
You are lucky in the US, for the most part you are able to deduct the mortgage interest on your tax return. That is not the case in Canada. You are only able to deduct the interest if you are operating a small business out of your home, otherewise the common taxpayer isn't able to claim this deduction. I would look at owning your principal residence not as an investment but as your escape from society. If you factor in how much you pay in mortgage interest, property taxes, and utilities, I think most people would be surprised at how little you are getting on your investment. But if you look at your home as your sanctuary away from everyone, the spot where you can relax, and eventually retire in, then it makes much more sense to own that to rent. The one problem in Canada is they have lowered the minimum down payment you need to as low as 5% so there may be a lot more home owners out there, but there are a lot more people going to go bankrupt because they cannot afford to make their mortgage payments.

madmaxine
12-21-2004, 10:18 PM
Miracles can happen in real estate purchasing, albeit down-to-earth-ones: 2 years ago I met a man who purchased a "crackhouse" in downtown Fresno CA for $20,000, to renovate. Due to mushrooming urban sprawl, the value on this property has shot sky-high. My cousin tried to buy a home in that area and was unable to, she had to move far southward, and that home was still over $300,000.

scorpio
12-21-2004, 11:24 PM
Melonie, I know you are real smart and all, but I am so sick of you scaring people away from home ownership. real estate is the safest, fastest appreciateing investment you can get, and on top of it all...you can live there. Maybe out in the boonies or wherever you live property values are falling, but for 99% of Americans, home ownership is building wealth. I see it every day in the mortgage industry-people who bought homes for 100K 5 years ago are shocked to see how much their properties appreciate. I know people, dancers, who buy properties at the rate of one per month-and they are fast becoming asset wealthy. rates go up and down, and there are a variety of stratagies to combat this. I can tell you that with even marginal credit, getting payments that equal 2-3% isn't hard. Buy a home and rent it out and get cashflow while you gain equity. You can spew your stats and figures all you want, but the reality is that real estate is a winner. Sure, like anything, you have to educate yourself and buy right, but I guarantee you, without a shadow of a doubt, that I can go into any area of America, even yours, and find a property that will make me money. What people don't realise is that your home mortgage is not a bill-it is a tool. Your property is like your very own bank. You can extract money from it as the equity rises. With this money, you can invest in more property. As an example, I found a home where the owner is behind on the mortgage. The loan he owes is 280K, and after a quick appraisal check, I determined that his home is worth about 495K! That is 215K in equity! I could buy that now, pull 100K in cash immediately, buy 20 other houses with it, and make several thousand a month just on the rents-ALL FROM THAT FIRST HOUSE. Oh, and that 495K house? It will be worth 520K by this time next year.

Maybe you made a bad purchase in the past. maybe you never educated yourself in the niceties of real estate. maybe you are just a naysayer-I don't know, but I really wish you would stop scaring people, and stop talking about subjects you don't understand.

scorpio
12-21-2004, 11:30 PM
Also, to those who were asking about HUD or FHA-Don't. It's a waste of time, incredibly complicated, offers no better rates than market, has higher fees and add-ons, and restricts what kind of property you can buy. The only reason brokers steer people towards HUD/FHA is because they make twice as much in commissions.

You can find much better programs with the majority of lenders out there-even if you don't have much down or have marginal credit.

Melonie
12-22-2004, 03:39 AM
Maybe you made a bad purchase in the past. maybe you never educated yourself in the niceties of real estate. maybe you are just a naysayer-I don't know, but I really wish you would stop scaring people, and stop talking about subjects you don't understand.

Scorpio, I appreciate the fact that a few savvy and lucky investors have (emphasis on past tense) made incredible amounts of money speculating in real estate. However, the same sort of savvy and lucky investors had (definite emphasis on past tense) made incredible amounts of money in the 90's by speculating in tech stocks with the same techniques you mention (i.e. buying stocks on margin, pledging shares as collateral to purchase other shares). In both cases, accumulating highly leveraged assets is IMHO a "house of cards", subject to the whole "house of cards" collapsing with any serious market pullback. We all know the stories of highly leveraged stock market investors in the 2000 pullback. IMHO there's every reason to believe that the US housing market in many areas is approaching similar conditions.

I'll again state that in terms of a 'primary residence', rent avoidance and deductibility of mortgage interest creates a situation where falling housing market prices in the future is a secondary consideration. In other words, buying the house you plan to live in makes a great deal of sense. However, investing in rental real estate or speculative real estate involves significant risks, and those risks should not be ignored simply because the "housing bubble" has created many more winners than losers over the past few years.

DJ_WuLf
12-22-2004, 10:42 AM
Sounds like somebody bought a Carlton Sheets course and couldnt get his money back. If it was sooo EZ to make money in Real Estate ya gotta wonder why EVERYBODY isnt a millionaire and why Scorpio doesn't own those 20 houses? Maybe because Talking and Typing about it is alot easier then actually DOING IT?

Why would the housing market be ready to decline? Lets see .... Aging population, Trend to less children and smaller homes/apartments, rising interest rates, rising energy costs, rising material costs, FALLING wage rates, .... ect ect ect. I challange you to find ONE Solid reason that RE Values might rise in the future. NOT what they have done in the PAST .... The FUTURE condition that is conducive to RE prices continuing to rise.

The thing I am SICK of is hearing people talk about APPRAISAL VALUE. Thats meaningless.
My ex had a 1ct diamond ring that APPRAISED for $6,000 .... is Sold for $1,500
I have a Car that APPRAISES for $30,000 ..... Sale value is less than $20,000.

If Appraisers had to actually BUY the houses they value .... then quote me Appraisal value as a real selling price but otherwise it's just a borrowing value and guess what ... YA STILL OWE THAT MONEY!

Its EZ to become a PAPER Real Estate Millionaire. Show me a Million in DEBT FREE cash and Ill be impressed. The quickest way to do that is STOCKS. Ask Warren Buffet.

I wish Scorpio would UNDERSTAND the subjects he decides to Talk about but if wishes were wings .....

VenusGoddess
12-22-2004, 01:46 PM
^ Hmmmm...someone sounds a little jealous.

madmaxine
12-22-2004, 01:46 PM
A word quickly about government home loan programs. In cynical truth, the government treats homeowners it has lent to like tenants until the mortgage is paid off. In fact, much of the Q&A literature explains that the houses available to to HUD/FHA qualified buyers ARE repossessed properties.....that could make you nervous, but hell, the government putting you out on the street is the same as a bank putting you out there too!
I am a proponent of homeownership because it is an investment in your future; even if it doesn't appreciate much, you still have somewhere to live. If you want to raise children, letting them grow up in one place is healthier for them. Besides that, in my experience, landlords are never incredibly concerned about their tenant's welfare. Wouldn't you rather do things for yourself?
PS Those of you in states other than California should count your lucky stars- you get more house for your dollar. Where I live, people are paying upwards of $250,000 for ugly tract houses with tiny yards. I'll be buying my first home OUTSIDE of this state.....

Emily
12-22-2004, 01:57 PM
The population is not declining! Where did you get that? If people live longer, then they are holding on to their houses, not selling them. Children don't really factor into the equation since they won't be buying for another 20 years or so. Houses are getting bigger, not smaller. It's only recently has the number of bathrooms in a house matched the number of bedrooms. Children don't share bedrooms anymore. Old houses don't have family rooms and living rooms and dens and finished basements. People don't care about the cost of energy and materials. If they did, SUVs wouldn't be so popular. These days, bigger is better.

There will always be people that want to live in a house they bought for themselves. The American dream isn't owning stocks. You cannot compare the tech bubble of the late 90s to real estate. People were buying stocks based on their perceived value, not actual value. Real estate isn't as much of a speculative market (people buy a primary residence for personal use first, investment second). People don't sell on a whim when the values start going down.

I know it's not easy to be a real estate millionaire. I don't know any. But it's a safe bet there are many out there.

I think there are two different types of real estate purchases being discussed here. I hope people don't interpret this thread to mean that they should not buy a house as a primary residence.

Bridgette
12-22-2004, 03:42 PM
grabbing the puppy from Emily's hands

Right on Em!

running away with the puppy

Emily
12-22-2004, 03:51 PM
heeee!

That's my little man!

Root Beer. ;D

DJ_WuLf
12-22-2004, 04:46 PM
Save the puppy!

First of all I didn't say DECLINING population ... I said AGING population.
I also said less children .. 2 kids at 1 bdr per kid is less bedrooms than 4 kids at 1bdr per kid.
It costs almost $100 per sq ft to build a new home today. That makes a 2500 sq ft house (not a huge house) cost a quater million dollars. even on a 40 year loan ....the AVERAGE American can't afford this house. Remember that the AVERAGE American makes $32,000 a year. Everybody isnt a stripper (or a DJ) who makes a grand or 2 a week.

When houses become overpriced (priced higher than the target market can afford) Guess what HAPPENS? Prices HAVE to come down and the only way to do that is either SMALLER or OLDER.

Cars (SUV's) are different. a 30-40 thousand investment is much easier to NOT Afford than a 250 thousand investment. Also on both cars and houses .....most people don't really BUY anyway because they never REALIZE (actually get) the equity. If you don't actually get the equity ..you may as well RENT.

I agree ... BUYERS don't really care about materials and energy. BUILDERS DO because thats the area they can CUT prices. All most buyers care about is the monthly payment. Just like with cars. It doesn't matter what it COSTS in total .... just how much it costs per month. Well the creative finance boys are about out of ways to make payments cheaper so ........

Im still waiting for ONE valid reason that pre-existing RE will continue to gain value in the future? Anybody?

Bridgette
12-22-2004, 07:10 PM
:chillpill


OMG this is just the CUTEST dog EVER! I might have to hold him for ransom. ;D

What kind is he?

And Wulf I'm stealing your kitty too :P

scorpio
12-22-2004, 10:33 PM
Sounds like somebody bought a Carlton Sheets course and couldnt get his money back. If it was sooo EZ to make money in Real Estate ya gotta wonder why EVERYBODY isnt a millionaire and why Scorpio doesn't own those 20 houses? Maybe because Talking and Typing about it is alot easier then actually DOING IT?

Why would the housing market be ready to decline? Lets see .... Aging population, Trend to less children and smaller homes/apartments, rising interest rates, rising energy costs, rising material costs, FALLING wage rates, .... ect ect ect. I challange you to find ONE Solid reason that RE Values might rise in the future. NOT what they have done in the PAST .... The FUTURE condition that is conducive to RE prices continuing to rise.

The thing I am SICK of is hearing people talk about APPRAISAL VALUE. Thats meaningless.
My ex had a 1ct diamond ring that APPRAISED for $6,000 .... is Sold for $1,500
I have a Car that APPRAISES for $30,000 ..... Sale value is less than $20,000.

If Appraisers had to actually BUY the houses they value .... then quote me Appraisal value as a real selling price but otherwise it's just a borrowing value and guess what ... YA STILL OWE THAT MONEY!

Its EZ to become a PAPER Real Estate Millionaire. Show me a Million in DEBT FREE cash and Ill be impressed. The quickest way to do that is STOCKS. Ask Warren Buffet.

I wish Scorpio would UNDERSTAND the subjects he decides to Talk about but if wishes were wings ..... ?????

Sounds like someone hasn't bought a home, and therefore has nothing of value to show for all his hard work.;)

Where, exactly did I say it was easy? Home ownership is a big responsibility. Melonie likes to point out that owning property carries responsibilities such as taxes, repair, maintinance, insurance, etc. etc. etc...

...aaaaand.

She's right. BUT. at the end of the day. At the end of the year-99% of home owners are left with more value than they started with. 100% of renters are left with ZERO value, minus thousands of dollars in expense. Period. Full stop. End of story.

as far as the "housing bubble" yes, in some areas of the country, homes are appreciating so rediculously rapidly, that some areas, and some properties, are bound for some sort of decline. That may be, but the VAST MAJORITY are not. The homes that are in danger of declining are the bigger custom homes. You have as much chance as a single family, 3 bedroom home declining as getting hit by lightening. You have as much chance as that same home appreciating as you do thinking Angelina Joli is hot-nearly 100%!


Cars (SUV's) are different. a 30-40 thousand investment is much easier to NOT Afford than a 250 thousand investment. Also on both cars and houses .....most people don't really BUY anyway because they never REALIZE (actually get) the equity. If you don't actually get the equity ..you may as well RENT.
By you trying to compare purchasing and SUV with a home, you just proved that you never passed an economics class, and that you probably went ahead and did something stupid as wasting all your financial leverage by purchasing said SUV instead of a home (A 100% certainty that that SUV is depreciateing rapidly) Sadly, I see it all the time. Joe Q Public, who makes 32,000/yr, Has a $500 a month payment on his Excursion that he just HAD to have, and now his debt to income ratio (debt divided by income) is so whacked, that he can't qualify for a mortage......Idiots.

And....how can you say people never realise the equity in their homes? Are you daft? Do you own any property? For example, Venus and I bought a small, 2 bedroom condo in an average, suburban area of Chicago last year. Nothing special. Good investment. Our taxes, insurance, association, etc payments are around $1000/month. We bought the property with only $2,000 down. The going rent in the area is $1200/month. That is $200 in monthly cash-flow. Not great, but positive. Now, I am refinancing it on an interest only loan at 3% so my PITI payments are dropping to under $600, so now my casflow is increasing to $600 per month.The real cool thing was that as of July, only 10 months after we bought it, that it apprasied for $6,000 more than what we bought it for. See what I mean? Compare THAT with renting.

As far as appraising..that you compare home appraisals with jewlery further illustrates your lack of education. In real estate, Agents freaquently over appraise, but the mortgage lenders will ALWAYS cut the appraisal down to reality. If your are successful in getting a loan on a property, you can bet your bottom dollar that the appraised value is real value-maybe even a bit under. I can't tell you how many times a day my appraiser reviewer chops appraisal values to conform to reality, so no, what you say, again, has no basis in truth.

and stocks? Please. If you are going to waste money gambling, just go to Vagas. You will have more fun, and you have the same chance of winning.

exotica17
12-22-2004, 11:47 PM
Thanks, Katherine. The problem when attempting to do anything like this is credibility. My degree is in respiratory therapy not economics. I work as a big boob stripper not a banker or broker. Nobody in the publishing industry would give me the time of day if I submitted anything 'serious'.
Get a pen name! Or write a humorous but infomative book, "Big Boobs, Big Brain." :P I am sure that if the publishers read your book, they wouldn't care if you had a degree in finance or not--good info is good info.

Melonie
12-23-2004, 04:35 AM
Get a pen name! Or write a humorous but infomative book, "Big Boobs, Big Brain." I am sure that if the publishers read your book, they wouldn't care if you had a degree in finance or not--good info is good info.

Ah, if only it actually worked that way ! Like clubowners, publishers have their own personal preferences and favorites. I might look into on-demand internet publishing though.


The population is not declining! Where did you get that? If people live longer, then they are holding on to their houses, not selling them. Children don't really factor into the equation since they won't be buying for another 20 years or so.

Actually, population in specific states IS declining. Coincidentally LOL the US Census Bureau has just released new figures which show that people with good jobs = taxpayers = qualified buyers for houses are leaving California and NY and IN and PA etc. and moving to southern and western states by the thousand per day. True, the population of California and NY etc. does not decline overall because there are more (illegal) immigrants coming in to take their place than there are taxpayers leaving the state. More details at .

At any rate, for those states where taxpayers are leaving by the droves, these people are selling their houses. Obviously the (illegal) immigrants coming into these states usually do not have the financial means or reported incomes to be able to afford to buy these houses, leaving the real estate markets in these states under pressure. When the taxpayers arrive in the southern and western states, they will need to buy another house and DO have the financial means and reported incomes to be qualified buyers, causing the housing market in these states to boom.

michele1
12-23-2004, 06:15 AM
I think scorpio understands what he is talking about dj wulf better than most. I love when people who dont even own a home try to make assumtions about something they know nothing about. The reason there arent tons of millionaire realestate investors out there is because alot of people dont know how to go about it. Or they dont have the credit or cash flow. I still say rental properies are a great investment. Or buying holding for a while and selling. If I sold the property I built 15 months ago for 126,000 I could easily get 249,000 for. Even if property values did fall say 10 % most values are so over inflated right now it wouldnt matter, there would still be tons of money to be made. Especially in florida were houses actually sell for over the asking price because of all the buyers here.

scorpio
12-23-2004, 09:38 AM
At any rate, for those states where taxpayers are leaving by the droves, these people are selling their houses. Obviously the (illegal) immigrants coming into these states usually do not have the financial means or reported incomes to be able to afford to buy these houses, leaving the real estate markets in these states under pressure. When the taxpayers arrive in the southern and western states, they will need to buy another house and DO have the financial means and reported incomes to be qualified buyers, causing the housing market in these states to bo
this would be an interesting story had it been tru. Public and corporate data are all showing that the California housing market is expanding at a fevered pace, NOT declining. So what gives? Mel forgets that for every thousand Cali native that moves away, 2 thousand others take their place....and the values are rising with no end in sight.

Melonie
12-23-2004, 10:23 AM
Washington Post today ...

" Housing starts plummeted in November to 1.771 million residential units at an annual rate, from 2.039 million in October, the Commerce Department said. It marked the biggest decline since January 1994 and pulled starts down to their lowest level since May 2003. Construction declined in all four U.S. regions. Starts were down for both single-family and multi-family projects.

"Housing is leveling off," said Michael Carliner, another economist at the home builders' group. "It's not going to be able to drive the economy like it has."

At the same time that starts dropped so precipitously, though, building permits, a sign of future building activity, declined just 1.5 percent, to 1.988 million.

"When you see this big of a gap between permits and starts, it almost always involves a weather problem," Seiders said. "The level of permits is still very, very good."

Seiders said that builders were carrying more unsold houses in their inventories now than at any time since the beginning of the 1980s. But, he said, the pace of sales continued to be strong. He said the drop in construction in November could be the result of "builder caution about starting new units when they've got a sizable inventory on their hands already."

The home builders' association predicts housing starts will decline in 2005. Economists there forecast a dip of 3 to 5 percent in starts for the year, compared with 2004, which is expected to be a record year for new home starts, new home sales and existing home sales.

Builders in the Washington area, however, remain bullish about business prospects for the coming year.

"The Washington, D.C., market is spectacular, one of the best in the country," said Robert Toll, chairman and chief executive of luxury builder Toll Brothers Inc.

Cory DeSpain, Toll Brothers' division vice president for Maryland and Virginia, said the demand for new homes in the region is much stronger than the company's production capacity. DeSpain said that as a result, prices of his firm's houses went up more than 20 percent in 2004 in the Washington area and are expected to increase by a similar amount in 2005. "

My own take on the situation is similar to the Toll Brothers comment, that the rich have money for expensive upscale houses in classy neighborhoods, but that the 'poor' do not have the income and can no longer get the credit to buy relatively inexpensive downscale houses.


So what gives? Mel forgets that for every thousand Cali native that moves away, 2 thousand others take their place....and the values are rising with no end in sight.

Granted that two thousand new residents may replace the one thousand that left. However, the vast majority of the one thousand that left were middle class, and the vast majority of new residents are not going to qualify for mortgages at California home price levels. IMHO if you're talking about UPSCALE housing then yes the California market will probably continue to rise (as many Californians have more money than they know what to do with!). However, if you're talking about 'average' or 'downscale' housing, speculating in the California market involves an increasing degree of risk.

scorpio
12-23-2004, 12:15 PM
new construction is not the only indiex of housing purchases. The mortgage application stats are not declining.

primetime21
12-23-2004, 01:01 PM
?????


She's right. BUT. at the end of the day. At the end of the year-99% of home owners are left with more value than they started with. 100% of renters are left with ZERO value, minus thousands of dollars in expense. Period. Full stop. End of story.

.
I was just wondering what other expenses renters would have. If you rent an apartment, other than the phone, and possibly cable, what other expenses could you have, with renting your costs are pretty set each month. With owning your own home, you have property taxes, utilities, repairs and maintenance. If you add on the interest paid on the life of the loan, I would be interested to see the actual difference between renting and buying. Scorpio, you are right, renters are left with zero value in their apartment/house, but if you include the expendable capital they have by not paying utilities, prop taxes, and repairs, with which they could invest in the markets, art, collectables, etc. they could end up with a higher rate of return on that money.
I am not going to say that owning a home is bad, because it isn't, but unless you have a family and need the space, or don't want your neighbours above, below, and beside you, renting doesn't have to be bad either. And before you say anything, I have a University degree in Business/Politics, and have been preparing income tax returns for the past 12 years. So I know about investments, rate of returns, etc. And I have seen the problems that people have gotten themselves into by buying a house when the weren't financially capable of it.
Purchasing a rental property is completely different, as there is definitely money to be made there, as long as you get good tenants, don't have to do too many repairs to the property, and enjoy taking care of the property. Me, I can think of many other ways to make money, that doesn't involve those headaches. ;D

scorpio
12-23-2004, 02:07 PM
You are correct in that many people over purchase homes. I see it all the time, people make 80K and think they're wealthy, and try to pay for a 400K home. Stupid.

remember, renters also pay most utilities. Mortgage interest and fees are deductable, and in many cases, your mortage payment will be lower than your rent payment.

Bridgette
12-23-2004, 02:46 PM
Most of the time, unless you buy a house that is waaaaay out of your means, your total monthly payment including principle, interest, taxes and fees will be less than rent. I can buy a 3BR house in my area and pay alot less per month than what I pay for rent in my 1BR apt. Even with higher utilities to heat and cool a larger space, I'd still be paying less in total. Then consider my mortgage interest will be tax deductible, and I save even more money. If I have to pay for repairs and maintenance, that could come out of the money saved by no longer paying rent. And this says nothing of the fact that a mortgage payment equals buying an asset I could theoretically live in forever, where paying rent only serves to put money in someone ELSE's pocket.

I think where most people run into problems with their house payments costing more than rent is exactly what scorpio said - they overbuy.

Lena
12-23-2004, 02:53 PM
Agreed. I was paying $650/m rent for a two bedroom house with an itty bitty yard (which was costing me closer to $800 with utilities). Then I bought this place super cheap, was able to pay cash for it, and my utilities/taxes/etc. are way under $200.

Lena

montythegeek
12-23-2004, 05:56 PM
new construction is not the only indiex of housing purchases. The mortgage application stats are not declining.Scorpio is exactly right. The MBA mortgage applications data is a more reliable indicator of home purchases than either the Census sales data or the initial estimate by the NA of Realtors.

The four-week average of mortgage applications for the month of November was a record high by a solid margin and the December data is almost as strong and was only exceeded by November. These numbers suggest home sales (closings) in either December of January (or both) will set a new all-time high record.

The aforementioned housing starts are hyper-volatile and not vey reliable until revised. Builder confidence is very high and the only thing keeping starts below their peak levels is the fact that builders are running down the permits they got earlier in the year but did not start at the time.

DJ_WuLf
12-24-2004, 08:44 AM
Just for the record here I don't own an SUV. I was responding to a comment made by Emily about SUV's (I do own a 70 Z-28, a 94 Mitsibishi 3000 VR4, and a 2003 Chevy pickup).

I have OWNED 4 homes in the past 15 years. An older 1600 sq ft 3 bdr/2 bath in Las Vegas (Henderson actually) ..sold in 1990. A new 2100 sq ft 4 bdr/2 bath in Denver sold in 1996. A 2600 sq ft 4 bdr/3 bath in Fenton Mo. (South St Louis) where I was the designer and general contractor .... sold after the divorce in 2002. My current abode is a 1200 sq ft 2 bdr/2 bath CONDO because im tired of mowing the yard. I made money on all but the divorce sale.

I have a degree from UNLV in Business Administration but I have REAL WORLD experience which is much more valuable. I do location evaluations for the company and I deal with appraisers all the time. First thing they ask me is "What do you need it to be worth?" Gimme a break.

For EQUITY to be realized, the property HAS TO BE SOLD! Otherwise its not real money. An "interest only" loan may increase your CASH FLOW but it does not increase your NET WORTH. Is that realized (REAL) money? NO! How can you be making soo much money on your RE when you're not paying any principle? Actually if you want to profit on your home shouldn't you make additional payments on it now in pre-inflation dollars? I wouldn't brag about an interest only loan.. Sounds to ME like someone can't afford to pay thier bills.

Which brings me back to my original point. The average person in the USA making $32,000 a year CANNOT Afford a $200,000 home! The disparity between classes is widening daily. very few people make the magic 50-80K/year it takes to be "middle class" They either knock down 100K+ or they are in the "blue collar" 30-40K area. A 100K+ guy is going to build new so he (his wife actually) gets what she wants. Since it takes 30K /year to support a family at just above poverty ....the 30-40K guy never saves a down payment.

What Scorpio spouts is THEORY. It has worked in the past. The reality is that IF (according to theory) Houses keep appreciating in excess of inflation (which is why they were a good investment) and WAGES/EARNINGS continue to FAIL to keep pace with inflation (which has been the case for 5 years) Then each year LESS and LESS people can afford to buy a house. When the SUPPLY of "used affordable" houses outgrows the DEMAND for (and ability to AFFORD) those houses GUESS WHAT HAPPENS? (You did learn the laws of supply and demand?) I think Melonie and I are saying that this may be happening NOW and people might not want to get caught up in it ...but then I understand why someone who is already up to thier ears in debt would be in denial.

I re-state my original opinion: Own the home you live in but avoid RE as an investment vehicle.

Emily
12-24-2004, 08:59 AM
but people have to live somewhere! This is the typical person's number one priority.

If they aren't buying homes, they are renting, thus one could say that buying real estate for the purpose of renting is a solid investment, no?

scorpio
12-24-2004, 10:44 AM
No, dear, not theory-reality. I am an executive at one of the nations largest home lenders. I wouldn't pretend to tell you how to do your job, and you certainly know zero about the mortgage business, so don't tell me about mine.
I use an Interest only loan as an example of realising income from a property today in the form of cash-flow, instead of equity later. Even with little or no principal paid down, the property still appreciates, so you still realise equity. What is so hard about that to understand?

As far as your appraisers, well, they are not the same as residential real eastate/mortgage appraisers. try using a stretched appraisal to refinance your home. The bank uses its own appraisers to review yours, and they will cut or reject a bad appraisal.

The bottom line is, you make money when you buy real estate, NOT when you sell it. Do your research, buy a property under market value, and you will make money when you sell it.

Melonie
12-24-2004, 11:08 AM
If they aren't buying homes, they are renting, thus one could say that buying real estate for the purpose of renting is a solid investment, no?

In many situations, investing in rental real estate can be extremely risky. For starters, mortgage interest on such a property is not tax deductible, meaning that the government is not going to help subsidize your business. Next, when local government budgets are in the red, politicians have to decide whether to increase taxes on individual homeowners (several registered voters per household) or commercial property (only the owner is a registered voter) to cover the shortfall. Next is the issue of maintenance costs, where the people actually living in your building having nothing at stake in regard to being "careful".

On the income side you have the issues of going rate for rents, which is a function of everything from population growth rates to unemployment/starting wage rates to state welfare benefit levels to direct rent control by local governments.

You then have the issue of turnover/vacancies, where you not only lose revenue while people are moving but it may cost you ad/agent expenses to find new tenants. Then add in deadbeat tenants who stiff you for rent money.

On top of all of this, the possibility exists that the market value of your rental property will drop !

scorpio
12-24-2004, 11:50 AM
Thats why you buy property wisely, Mel! Use low interest/Interest only loans, and research market rents, conditions before you buy. Personally, I am a fan of section8-government pays your rents, finds you tenants, rents are over market value, and if you have problems with atenant, they will find you new tenents. These are for lower level properties or multi levels. It never failes to suprise me when peiople buy new contruction with little down on a fixed rate loan, and then try to rent it out. If the market can only bear $1200 rents, and your PITI payments are $2000, you will have a negative cash flow. This is not how to do it and it is instances like this that cause people to be afraid of real estate investing. Remember, you must buy the property right.

primetime21
12-25-2004, 09:53 AM
Scorpio, that sounds like a good program the gov't finding you tenants, and replacing them if necessary. Here in Ontario, the rent is capped at 2.9% increases, unless there are special circumstances, you must give tenant 60 day eviction notice, even if they aren't paying the rent, and then they can still damage the property. Trying to get the money out of them in court is next to impossible. Things swithched to tenants favour in some areas due to rental shortage that occured in late 80's, and they haven't gotten rid of those controls now that there is an over-abundance or apartments for rent. If you find the right tenant that gets rid of most of your problems.
What I was talking about before if people are renting an apartment, they have no added expenditures, no utilities, so their discretionary income is much greater than that of a home owner, if they took that extra money they could invest it and still be able to purchase a home outright to retire in. There are some people that just shouldn't own homes, but the banks up here are more than willing sometimes to give them that loan, and everybody ends up losing.

Melonie
12-25-2004, 11:48 AM
Here in Ontario, the rent is capped at 2.9% increases, unless there are special circumstances, you must give tenant 60 day eviction notice, even if they aren't paying the rent, and then they can still damage the property. Trying to get the money out of them in court is next to impossible.

This isn't exactly the same as government subsidized rent arrangements in NY and NJ, but close enough. Besides 'limited' monthly rent amounts established by the gov't for the different cities, there is the huge sinkhole of only one month's rent amount being allowed as a security deposit. Obviously it's very possible for a rotten tenant to cause damage far in excess of this amount, and the landlord is left totally without recourse.

In point of fact, the main reason that rents in available NYC apartments are so expensive is because of NYC's gov't rent controls. These were enacted many years ago, and cap rents on downscale/midscale apartments. Because of the rent controls, landlords of these sort of apartment buildings cannot make a profit if they do proper maintenance. As a result some have been converted to different use, and nobody in their right mind will build new downscale/midscale apartment buildings. The only type of apartment which is not severely rent controlled are so-called 'luxury' apartments. As a result, essentially all of the new and refurbished NYC apartment buildings are built to 'luxury' standards to avoid the gov't rent controls - with 'celebrity' level monthly rental rates to boot. Thus the only way one can get into a downscale/midscale apartment is if it is 'willed' to you by a dead relative who was already living there !


What I was talking about before if people are renting an apartment, they have no added expenditures, no utilities, so their discretionary income is much greater than that of a home owner, if they took that extra money they could invest it and still be able to purchase a home outright to retire in. There are some people that just shouldn't own homes, but the banks up here are more than willing sometimes to give them that loan, and everybody ends up losing.

Well, that's the piece of the equation which people seem to have the hardest time understanding. Tying up large amounts of money in a property may still provide a lower rate of return than other investment possibilities even in a real estate market where property values are rising and property taxes are not rising. When you factor in the possibility of the property taking a 10-20% decline in value, plus real estate taxes rising 20-30% or more, the ROI situation can really get dicey.

scorpio
12-25-2004, 09:19 PM
When you factor in the possibility of the property taking a 10-20% decline in value, plus real estate taxes rising 20-30% or more, the ROI situation can really get dicey.
name one instance where this has happened. (outside extreme localised and special circumstances)

The taxes rising, yes. Your property losing 20%? Not a chance.

If you invest in stocks, MF's, or other investments, you are liable to lose alot more than that, possibly 100%.

Emily
12-25-2004, 09:24 PM
That's what I was thinking

there are some "ifs and and buts" in real estate, but they exist in stocks too, and are much bigger!

No investment is completely safe, but given the information we have about real estate and that of stocks, I feel real estate is the better investment.

Melonie
12-26-2004, 08:08 AM
name one instance where this has happened. (outside extreme localised and special circumstances)

The taxes rising, yes. Your property losing 20%? Not a chance.

How about it happening nationwide during the 1930's depression ! In terms of downscale/middle of the road apartment buildings, how about every northeastern big city which has enacted rent controls in the past 20 years ! How about Houston after Enron ! How about every city where the military has 'consolidated' and closed a major military base !

When comparing an investment in rental real estate to investing in stocks, where stocks are concerned one has a pretty good idea what the potential risk vs reward ratio is going to be. There are 'safe' investments i.e. utility companies which will continue to provide 5-10% returns between dividends and share appreciation with next to no chance of losing your initial investment. There are also highly speculative stocks such as biotech research or gold mining companies which could turn into a 100% loss of your original investment or a 1000 percent gain. The point is that one accepts the risk/reward ratio before making the investment.

But with rental real estate, you THINK you know the potential risk vs reward ratio right now, but in fact you're at the mercy of local governments, local economies etc. where a major change can come with the next election or the next plant closing. And unlike stocks, rental real estate is not 'portable' such that if things go sour you are entirely dependent on the local buyer's market to get your money out.

Melonie
12-26-2004, 04:54 PM
this is for you, Scorp ...

You're gonna love this one!! sponge

NEW 12/26/2004 3:55:18 PM
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Here in Southern (ventura county) California, property prices are now well past the words "ludicrous" or "ridiculous" or "mind-boggling". Prices are now in their own "Twilight Zone". So, concerned perhaps that those of low incomes need help to buy property, the local government decided to only grant building permits to builders who would agree to include several properties in their plans for people of low incomes. The latest development consists of 27 houses. 20 are "luxury" houses, priced between $650,000 and $750,000. 7 houses are for low income earners. Price...........$365,000. Am I missing something here?


RE: I guess I need to........ Yogibear101

NEW 12/26/2004 4:08:08 PM
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...dust off the old framing hammer. No wait, I'll just rebuild both my pnuematic nail guns.

Low income housing is normally represented by trailer parks. Here in VA I was told the ROI on building a trailer park was five years as compared to over 10 on apartments. This was during a discussion on my land clearing contract from the developer of an apartment complex next door to a trailer park. Of course he lost his butt after two drownings of children in the apartment pool.

RE: You're gonna love this one!! quiet bruin

NEW 12/26/2004 5:19:23 PM
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This has been done for years in California nothing new here. It is a requirement under state law to provide a number of units for low cost housing. Don't worry the tax payer is the one picking up the difference. Also so the builder gets a number of breaks on regulations if the provide this housing. Remember the only one who get's taken in this deal is the taxpayer.

Melonie
12-26-2004, 05:14 PM
and this just came out in the NY Times ...

If Home Prices Plunge, Will Damage Be Worst in Democratic States?


By FLOYD NORRIS


No boom lasts forever, and in countries like Britain and Australia, the housing market has suddenly turned lower, leading to discussions of how a plunge can be avoided and what will happen if it is not.



The American housing market received a scare yesterday, with a report that the pace of new-home sales slipped in November as the median price of a new home fell to the lowest level in a year. But mortgage applications indicate that a rebound has begun, and in any case, prices of new homes can fail to capture price trends for existing homes in areas without new construction.



A more reliable measure, albeit one that is reported more slowly, is an index that compares prices over time on the same house and is put together by the Office of Federal Housing Enterprise Oversight, which regulates Fannie Mae and Freddie Mac. Even though the index excludes many higher-priced homes, and thus probably understates house price inflation, it is booming like never before.



Through the third quarter, it showed prices up 13 percent over the previous 12 months. The index, which dates to 1980, had never before recorded even a 10 percent annual gain. In the last five years, the index shows a gain of 48.5 percent, while consumer prices for things other than housing have risen 11.8 percent. The absolute gain and the spread over inflation are records. The only time that was even close was the period through 1989, which was followed by a housing bust in 1990 that caused prices to plunge in some areas.



If this is a bubble, its creation can be traced in no small part to the Federal Reserve's efforts to deal with the bursting of the stock market bubble. It cut rates aggressively and the 2001 recession was a mild one. The very low cost of borrowing, coming at a time when alternative investments seemed less desirable, encouraged a big run in home prices, whose growth outstripped both personal income and rental prices.



There are indications that speculation is rising. Patrick Lawler, the chief economist of the agency that compiles the index, reports that the popularity of interest-only and adjustable rate mortgages is rising. That would indicate more and more buyers are straining to qualify for loans - and would be vulnerable if interest rates rose.



The housing market would not have to collapse to have a negative impact on the economy. Even a lack of appreciation could put a damper on consumer spending by depressing sentiment and the volume of refinancings.



House prices vary significantly by market, of course, and it is reasonable to think that a decline in prices would be most likely in areas that have had the strongest gains. And those areas are concentrated in states that voted Democratic in the last election. Of the 12 states with the fastest-rising home prices in the last four years, only Nevada and Florida voted for President Bush. The 12 states with the smallest gains all backed Mr. Bush.



Over all, states that supported Senator John Kerry averaged a 47 percent rise, while prices in Bush states climbed 24 percent. Rhode Island and California led the list of states, although neither could match the 80 percent rise in the District of Columbia. In California, the median-price home costs $460,000, and the state association of Realtors says only 19 percent of the state's residents earn enough to afford to buy such a home.



With the trade deficit hitting records, the American government seems to welcome a weak dollar. But there are surely limits to that. A nightmare for the Fed would be that it finds itself under pressure to raise rates to support the dollar, just at the time that a weakening housing market needs lower rates to avoid big declines. If that were to happen, the Fed might regret having done so much to encourage the boom in home prices.

montythegeek
12-26-2004, 07:01 PM
Melonie,
Maybe I can beat Scorpio to this one so this time he can agree with me.

The stories of housing sales or sales price "collapsing" in November are pure crap. The numbers quoted are average prices which a tremendously affected by composition and location. What happened in November was a reported large drop in sales in the West. Average prices in the West are 2.5 times the national average and they are about 2.25 times the national average in the Northeast. Thus when the reported number for one region moves a lot the average moves a lot from month to month. Thus a single month's numbers are crap. It is the same principle as reporting one stores sales in Iowa and calling it a national trend. It just makes not statistical sense. According to the number reported the West had sales plunge.

What declined was sales of homes which were not started and under construction. New homes which are not even homes yet. People were grabbing new construction before it was even built yet. and that was almost half the market for new homes in the RECORD SALES month of October. This November # will be a reasonable thing to look at in 4 weeks when they revise it.

Pay MUCH more attention to the NAR (Realtor) number due out 12/29. You can find it at http://www.realtor.org/PublicAffairsWeb.nsf/pages/NARNewsReleases

PS Melonie you can see how wild and badly done the new home sales numbers are at http://www.census.gov/const/newressales.pdf


Melonie, use the cocktail party rule of thumb to gauge booms. If at the holiday parties you went to a large percentage of people were speculating in real estate you have something to worry about. Nationally just over 6.5 million homes changed hands in 2004 (see NAR for confirmation of this estimate). That is 6.5 million out of about 120 million units or just about 1 in 20 (just over 50% more than a BAD year).

You can make a better argument that the car you bought is going to collapse in value because a higher percentage of the vehicle fleet was bought new at heavy discounts in 2004.

PS Mr Norris does not know shit about economics. The NY Times economics correspondent who really knows what he is doing is Louis Utichelle (spelling?) Mr Norris is a pundit who does not know shinola from gastrointestinal by-products.

scorpio
12-27-2004, 11:04 AM
yeah! What he said!;)

Lena
12-27-2004, 11:32 AM
Is there a place to find out the average rental rate for different parts of a city? And/or average sale price of houses?

scorpio
12-27-2004, 05:05 PM
contact a realtor. Their job is to help you with these things. An appraisor is also a good resource.

toxicgirl
12-27-2004, 09:10 PM
damn. melonie you are so smart!!! you write some of the most intelligent posts on here!

toxicgirl
12-27-2004, 09:11 PM
i've made my descision- get an rv! my datsun's getting old.

Melonie
12-28-2004, 01:01 AM
damn. melonie you are so smart!!! you write some of the most intelligent posts on here!

naaaah ... I'm just a dumb blonde with huge boobs !

It's fairly obvious that there are significant differences of opinion in regard to the relative value of real estate investing. Personally, other than continuing to own the house that I'm living in, my investment funds will be betting on a falling US$, betting on rising US interest rates, and betting on Chinese commodity companies, rather than betting that already ridiculously priced US real estate markets will continue to hold their ridiculous valuations.

montythegeek
12-30-2004, 06:06 AM
Melonie,
For the record the NAR (Realtors) reported a new all-time sales record of 6.94 million sales (annualized). December appears to be awful close to the record if not a new record.

http://www.realtor.org/Research.nsf/files/REL0411K.pdf/$FILE/REL0411K.pdf

DJ_WuLf
12-30-2004, 12:08 PM
Record sales means the SUPPLY is way up there doesn't it? It means there is lots of supply in both pre existing and new const homes. Perhaps an OVERSUPPLY?

I have believed for 2 years that the ratio between houses for sale and buyers who can afford them is out of sync. Show me the number of homes that DIDN'T SELL! Show me the number of mortgage apps that were refused. Some people just refuse to see the whole picture.

When an industry resorts to rebates and creative financing to support it's thru the roof prices (also see Cars and electronics) its a sign that objects in the mirror may not be what they appear.

When the supply is at record levels and sellers are resorting to tricks and gimics to attract new buyers .... Hmmmmmm Sounds like the bottom getting ready to fall out to me.

Emily
12-30-2004, 03:51 PM
Record sales means the SUPPLY is way up there doesn't it? It means there is lots of supply in both pre existing and new const homes. Perhaps an OVERSUPPLY?

I have believed for 2 years that the ratio between houses for sale and buyers who can afford them is out of sync. Show me the number of homes that DIDN'T SELL! Show me the number of mortgage apps that were refused. Some people just refuse to see the whole picture.

When an industry resorts to rebates and creative financing to support it's thru the roof prices (also see Cars and electronics) its a sign that objects in the mirror may not be what they appear.

When the supply is at record levels and sellers are resorting to tricks and gimics to attract new buyers .... Hmmmmmm Sounds like the bottom getting ready to fall out to me.

I think this is faulty interpretation of the law of supply vs. demand. If I buy a house, it's not because there's a huge supply - it's because I want a house. If I can get a good deal on it, it's probably because of an oversupply (i.e. buyer's market.) This is Economics 101. A house is not a luxury item. It's a necessity. It cannot be compared to consumer goods.

Also, how does the number of mortgage applications that were refused have any effect on the record number of sales? I'm one of the "some people" that refuse to see the whole picture, I guess. I see houses selling like crazy, the last few years in particular. There is no such thing as a house that can't sell....only houses that are overpriced. But even in this market, people are obviously buying, so they cannot be THAT overpriced.